Meet my customer's customers!

For practitioners of the art/science of new (IT-) product development, CIO roundtables are a must attend. Many a time, such a practitioner faces oneself with a product-concept that sprung out of somebody's frustration/imagination, a product-concept that extrapolates somebody's strong feelings into a whole market. Therefore, getting together with a group of CIO's is as close as one can come to experiencing the reality oneself.

I happened to be involved recently in such a CIO roundtable, over a couple of days. Here's the background on the CIO's companies.

Day One:
Manufacturer: a US subsidiary of an Asian manufacturer of electronics;
Designer: A company that only designs stuff;
Agency: A quasi-governmental entity;

Day Two:
A retailer: A rather special one;
Financial: A diversified financial services company;

Here is my approximate transcript:

THEME #1: How to manage growth without adding personnel? Leverage IT to scale the company/IT as multiplier of existing resources!



Manufacturer's View:

Premise: IT gets information to more people faster;

Goal: Automating everything without adding personnel;

How: BPI & BPT initiatives;

Challenges:

1. For those people in the room things are OK, but for those outside the room it's about loosing control;
2. The IT leader problem: getting in the right place where business people make strategic decisions (i.e. informal networks where things happen)
3. --> It's not about IT, but relationships

Conclusion: A lot of the technology problems are about people's (not) wanting to use new systems--culture change, etc.

Context: Everybody in the industry buys the same tools, so business processes differentiate a supplier from the next; the next step is automation

Quote: "The exact process that I use is my only advantage for the next year!" after that, process automation

Outsourcing Views:

1. Outsourcing without offshoring doesn't save money!;
2. Outsourcing results in as much as 10% savings, however it ends up not being profitable;

Outsourcing challenge:

1. If you outsource for knowledge then you had better know how to get that back in house;
2. Understanding diversity of cultures is critical for good outsourcing (incentive system, trust, etc.);

What to know about outsourcing:

1. How much does it really cost you to outsource: socialization (i.e. making the same assumptions), coordination, etc.?
2. Outsourcing Business analysis and design: good;
3. Outsourcing coding : not good since it brings no value added;

ROI's:

1. No ROI internally but at corporate level they are lots of them with plenty of intangibles;
2. Should separate the cost of doing business (email, computer, etc.) from others and don't ask for ROI's over a long period of time;
3. I can do more with less;
4. ROI's have been misused and abused to the point they all sound like TV ads;

Words of wisdom: IT vendor, give me the biggest, fastest, and that can be absorbed--many times, several initiatives come into the same area and that's a problem for they cannot be absorbed!




Designer's View:

Premise: IT is good only in the context of what's important for business, what's mission critical, etc.

Industry challenge: When the OEM's slice their prices the suppliers have to figure out a way to do so as well;

Modus operandi:

1. Before improving a business process, ask if it can be eliminated
2. --> Is this business process a value adding one or is just a support function?
3. --> simplification / elimination;
4. Change the business process to comply with the IT tool--unless prevented by a strong business reason!

Context: A lot of IT activities are commodity (except for Dell's)

Challenge: Business leaders to understand what technology is

Solution to above challenge:

1. Insistence on formal communication;
2. Some IT leaders are assigned to talk to the business/design leaders;
3. Quarterly stirring committee--people at 2nd level of management (directors and senior managers) in charge with accounts payable etc.;
4. -->bi-directional flow of communication

Outsourcing:

1. 80% customers, 90% suppliers and 60% of sales force are in overseas
2. --> global environment
3. --> global support for customers, its own sales, and suppliers
4. --> outsourcing

Perspective on outsourcing: Outsourcing is not new (e.g. payroll, salesforce) but mission critical apps should stay in-house for control reasons

Outsourcing Challenge: Understanding culture is also important, otherwise contracts are just pieces of paper that need to be enforced in courts

ROI's:

1. Things need to be articulated in metrics that matter to the leadership (not money always!);
   
2. Investment driven by the need and not other considerations;
3. When a business case is made and a look at the total cost.

Agency:

Challenge: Educating business people about IT and not only the IT people about business;

Outsourcing:

1. "O"-word is forbidden;
2. Business wants to keep control (over accounting, back-office, etc.) so outsourcing is not liked;
3. However, it is CIO's job to consider all options;

Outsourcing challenge: What's gonna happen when things go wrong? If I am responsible I want to be in control.

Outsourcing potential:

1. Keep same level of service when ownership changes;
2. Pilots are good (learn a lot of info and risks are low);
3. Identify non-critical parts of the business and outsource them so you don't keep hiring;
4. How expensive is to bring things back in house if/when something goes wrong?

ROI's:

1. Intangibles are no good in an ROI analysis;
2. --> Don't tell me how much IT saves, but by how much my fixed cost decreases.

THEME #2: What is you biggest set of (IT) challenges?


Retailer:

Challenges:

1. Automation of the relationship with suppliers without cost to the suppliers (let Wal-Mart drive the RFID)
2. Compliance // MasterCard and Visa are imposing controls on the users of their cards that cannot be observed by themselves
3. Getting the telcos to wire the facilities (they sell all the right stuff in words but don't deliver)
4. Password change rule: "to be different from the last 4" is difficult/costly to be enforced
5. --> Solution Single Sign On (SSO)

SSO Problem: SSO would be a neat technology if it came at $10/user per annum;

SSO alternative: Leveraging Active Directory because it was too expensive to buy SSO!

Opportunities:

1. Technology today is so much easier to use that developing in-house applications is more and more doable HOWEVER, the problem is that in-house developed software needs to be documented, but then ERP-X support doesn't have all the answers typed up on paper either so it all comes down to the responsibility of the CIO;
2. Due to outsourcing pressures, IT people are normal again and one ought to look for in-house integration and development opportunities as well.

Challenge with outside software packages: 16 people are supporting 4 functional blocs of ERP-X, and next year they'll have to grow to be 20 --> too much for a general ledger or payable/receivable system!

Needs and Future Opportunities:

1. Mobile ways to get merchandise out of the store so that waiting in line will be cut down (it's not about cutting labor as much as keeping the flow)
2. Restaurant technology in supermarkets

Modus operandi: The only information on the customer is their credit card number held for 30 days by and at an outside highly-encrypted place

fCh Question on the above: How about the whole new etailing category exemplified by Amazon and E-Bay, and their IT-enabled ways of knowing everything about the customer? Not to mention the whole school of thought from the strategy consulting houses that calls for more numbers and data about the customer?

Retailer's CIO Answer: The pendulum is swinging back--it went too far into numbers and everybody is getting hurt. We offer our customers a (shopping) experience not cross-selling/marketing...

Quote: "I'd love to buy software that's reasonably priced; 3% is a good margin in retailing, 10% (as opposed to 50%) might be a good margin for the IT vendor too!"




Financial:

Challenges:

1. Information security;
2. Our Company name shall not be in the newspapers;
3. California and New York ask repositories of personal data to inform each and everyone of their customers in case there is a breach in data security, other states will follow;

Approach towards information security: Info security oversight committee (security, legal, compliance)

More (mundane) challenges: 1000 people in the branches who need to access 5 to 10 applications with different passwords/rules/scripts etc. --> SSO would be a good thing 27% to 32% of helpdesk calls were about password resets (clerks at $8/hour forget passwords from Friday to Monday)

SSO problem: The difficulty is not about logins and passwords, but scripts that launch the legacy financial applications.

Modus operandi: DIY doesn't work for banks! Too many applications coming from different and highly specialized vendors; internally, we develop only interfaces and intranets

Future needs:

1. Data warehouse (cross-selling opportunities etc.) due to the proliferation of too many SQL databases (a total 57);
2. Enterprise content management (archival, storage, retrieval, etc.)

Quote: "If you wait long enough in the industry, it's all going to come back: now, with ASP's, it's all about time sharing again!"