To Jim Heskett

Harvard professor Jim Heskett raises a monthly challenge at HBS Working Knowledge. This month's topic is "Is Less Becoming More?". Here's my take:


Complexity problems with producers are seldom encountered by first movers. Complexity tends to creep in either as result of the producers' need for differentiation, product complexity, or as "me-too's," choice complexity. Indeed, when producers want to differentiate themselves, up to a point, the safest and quickest way to achieve that goal is to add features or increase product complexity. Moreover, striking analytically (as opposed to heuristically) the right level of complexity may not even be doable. Thus, the first impulse of some producers is to err by doing more. When successful, product complexity is being subsidized either by scale economies, as in software, or by the consumers' wants, as in luxury products. Choice complexity is usually brought about by those "me-too" producers that want to capitalize on the first-movers' R&D. Less search-costs, its net effect is to drive down prices, being subsidized by producers. It is remarkable though how Apple manages to achieve product simplicity and choice complexity with its iPod line of products. Product simplicity endears iPod with the consumer, while choice complexity helps Apple segment its customer base. As a side note, products start simple, and then get copied and more complicated until another category starts anew.

Regardless of the type of complexity, product or choice related, the consumer is ultimately overwhelmed. Worse yet, consumers may even experience frustration due to unfulfilling complexity of choice. An example could be found on the shelves with cereal boxes at your health-food store. Cereals come in about two dozen offerings, but chances are that you'll find just one to contain organic cereals without sugar. Maybe the producers' problem is the lack of perceived innovation/differentiation in plain and sugarless cereals.



Additionally, you may want to consider: Minimalist vs. Baroque Categories

Internet futures

Friends and foes alike are asking for a seat at the Internet-governance table through the formation of an international institution supplanting the US-based ICANN. The US Government responded with a Monroe Doctrine of our times. For more, check out Internet(s) at crossroads, posted on the sister site Ideas in Motion.

An unorthodox mix of voices

What an interesting phenomenon is shaping up at minimsft, right now! Due to either the exhaustion of more mundane subjects or the logical escalation of the conversation, minimsft has started tackling a subject of major importance for Microsoft: How Fit Is Steve Ballmer as the CEO of Microsoft? Judging by the comments on the subject, the conversation is spreading beyond the usual (SDE) suspects of the blog to embrace what seem to be Microsoft more sophisticated constituencies such as Company management and investors.

It is interesting how, by "ignoring" the conversation, Mr. Ballmer has attracted onto himself the lights of public scrutiny. For most, in the end, it doesn't matter who's raising the questions about the top guy as much as the rise of the right questions themselves.

How this whole episode in corporate communications will end? Your guess is as good as any. However, management at public companies is likely to have one more Sarbanes-Oaxley-type of burden to put up with: the "unorthodox" mix of voices coming from employees, customers, investors...


Addendum Oct 8, 2005

Apparently, there is at least one member of management at Microsoft, Ken Moss - General Manager MSN Web Search, who has read minimsft. Mr. Moss has "strong opinions on many of the points discussed on Mini’s blog and in the comments. But I’ll save those for another discussion." For the time being, Mr. Moss is only addressing a challenge to the anonymous employee behind Mini-Microsoft:
I have no idea who Mini is, but I would like to officially issue a challenge to him to come and do a totally anonymous informational interview with me. If he passes our hiring bar, I am confident that we can provide him with a way to feel inspired by Microsoft and the work we’re doing. We have many awesome features he can come and work on – and he’ll be able to ship them as soon as they’re ready since we update our service constantly.

I, and the rest of the management team, will do our very best to provide cover for any bureaucracy that may stand in his way. Mini will be free to innovate and ship software as fast as he is able to. He will be able to challenge himself to see how good he can be. He will be inspired and have a blast. I can almost guarantee that success won't be easy -- but I can guarantee the opportunity to challenge himself. If he does great work, he will get great rewards.
I find such an idea commendable--to invite an employee to an interview whereby s/he could work in an inspiring environment. Indeed, there are great individuals who get stuck in one organizational context or another, and the only way out/up is outside the organization. Having a second chance in the same place cannot hurt. However, a question still remains: Why would a manager make such an invite only to the person who, supposedly, is behind minimsft? What recommends an anonymous figure to such preferential treatment is an enigma to me... unless this is an attempt at tackling the Mini-Microsoft blog issue?

Hmm... I think the horse is out of the barn and enjoying, albeit in a contorted way, the blogosphere pastures. However, since investors and customers have joined in, minimsft is no longer an internal Microsoft affair. Thus, Microsoft management should kick into gear and treat the whole issue at least at a PR level. Observers of the whole phenomenon would probably welcome Mr. Moss' addressing any of the several MSN-related issues that have come up at Mini-Microsoft.

Addendum Oct. 17, 2005

On where Bill Gates sees himself in ten years:
I’ll be turning 60. I have to say, ten years older than me always seems like that’s when I’ll be old. When I was 40 I thought 50 would be that mark, and, now that I’m very close to that, No, no, no, that’s not being old. My life’s work in terms of creating a company is certainly around Microsoft. Software was what I thought about when I was very young and believed something dramatic could happen, and so the opportunity to be involved in that and shape that industry, that’s really my professional work.

Over the next ten years, my balance between the time I spend on philanthropic things vs. my full-time job will switch in favor of doing philanthropy. It does mean I need to get one of the great young people at Microsoft to get on the hot seat of setting product strategy. I love my job, it’s an amazing job, and I’ll always be able to have some mix of Microsoft and philanthropy.


Addendum: 12/02/2005


Kevin Schofield, General Manager with Microsoft Research, visits MiniMSFT and leaves the following comment:
Regarding Thinkweek documents, they are company confidential documents and should not be discussed outside the company. As employees who want to be trusted by our company, it's our responsibility to be trustworthy in return and not "go rogue" and leak confidential information.

For example, if there is indeed a thinkweek paper about taking MS private (I haven't tried to verify this) it's inappropriate for you to mention it here. Some reporter will read your comments, will start calling Microsoft asking for a copy of it and comments on the record, and will eventually nag enough people that someone will dig it up and leak it to the reporter. Or worse, they'll just make stuff up. This is a huge can of worms that you don't want to open.

Mini, I understand why you feel like you need to stay anonymous to be a public critic of Microsoft, and while I'm not sure I agree I certainly respect the reasoning and emotion behind that decision. You'd lose all respect in my book, however, if you start using the cloak of anonymity to leak confidential information. I think it's great that the company encourages a broad set of employees to read and discuss Thinkweek papers -- I love the philosophy that by default we should trust our employees -- but this is a relatively new trend for Thinkweek and I worry that they will be forced to re-think that policy if the papers keep leaking.

But by all means, I hope you enjoy reading the thinkweek papers. There's a lot of good stuff.
available here
Here's my reply:

Kevin, knowing that a GM with MSFT visits these pages confirms my suspicion that Mini-MSFT cannot be ignored where it counts a great deal (i.e. among the executives of the Company). Not being privy to the discussions you and your peers have about Mini-MSFT, I would certainly expect that, at least when you officially visit this place, some consideration is given to any one of the real issues people bring up. Addressing this forum obliquely does justice neither to your position with the Company nor to your public profile as illustrated by radio.weblogs.com/0133184/

The option of taking technology companies private again has been exercised by several (e.g. Trilogy, Seagate, Corel, etc.). In other words, changing the form of ownership of a company, from public to private, is just one of the several strategic options managers ought to consider. Since a prior comment here addresses so well such (im)possibility for Microsoft, one should be grateful to the public, if anonymous, intelligence, enabled by this blog, for saving some brain-cycles of Microsoft executives.


Addendum 1/19/06:

To the growing chorus enabled by blogger/minimsft, we should hail the latest voices: Microsoft Partners'. To judge the amount of scripting vs. improvisation, the over/under-tones, and any other parameter in these folks' tunes, have a look here: http://minimsft.blogspot.com/2006/01/when-partners-collide.html

And now, the $10k-question: How soon will the top two acknowledge the minimsft- phenomenon?

On sources of technology innovation


Two recent comments, posted at Mini-Microsoft, have given me some food for thought. Please, read through and ...
  1. Oh by the way, there is the SmartWatch to look out for. You know - BillG's innovation that made the IEEE Spectrum list of the ten dumbest ideas of the year? LOL, that's the kind of innovation Microsoft is famous for!
  2. The sad fact is that our execs are now so very disconnected from the real morale/culture problem. They think that somehow just shipping more product will help. NOOO, that's not it. It's the fact that our execs don't understand what it's like to be an IC, to want to just get something done, get credit for it and get paid well to do it...and NOT be getting micro/process managed to death while you're doing it. That's it, plain and simple.
... answer: Could multi-(b/m)illionaries innovate on behalf, and for the benefit, of your average JOE?
Since the collective intelligence is more apt to tackle such a question, I invite you, the reader, to think about this. Your comments will be appreciated!

From behind the NDA curtain

Considering the (qualifiable) success of Mini-Microsoft, a supposedly Citrix employee has launched a Mini Citrix blog. Is this part of a trend that's going to make corporate management honest, and overall better? Only time will tell. Meanwhile enjoy what the smart, and identity-less, folks say, despite the NDA curtain.

Is Koogle's successor the key to Google's future?


I can hardly imagine Google making the kind of money the investor community is anticipating without getting scores of unhappy users. Granted, Google is still far from Yahoo!'s misplaced and annoying advertising, but in the end how can anybody make that kind of money and remain Mr. Nice?

First off, how many people recall Koogle? He used to be Yahoo!'s CEO before Semel. Yahoo! needed a Semel to graduate from the do-only-good on the internet stage and start delivering the type of ROI the Street had been waiting for. Will Google's management and don't-be-evil philosophy change in time? Let's see: Eric Schmidt had given us a taste for how well he could maneuver a corporate entity, at Novell. Wasn't he the one who, among other things, sold SCO-Unix, yet later Novell bought SUSE-Linux? If Schmidt is replaced by a Semel's equivalent, people will talk about Page&Brin as they do now about Filo&Young.

So far, Google's achievements are:
  • Made most happy internet users;
  • Built one (of the most?) extraordinary internet infrastructures on commodity equipment;
  • Perfected an (IBM/CMU?) search/ranking algorithm for web pages to the point advertising subsidizes their turning upside-down business rules for ISVs;
  • Bought a few start-ups and released their nice technologies for free;
  • Seduced the Street into getting a $7Bn cash advance;
  • Created a supposedly phenomenal working environment at a larger scale;
  • By and large, lived by its don't-be-evil philosophy.

How far and where can Google grow from here?

I think most speculation on this is, to put it mildly, unwarranted. I'll leave it to those who need to trade such things. What we may anticipate is that an advertising-subsidized internet can become as Orwellian as they come. There is no such thing as free lunch, and those who expect it should reckon the difference between HBO and the big 4-5 major TV networks. The only problem is going to be the multiplicative factor of the internet.


Who should be afraid of Google?

IMO, its first casualties are going to be those businesses, targeting consumers, that don't understand simplicity commands a premium. More on this here--see the CHI Triad. Conversely, when companies are thinking too much in terms of closed-platforms, or closed-specs complements for their products and technologies, the inherent complexity is discounted. It is as if Microsoft or Intel started with the idea of a platform in mind, or DRM was contemporary to the first Walkman. So, when "new" at Microsoft is an extension of one of its platforms, and Intel tries to go with its first Itanium, they are not as mindful of the customer as they were when their success was growing. In these cases, the novelty is called Google, and AMD, respectively.

Another category that is living under potential threat would be our very selves--the users of Google technology. Indeed, the potential for Google's misusing personal information is so huge that one may want to pay just to be free.


Personal note

As far as I am concerned, my interaction with Google has been allright. While I have not received any discounts to the things I enjoy via Google, the little experiment I run with the smallest Google ad-box to the right of this posting is behaving. The displayed ads match the contents of this page anywhere from 45% to 85%. Yet, I have seen much worse on more popular pages...

Thank you for your attention and comments!

Comments I posted at Mini-Microsoft

Here are my comments posted in different places on the Mini-Microsoft Blog. In green-font are (snippets of) others' comments posted there that prompted me to reply.


I

It is interesting how, across most postings to Mini-Microsoft, most blame is directed at management. And, to a great extent, management is responsible--otherwise how in the sky could they justify their own compensation schemes?

In ancient times, people used to vent their passions during carnivals, when kings and fools exchanged places for a brief. In the long interval between carnival days, it used to be religion. In democracies, we have elections. Religion has been replaced by shows and morale building exercises (i.e. propaganda). When the individual (contributor) doesn't believe anymore in the show managers put on, it's time for a (ritual) reversal... So, managers, take notice!

Yet, where is the personal responsibility that arises from a conscious decision to grow up as individual and either clean up the mess around you or move on?In the end, let's face it, the cake is in only one place!


II

For the MSFT shareholder who asks why the Company has a finger in the gamming pie, I would venture to answer:
  • Because of digital convergence;
  • Because of no-longer growing revenues in those areas that have made him money so far;
  • Because it's fun for the engineers who work on it;
  • Because consumers welcome alternatives (to Sony and Nintendo);
  • Because it's there--as a growing market.
...should I go on?


III

Somebody at Mini-Microsoft quoted "Microsoft Corp. and Time Warner Inc. have been discussing potential online partnerships that would help the two companies better compete against rivals Google Inc. and Yahoo Inc. (Nasdaq:YHOO - news), two people familiar with the talks said Thursday."

MSN has always had a problem: it tried to be(at) AOL no matter what the users who were running to Yahoo! and Google were saying. Now, does anyone think that putting together two less-than-stellar entities will form something great? Hmmm, unless I am a hopeless geek, they should ask Carly--the former first lady at HPQ!


IV

Why is it that folks think Microsoft has lost it's agility? My guess is that most associate the Longhorn/Vista delays with this lost agility. I think this is a cop out. The systemic constipation inside of Microsoft around Longhorn/Vista is the result of the Chief Software Architect's failure to properly design and architect his vision of integrated innovation. Bill is an architect in name only.


The above comment raises some interesting (insider) points. For us, the outside observers, the big question nobody has been willing to ask is: "How much does BillG still deserve the position he appointed himself to?" Follow up question becomes: "When talking about accountability, how high up can one go?"

Be it as it may, we've seen how Scott McNealy and Larry Ellison have stepped aside to make room for new blood...

Few more interesting points, and I would welcome a conversation on the subject, are those related to MSOffice on Linux, getting together with Apple's music format at the expense of WMA, etc. That such points make for heresy at Microsoft goes without saying. I'm not sure though they make a lot of business sense.

Oh well, drop us a line, especially if you are PM in one of these areas. In any case, state your function at the Company!


V

The owner of, and MSFT participants to, the Mini-Microsoft blog might have done more (for better or worse) to set things in motion at Microsoft than scores of executive wonks. Hence the value of the internet in making the workplace more democratic. Now we should wait and see how well this does to business. I cross my fingers!


VI

From all incentive systems I've known, for large organizations, I had come to respect the most the one employed by McKinsey.

Consultants (at lower levels) rate their next-level-up manager/mentor anonymously, and are being rated by their manager. There is assumed flexibility for a junior consultant from a mentor to another. This inter-rating mechanism keeps most bastards honest, and people do actually get useful feedback for improvement.

For how long has this incentive system been in place at McKinsey? For as long as anybody at the Company remembers!

Now, incentive theory is really a chapter in the science of economics. Have you wondered why when you get in a cab, it starts with a few dollars on the meter as the driver turns the engine on? And, relative to the cost per mile, the starting-fee is not trivial. They make it so a driver gets enough from such starting-fees that he's got an incentive to drive you in the shortest time to destination...


VII

Dear fellow minis,I really love this blog and I am a huge fan of the "Mini" himself. But please quit with the constant field sales bashing,e.g - that shit might get salespeople fired up but for your average introverted dev it does nothing but promote ennui.We both love and fear for the company just like you do. Signed, Longtime EPG account rep (lowest of the low but I have served one of our biggest customers for 7 years and beleive me the software you develop (a) isn't easy to sell and (b) it's a total b***tch to deploy across an enterprise.

Sometimes, it takes an "EPG account rep" to see the gap between the coolest/innovative ideas and happy customers--some people call it "process." Other times, nothing does the trick but a higher stock-price.

Thinking more about the review process at MSFT, it looks like it encourages massive politicking due to its one-sidedness. I would be surprised if, in fact, there have not been executive drives to streamline middle management and increase accountability. But hey, everyone has got a friend, with a lower IQ, whom can be turned into a power base through the one-sided review process.

In other words, a bad process may be as costly as no process...


VIII

Bring back some sense of fairness between execs and rank and file. 320,000 shares for Kevin Turner? Is Kevin really worth 320X+ more than the average good employee? Should a grossly underperforming exex like Burgum not only retian his job but cash a couple $M every Q? I don't think so.


I wonder since when has it become an issue the fairness of executive pay? By and large, little is fair about it, and so is life!

Having incompetent executives is a another matter. The novelty about this latter notion is given by this couple of key elements:
  1. MSFT has smart, and type-A, personalities who came to the Company after/under genetically less endowed managers;
  2. The employee-liberating, and -enabling, capabilities of a blog.
The rest will be a new page in corporate reform, driven by the explicit action of a vocal, and newly empowered, minority.


IX

Imagine if Apple suddenly decided to offer MAC OS 10 on standard Dell platforms, and when you called Dell, they asked which OS you wanted.


...new UI in Office 12 with other 23.984 useless featuress (where each running Office app will eat 70 MB of the memory)...

Reading some recent opinions posted at Mini-Microsoft about how several of MSFT products/features turned into resource hogs, let me put it in a slightly different (non-Google) context:

There has been a yesterday's company whose platform runs most efficiently and effectively out there. Its customers loved it so much that they saw no need to upgrade--no, it's not about some mainframe architecture.

So, what happened? Hardware system vendors (HSV's) decided to stop offering support for the old platform. The old hardware would either crash or not interconnect with the newest hardware. In the end, customers had to jump ship. Who benefited from this? MSFT, Intel, and al other usual suspects in the HSV space. Who lost? The customers and Novell.

Fast forward (I) to the early 2000. IBM, not to be fooled twice, drops a lot of mainframe-, and new-IP, into Linux (e.g. virtualization, driver support). Not to be outdone, the rest of the HSV band (formerly, of MSFT-brothers), with the partial exception of Dell, joins IBM in supporting straight Linux, or one of its corporate flavors (Red Hat, SUSE/Novell). As a measure of this transformation, 5 years ago, who would have thought SUN would complement both Solaris and Sparc with Linux and Intel/AMD, or the fact that Oracle would run on Linux??? And, except for IBM (and possible Oracle) nobody does it despite Microsoft.

Fast forward (II) to the Google's IPO. The public at large gets a taste of Google's context (i.e. simple things in small-sized software).

Fast forward (III) to 2005 corporate customers. Here's the voice of a select few. What is the message? They want to DO MORE WITH LESS!

Fast forward (IV) to 2005 HSVs and ISVs. Oracle and IBM are doing/promoting about grids, and most every HSV is doing blades. How do I translate III & IV? Optimal allocation of IT resources or better ROI's for the IT budgets.

Fast forward (final) to mini-msft blog. Microsoft engineers ponder how it is possible that their Company continues to invest in countless obscure Office-like features. Yeah folks, the genie is out, yet who knows when the turn comes for your management to think of growth alternatives to bloating software.

As end-user I've been able to tolerate MSFT annoyances up until two episodes. (1) When a customer from abroad emails me an audio-clip he made using MSFT tools, I could not play it back until Windows Media Player checked with some DRM-god on the internet. (2) Hearing the complaints of a partner (marketing-strategy type) about his Dell laptop slowing down I suggested, and then wanted to initiate, a reinstallation of the system from the vendor's CD. I was told that, because the XP version on the CD was older than the (patched) one on the laptop, I could not reinstall the system.

Why did I share the above two anecdotes with the readers here? To illustrate how MSFT-neutral customers might have grown unhappy with MSFT to the point they'd switch when alternatives show up. For the (mini-)Microsoft engineers, such consideration should only nuance the(ir) conversation--after all, they've gotten paid their salaries from such tactics. For those in management, it is a whole different thing. It's up to them whether or not to take their customers and (minimsft-)employees seriously, regardless of their particular biases.


X

Somebody posted a remark about Apple grabbing mindshare with the iPod and OS X. As somebody who is completely outside of Microsoft -- I'm a journalist, but very much not tech -- I can't stress enough how right that is. It is not only the products like the iPod, it is the decisions they have made, like yanking the iPod Mini at the hight of its sales to market the Nano. The collective reaction among the people I know was first something like God, the balls on those guys! followed by God, is that beautiful!. And the "halo effect", though probably overrated, is real. All the Apple people in my department have to do is say something like "If you think that is cool, you should see my Mac."

I think folks in MSFT Entertainment Group have taken notice--As proof, msofties themselves are saying the latest XBox is something they look forward to buying.

"If you think that is cool, you should see my Mac."

Now this is major indeed. Not as much for its effects--when Apple started going down, it still offered a greater experience than MSFT--as for its power of example for companies dealing with consumers. The platform approach at MSFT, which made them so big, sustains a vicious circle in which some products are put on the market without being required to compete on their own merits. We are probably witnessing in fact the price platforms are exacting on a firm by skewing the behavior of marketing and development folks. On their part, customers who sunk so many resources in MSFT technologies have little option but keep "consolidating" the platform. The ideal situation would be when customers like so much a product that they want to try others from the same vendor. Only then should the vendor look for platform synergies. Again, this would be ideal.


XI

More on mini-Microsoft
On MicroSoft

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!"