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?
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?
How do you handle re-staffing and re-skilling?
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?
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?
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.'
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.
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.
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.
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.
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.
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.
Governance is among the top three [challenges], but behind global deployment of common systems.
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.
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