Erp

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.

What are your biggest pain points?

We have a user adoption issue. As we deploy technology, people are responding at varying rates -- and much slower than I predicted.

For example, the bulk of our managers have become used to fixed reports and spreadsheets, but the notion of analyzing data was beyond their thinking.

I was shocked as both a technologist and a business person -- BI is sexy, but users don't get it. That's when I said, 'Holy mackerel! We have to do some training to get managers to use the tools.'
How are you solving the problem?

We've created the United Pipe & Supply University and we're putting managers through a rigorous training course.

The purpose of the university is to make managers aware of the need for the various tools available to them. The university is conducted via Web-based training, and we're sending users to off-site training. They also get business training.
What type of business training?

They might have an afternoon with the CFO [chief financial officer] where they learn the nuances of a P&L. The CFO might show the levels of controls on how to reduce fleet costs or freight costs.
What does United Pipe & Supply University look like?

We have a training and development manager at the company. We put our users through a boot camp.

We also give them certification exams -- and it could take up to a year to get to a certain level of certification. For the analytical tools, it could take three to six months for full certification.
Which BI tools are you using?

We have a few things. The majority of our database is Mincron -- it's a Houston-based company and they focus on hard, good distribution, and we run that as ERP [enterprise resource planning].

It's against that database that we're running these reports. We have a number of Cognos tools and I'm trying to make it easy to extract information for these databases.

We're also using SAS Activity-Based Management.
Is this training mandatory?

We've identified high-potential people in the company, and those who have expressed interest in management. Training is mandatory if you want to advance in the company. We want to have the best managers in the industry.

We can justify the programmer's time. Right now our managers are going to programmers to get data analyzed. If managers do it themselves, it makes them better decision makers. They can answer the business questions themselves and it frees up our programmers' time.
United Pipe & Supply CIO Mike Green was stunned when employees at the Portland, Ore.-based wholesale distributor weren't excited to use the new business intelligence (BI) tools he bought them. So he built a virtual BI university, started handing out diplomas -- and sent users to meet with CFOs so they could see how BI benefits the bottom line.

You're a first-time CIO, but you're hardly a newcomer to IT.

I'm in my fourth year [as Plexus' CIO]. I came out of 15 years of professional services with EDS and Deloitte Consulting when I decided to transfer into [the IT] industry. It's been a challenge being on the industry side, and it's a new challenge every day. We're in a volatile industry, but it's going well. We'll be a little over $1 billion in revenue this year.
You have a B.A. in finance and an MBA. How does your business education background affect your role as a CIO?

It's important to Plexus to have a business-oriented person in my role. I'm the first CIO the company has had. The role has always had a technology feel to it, and there's nothing wrong with that, but as our company grows and we spend more capital on IT, it's important to have a business feel in the CIO role. It's been helpful to me, and I think it's generally helpful to have a good business operations focus. In some cases, [it's more important than] a technology focus because you can make a lot of investments in IT for no apparent reason. I like to think my [business] background helps with that challenge.

My peer group, a leadership team of 10, is made up of business folks and supply chain people, and I need to have a good relationship with them to be effective in delivering IT services.
What are you doing to create IT governance?

Over the last year and a half or so we've put a big focus on IT governance. We set up a global project management office, and the organization grows every quarter with project managers essentially governing how IT is run, how investments are made, prioritized, proposed. The company has never focused on these things before; it's always been done informally and at the discretion of the decision makers. We've put in place a pretty regimented process to formally propose all new capital that touches IT into a standard form. There's good project management lifecycle methodology, and we're in the process of deploying those standards and methods to all of our sites in 23 locations around the world. So we're in the midst of transforming the way IT runs at Plexus with a governance model that may be commonplace in some organizations, but not at all common in companies our size. These kinds of rigors and disciplines are important as we grow.

It's interesting, about governance overall, when we put in place governance in the IT organizations, it impacts all the people that consume IT services. The disciplines that we're putting in place in IT in many cases did not exist outside of IT. So it's as much a challenge outside of my function as it is inside. That's really what we deal with a lot of these days -- it's not so much the tools and the mechanics of the governance, it's the instillation of that and the discipline to stick with it.

The governance plan is weaved into the budgeting process for next year, and that's the first time we've done that, too. There are a lot of bumps along the way, but we're beginning to bear some fruit, and we feel good about it.
What's your biggest challenge right now?

Plexus is in the electronic manufacturing services industry; we build the inside of all sorts of electronic equipment. We're part of a supply chain that's very volatile. So when demand shifts up or down the slide chain, it has tremendous impact on us. The greatest challenge is tighter integration with our suppliers. We have a finite group of about 300 customers, but they spawn a supply base of more than 1,200 suppliers. Integrating IT tools with our expanded partners and making them more transparent -- the Holy Grail of systems integrated with systems -- is a major challenge. Everybody's different. We're just getting our feet wet with RosettaNet. A lot of industries don't have those kinds of standards initiatives. We tie up a lot of labor dollars with our partners just doing business with each other every day. The volumes are immense, and the change that occurs is rapid. And the cost of not responding is high.

Governance is among the top three [challenges], but behind global deployment of common systems.
How are you preparing for the Sarbanes-Oxley deadline?

We just met with our auditors this week to review our final plans for SOX remediation. We had a sizable effort under way. We have had six people full time for the past nine months or so, and they'll be on it for another six months. For a company our size, that level of resource commitment is pretty substantial. We've made a lot of progress. We have our IT remediation as well our accounting remediation. That's one team, and half of it is IT and half of it is other functions. We've made recommendations that have been accepted by our management team, and most of the recommendations have been accepted. So we're now in the process of implementing all the remedies we need. We feel pretty good about where we are. I've spoken to some of my peers -- some companies are ahead of us, but a lot of companies are behind.

We tried our best to make this a positive experience -- as positive as you can make something that's mandated. We knew we had a lot of undocumented processes both within and outside of IT. This gives us a chance to work on systems development, change management, methodologies, security and so on. We've put in place some better answers that are better documented across sites so future audits will be easier to digest. And we'll have an IT organization that will be better managed.

Plexus grew a lot by acquisition in the last five years, internationally and domestically. A lot of processes were done differently, and there were inconsistencies. Now we're taking the opportunity to put those fixes in place and propagate. We'll be a better company as a result. But this came from no shortage of effort. It was a substantial effort in 2004, and will be a substantial process through the first half of 2005.
How's your IT budget changing in 2005?

It's changed modestly -- under 10% growth. We scrutinized IT investments very carefully. The company has been through two to three years of IT projects, ERP consolidations and things like that. We've made a pretty substantial investment. We're reaching the point where, after we do our U.K. facilities, we'll focus on gleaning benefits out of systems deployed in many sites. The budgets reflect that and are less aggressive than they were in past years, but we've dubbed 2005 'the year of value.' We're trying to glean more out of the systems that we have. There are so many capabilities in these new systems that when you shove old processes into the new software, you get suboptimal results. So with deployment activities on the decline, we'll focus more of our energy -- IT and otherwise -- on value realization.

Click here to read the second half of the interview.
CHICAGO -- As the first CIO of Plexus, and in his first role as CIO, Tom Czajkowski has had his work cut out for him, but his background in business is helping. He sat down to talk with SearchCIO.com at last week's SIMposium conference to tell us about how the Sarbanes-Oxley Act has made the Neenah, Wis.-based electronic manufacturing services company better and how his budget is looking for 2005.

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