Business

In today's economic scenario, how can CIOs get the best value out of shrinking IT budgets?


Although it may sound harsh, I would say that the CIO should stop spending. He should evaluate his existing assets, and then decide what he can deliver using those assets. For example, assume that you have 20 servers, 25 databases, 30 applications and a staff of 25 programmers. Can you deliver the value that business requires with this staff without hardware investments?

Yes. This can be achieved with reengineering, re-staffing and staff rotation.

A CIO should also resist the tendency of unnecessary upgrades or migrations. Don't get carried away by what vendors suggest. For example, suppose I have a budget of Rs 5 crore. That budget should be used for extracting new value out of existing software. Instead, for most CIOs who have an ERP implemented, the effort is to go to the next version just for a couple of new features. In my opinion, you can implement add-ons which extract those values from the old system. If you have good programmers, this can be achieved. If business requirements absolutely demand a new version, definitely go in for it. Otherwise, the old system can be tweaked to get incremental functionality.

Be a bit more conservative on infrastructure investments, and try to use outsourcing as much as possible. If everything is in-house, you are not able to make 100% use of this investment. For example, most hardware runs on 25-30% of capacity, whereas 70-75% capacity goes waste. With outsourcing in place, you pay as per your usage. So you save on capital investments and running costs.

Can you give us some examples of the aspects that can be looked at for outsourcing?


Start from data center. You can look at managed services. Sometimes, if it's not a large operation, you can sign up for Software as a Service.

Common concern here is of security going out of your control. Always understand that it's a matter of governance. If proper governance is not in place for your IT setup, this can happen even in a new organization. So outsourcing is not necessarily the culprit.

Should you renegotiate existing contracts?


There's no harm in trying. In my opinion, you have to create competition between your existing vendor and a competing new vendor. If you negotiate directly, he won't listen. So bring in a new vendor who quotes lower. This will make things easier.

How do you handle re-staffing and re-skilling?


Companies which believe in managing a large number of IT projects through their in-house staff definitely need to look at re-skilling. For example, I use a technique where I assign three technologies to a group, which has three to four people. One becomes the leader by virtue of his experience and role. The other two are the followers. After six months, I remove the first person and assign him to look after another area. The second person now assumes charge of the group. It's not like if someone is a Basis expert in SAP, he will retire as a Basis expert. I move them after three years.

Second is that I always create new challenges for my staff by putting them in charge of a new technology every year. So they gain new skill sets. Always ensure that they have an enjoyable experience. You have to see that they should find a career in the technology.

With IT budgets coming down, staff training has also come down. How do you cope with that?


Learning new skill sets does not happen with two weeks of classroom training. It should be on-the-job training.

For example, we had undertaken migration from Microsoft SharePoint Portal 2003 to Microsoft SharePoint Server 2007. The challenge was to migrate Hummingbird IDMS to SharePoint Server 2007. Now the staff member was not conversant with SharePoint Server 2007, but she mastered it and completed the migration in three months.

Now, I had the budgets for outsourcing, but the objective was to create a challenging opportunity for a team member. Today we are able to roll out the technology in other parts of our business. We'll also be saving at least Rs 50 lakh.

What about using cloud computing's touted benefits?


Yes, cloud computing will work, but not the way that vendors portray. Software as a Service will definitely work. Corporates can use cloud computing for their own group companies. For example, we have two associated refineries. Why should they invest in infrastructure that we already have?

So our sister concerns use part of my ERP -- the catalog management system. We've asked them not to buy any software and hardware. Our manpower manages their system, and we charge them a very nominal fee. Such efforts substantially reduce hardware and software costs.

How can a CIO deal with reduced IT budgets? M D Agrawal, the deputy general manager of IS (refinery) at Bharat Petroleum Corporation Ltd., shares tips.

You are credited with bringing IDBI Intech back to life. How'd you get involved in this effort?

IDBI Intech was started in 2000, during the IT boom. IDBI was a development institution with many subsidiaries, and IDBI Intech was one of them. Then the downturn started, and IT was not doing so well. So we had some talent crunch at that time.

Around 2004, IDBI got the license to become a bank. Hence, IDBI decided to exit from IDBI Intech.

In 2004, IDBI decided to acquire IDBI Bank, the private-sector bank where I was working. IDBI Bank was a very technology-savvy bank with good people doing creative work. On the other hand, IDBI didn't require a strong technology platform by virtue of its business. When you become a commercial bank, you cannot survive without IT. So we were wondering how to motivate and take care of the team, since things were completely different at IDBI.

Since we already had IDBI Intech, we decided to revive it. It was in the process of getting closed, so we wrote to the government authorities and got the permission. It was decided that I should move to IDBI Intech. Now I act as the IT advisor for IDBI Bank, as well as head, IDBI Intech.

And how did IDBI Intech move from being IDBI Bank's IT team to a service provider for other organizations?

In 2006, we shifted the complete IT team from IDBI Bank to IDBI Intech. It was decided that we'll not have an IT outfit within the bank to avoid conflict of interest.Initially, Intech was treated as just an extension of IDBI Bank. Then we realized that there's a lot of unexploited potential, so we started providing services to group companies. We started with IDBI Capital, IDBI Fortis and IDBI Gilts.

Since we were doing a good job with the group companies, our board suggested that we start providing services to external companies. So we started giving services to BFSI [banking, financial services and insurance] clients. Today we have more than 19 external clients and almost 500 employees, as well as international clients in Kenya and Oman.

How was the change for you personally?

Shifting to a company as the MD and CEO was a major challenge, since I was expected to do much more. It's very easy to be on the other side of the table, where you only have to execute the project. As a CIO, you should be good at project management and understand the business, but you don't have to seek business. Besides, you get very comfortable when you only have to interact with vendors and so on.

Suddenly, it's all about business strategies, how to run the company, make it profitable, manage the attrition of an entire company rather than just a department and so on. It was an experience where I had to change from a technology person to a manager. So this major shift was initially extremely difficult.

Also, it's easier to start a new company than to revive an existing one. There were many compliance requirements, and several other aspects which were new to me. So it was a fulfilling experience to move the company from, as they say, red to black. We have been a profit-making company for the past three years.

What would you put as the biggest challenges that you faced?

It's tough to build the confidence of people. First is that of your own employees, since you are trying to revive something which did not succeed earlier. It's also difficult to change from a department's mind-set to that of to a service provider.

Gaining confidence of other stakeholders was the second challenge. That's why I say that it's easier to start a new company than to revive one. The moment you are a separate company, expectations increase and service levels to parent organizations need to be very high. So the stakeholder's interest was a crucial aspect that we had to deal with.

2005-06 was a good year for IT, with people getting fat salaries and many offers. So it was difficult to source talent, especially since we were undergoing this transition.

The last challenge was to convince external entities that we can provide services in a bank-neutral manner. It was essential to demonstrate that we have the expertise, so please don't treat us like IDBI Bank's IT outfit.

Getting the first client was a challenge. Our first major client was the Centurion Bank of Punjab. It was a grand success. We haven't looked back since.

Sanjay Sharma, the managing director and CEO of IDBI Intech Ltd., has been credited with the venture's turnaround into a profit-making organization. The erstwhile CIO of IDBI Bank shares his career's evolution path.

What is the scenario in India when it comes to SLA management?

We believe that the adoption of formal SLAs is fairly limited in India. SLA formulation and management requires IT and multiple business stakeholders to accept a single version of the truth, in terms of the data that drives the metrics. This is typically a fairly resource-intensive task that involves aggregating data from multiple application repositories, databases, infrastructure management systems, configuration management databases and service desks. The cost is at least in the order of tens of thousands of dollars, and in many cases above the U.S.$100,000 mark.

A company would take up such a resource-intensive project only if sufficient scale exists and/or if the awareness of the need for IT maturity is high – these conditions are rare in India. Even globally, formalized internal SLAs are more important to the very large enterprise than any other kind of company (this does not include service providers of all kinds, because SLAs are the core of their business).
When defining an SLA with a service provider, what are the key parameters to be specified?

That really depends on the provided service. Any infrastructure management (including outsourced help desk) sort of service would have SLAs that cover incident response time (including tasks such as adds, moves and changes), mean time to repair, availability (such as network and email availability) and how these variables trend over time. A lot of work usually gets done before parties can agree about defining the right metric and context for each (such as, which event would define incident closure?), segmenting types of events (based on severity), periodicity of monitoring, data collection and aggregation procedure, rules defining penalties and the escalation procedure.

When the service involves application hosting, SLAs would be related to uptime (availability), which is qualified by factors such as the number of concurrent users to be expected. Performance is a little more difficult to define. Ideally, performance should be measured in terms of end-user experience, but sometimes measuring end-user experience involves hard-to-scale tasks such as installing agents on end users' desktops, and with the growth of mobile users, it's hard to control the endpoint and the network, complicating matters.
What are the aspects to keep in mind when it comes to managing an SLA?

SLAs are not substitutes for a good partner relationship and governance procedures. Therefore, a broader management scope would still be necessary. Inordinate effort to make the SLA absolutely watertight isn't necessary, particularly when the internal IT organization involved. Select the SLA that best represents the end user's actual experience, while being realistic about what the expectations should be. So, application availability makes much more sense than server uptime does.

It needs to be appreciated that SLAs can be met only under certain given conditions – for example, if the average user's Web experience is to remain above the threshold, strong URL filtering is required to ensure that Web usage is in accordance with policy, and requests for exceptions should be carefully managed. At a high level, there isn't much that is arguable about the right SLAs. However, collecting and aggregating metrics is usually quite tough. Data typically resides in multiple databases, infrastructure management systems and possibly multiple service desk solutions. Building connectors to these data sources, aggregating them and developing dashboards for reporting are all resource-intensive tasks.

Tools don't do much here – the professional services' costs typically equal the average SLA management tool's licensing costs (a 1-to-1 ratio). Hiring an expert who is familiar with the metrics that work in terms of securing buy-in (and truly representing the business' interests) and hiring the IT talent to build the data connectors is much more important than any tool-related considerations.
How can IT teams leverage the various features offered by SLA management tools?

SLA management tool vendors offer value in multiple ways. First of all, they know which metrics to select. They also know where to look for data necessary to build metrics that IT and business would monitor as part of the SLA.

Vendors have the necessary tool knowledge to build connectors to the data. They also provide mechanisms such as rules engines that ease the process of aggregating the data to build metrics to be monitored. Dashboards are usually provided to aggregate and present the metrics in an automated way, which provide automated alerting services, analytics, etc., and in effect, create a single system of records that everybody can agree on. So, it's less about tool features and more about competence that the SLA management tool provider brings to the table.
Somak Roy, managing analyst at Butler Group, Datamonitor India, gives his views on service-level agreement (SLA) management.

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