CIO Straight Talk Issue 4

www.straightalkonline.com Issue Number 4

DIAMOND

AWARDWINNER

2013 ITSMA Marketing Excelle

nce

Awar

dsThou

ght Leadership

Read CIO Straight Talk on your mobile device — for free!

Apple Newsstand Magzter - Magazine Store Nxtbook Nxtstand

partner.linkedin.com/ciostraighttalk

Join our group

Soon to be available on:

magazine.straighttalkonline.com/issue4

interactive

Issue Num

ber 4

C

IO Straight Talk

Read CIO Straight Talk on your m

obile device — for free!

Apple New

sstandM

agzter - Magazine Store

Nxtbook N

xtstand


Join our group


magazine.straighttalkonline.com

/issue4

interactive

Straight Talking

06

Content

Innovation by Amateurs 34Scott Blanchette, SVP and CIO, Vanguard Health Systems, and MIT Sloan CIO Award Winner, 2013

28SAP Runs SAP: How Technology Made It HappenMichael Golz, SVP and CIO, SAP Americas

Business-Driven ITand IT-Driven Business

24William E. Klitgaard, Corporate SVP and CIO, Covance

When Efficiency and Flexibility Trump All

20Mathew Jackson, Services Director,UK Asset Resolution

14Crossing the FinishLine TogetherPatricia K. Poppe, VP, Customer Experience and Operations, andMamatha Chamarthi, VP and CIO, Consumers Energy

Cover Article7 Things CIOs Are Doing to Get Ahead in the

DIGITAL ECONOMY• Experience Talks• The CIO’s Choice

• The End of IT Innovation• Other Voices

Plus:

Spotlight

39

44

Being a CIO: It’s Not a Job,It’s a LifestyleJohn Halamka, CIO, Beth Israel Deaconess Medical Center, and author of Life as a Healthcare CIO blog

Always On, Always in ContextRobert Scoble, Startup Liaison Officer,Rackspace, and author of the blog Scobleizer

The CIO-CMODream Team

The Rise of the Chief Marketing TechnologistScott Brinker, author of the “Chief Marketing Technologist” blog

Double Duty: Living the CIO–CMO ConvergenceRom Hendler, former CMO and Interim CIO, Las Vegas Sands

New-Age OutsourcingFive outsourcing advisors describeemerging models

Points of View

View from theTechnology Blogosphere

54 58

Issue Number 4

I wanted to share with you some thoughts that I believe are relevant as our company transforms itself – or is trans-formed, like it or not, by the business environment – into a digital enterprise.

First, a few observations about your customer – our customer – in this context.

I’m not telling you anything new when I say that customers have changed, as has their purchase process. It’s no longer enough to create a great television spot or print ad, then sit back as the customer walks into the store or calls a toll free number. For that matter, it’s no longer enough for us to hire a top-notch sales force as a means of generating revenue growth from our business customers. The leverage that you – or Sales – once had over the customer in terms of control-ling the interaction is quickly becoming irrelevant.

Today’s buyer is smart, resourceful, and connected through social media, someone who does his or her own research before entering the formal marketing and selling channels. What Google breathlessly calls the “zero moment of truth” – when a buyer goes online to learn about a product or service, usually before any interaction with the company that offers it – is reversing traditional information asymmetry, in favor of the buyer. Whatever you think of the term, a marketer that is able to positively interact with or influence a potential buyer at this moment will regain some of the power that has migrated to the customer.

Next, a few thoughts on technology:

Influencing a buyer online is a very different undertaking than influencing a buyer in the traditional way. Smart CMOs like you – and, if I may, business-savvy CIOs like me – are seeing opportunities to influence customer behavior through technology. This is ushering in an era of marketing and technology convergence, as marketers try to grow the top line by leveraging customer data – much of it “big data” – and using technology to enhance the customer experience.

Again, you probably already know most of this. Here’s something you may be less familiar with. Marketing technologies are proliferating at a dizzying rate. According to my last count, some 350 different companies are offering marketing technology services in five broad areas: digital marketing channels, marketing automation, analytics, data integration, and product extension. Some people predict that we’ll soon see a new position – in fact, a new profession – on your team: the marketing technologist.

Hence, the oft-quoted Gartner prediction that, by 2017, the CMO will spend more on information technology than the CIO will. Well, I want to be clear about this: I don’t care who spends the money. But I want to be sure it is spent intelli-gently. Collaboration between the two of us can help ensure that happens.

Attached are several interesting articles I’ve collected on this topic. Let’s talk when you’ve had a chance to look at them – a conversation that I hope will be the first of many. Working together would benefit both of us – not to mention the enterprise!

I’m happy to swing by to chat about this, if you want to suggest a time. In the words of a famous actor, “I think this could be the beginning of a beautiful friendship.”

Subject: IT-Marketing Collaboration

From: Chief Information Officer

To: Chief Marketing OfficerCc: Head of Sales

Memo to the Chief Marketing OfficerFrom the CIO

Atul SharmaHCL Technologies1st Floor, A-2, Sector – 3Noida – 201301, Uttar [email protected]

CIO Straight Talk is a periodical published by HCL Technolo-gies (HCLT) meant for its existing and prospective clients for information purposes. The information contained in the publication contains general views based on the experiences of technology practitioners and subject matter experts within and outside of HCLT, expressed by them in their individual capacity and in no event shall HCLT (including its affiliates and group companies) be liable for any claim, damages or any other liability arising out of or resulting from this publication. You are advised to seek professional advice before making any decision that may affect your business. All contents are copyright © 2013 by HCL Technologies Ltd. All rights reserved. Excerpts may be reprinted with attribu-tion to HCL Technologies.

Pride and Appreciation In early November, CIO Straight Talk received an ITSMA Diamond Award recognizing the global IT industry’s top thought leadership initiative. CIO Straight Talk – the magazine, along with our website, LinkedIn community, webcast series, in-person events, YouTube channel, and Twitter feed – was judged the best program out of 29 submissions in the thought leadership category. (ITSMA, originally the IT Services Marketing Association, is a research organi-zation serving B2B technology, communications, and professional services companies.)

The seal on the cover of this issue is an expression of our pride in receiving the award.

This letter is an expression of our appreciation. No sooner had we begun patting ourselves on the

back than we realized what a debt of gratitude we owe to those who have contributed to Straight Talk over the past three years – whether as an author or inter-view subject for the magazine, a presenter at one of our webcasts or events, or a participant in the conversa-tions that take place on Straight Talk Interactive, the LinkedIn group.

We are beholden to them because Straight Talk was honored for its unusual approach to thought leadership marketing, one that essentially turns the concept on its head.

We believe that some of the most valuable thinking on information technology resides with IT profession-als. Straight Talk features insights that practitioners have gained from years of hands-on experience. Our aim is to share this often untapped source of industry wisdom with our contributors’ peers – to be a publica-tion “for CIOs from CIOs.” The ITSMA award was further validation of our belief in practitioner thought leadership.

But a concept is one thing; content is another. There would be no CIO Straight Talk without the CIOs and other IT leaders who have shared their thinking via one of Straight Talk’s content platforms. Those practitioners deserve most of the credit for CIO Straight Talk’s success.

So please join me in congratulating these “co-recipients” of the ITSMA Thought Leadership award.

Or, if you’re one of these winners yourself – well, pat yourself on the back.

Paul HempEditor, CIO Straight Talk

Editor Paul Hemp

Managing Editor Anirban Sanyal

Contributing Editors Gil Press, Abbie Lundberg, Stephanie Overby

Copy Editor Amy Halliday

Art Director Neha Sharma

Designer Harvinder Singh

Studio Lalit Kumar

Events, Webcasts, and Leverage Mishtun Chatterjee, Atul Sharma

Editorial Advisory Board Anant Gupta, Krishnan Chatterjee, Apurva Chamaria, Abhishek Shankar

Printing Quality Printing, Pittsfield, MA Lustra Print Process Pvt. Ltd., New Delhi

Digital Amrish Sharma, Aradhana Sharma, Gil Press, Shristi Dugar, Suresh L., Shakti Srivastava

Acknowledgements

Contact Us

CIO Straight Talk Team

Ajay Nair, Amit Gandhi, Bharani Iyer, Edward Gardner, Elka Ghudial, James Riley, Jayabrata Nag, Joe Hogan, Mahesh Bhatt, Mohit Agarwal, Pankaj Kumar, Paresh Vankar, Steve Cardell, Vish Muralidharan

For information on reprinting articles and all other correspondence, please contact:

Big Data: A Rare Business Leadership Opportunity for CIOs

Plus:Pullout poster (“Welcome to the Big Data Zoo”)

“A Very Short History of Big Data”

Highlights from Issue Number 3

Straight TalkingActionable insights from the CIOs of Lafarge, Land O’ Lakes, EMI Music, and other forward-looking companies

Big Thinking Bill Inmon, the “father of data warehousing,” on big data

Trends 2013 Seven HCL experts on 2013’s top IT-related developments

Go to: magazine.straighttalkonline.com/issue3

Also in the issue:

Are Doing to Get Ahead in the

Cover Article

7 THINGS CIOs DIGITAL ECONOMY

08 CIO Straight Talk

We convened a “virtual focus group” of IT leaders to find out what kind of moves CIOs are making – what steps CIOs should be taking – in order to succeed in today’s brave new digital world. Here is the group's list of must-do's for their CIO peers.

What’s a CIO to do?

A growing chorus is telling IT leaders that they are on the verge of extinction. They stand in the way of progress, fail to understand the needs of the business, and fall hope-lessly behind in meeting the challenges of new and exciting digital business opportunities.

To prevent their role from becoming irrelevant and the IT function from disappearing, CIOs are told they should “seize the initiative” and “change the conversa-tion”; they are admonished to “collaborate” and “stay relevant.” Mostly, they are urged to “innovate” and keep the IT infrastructure humming — to lead and be creative while at the same time managing cost efficiently and controlling unobtrusively the information technology framework that supports the ever-changing needs of the enterprise. (See the sidebar “The CIO’s Choice.”)

All good suggestions. And certainly all senior execu-tives should have mastered multitasking by now. Here, however, we would like to offer some more down-to-earth advice, the first draft of a must-do list for CIOs in the digital economy, drawn from steps IT executives are taking today to upgrade their roles and transform the IT function into one that has a direct and profitable impact on the business.

To begin compiling our list, we assembled a virtual focus group of seasoned IT executives, all of them mem-bers of the CIO Straight Talk Interactive group on LinkedIn. We talked to Ann Alrich, former CIO of Asia-Pacific and various business units at DuPont; Scott Blanchette, Senior Vice President and CIO at Vanguard Health Systems; Ed Jurica, former Senior Vice President and CIO at the fashion clothing company Fossil; Alexan-dre Kozlov, CIO of the Extruded Products Division at Norsk Hydro, an aluminum and renewable energy company; Isaac Sacolick, CIO at McGraw Hill Construc

tion, the McGraw Hill Financial company that helps connect people, projects, and products across the construction industry; and Stephen Thurlbeck, Vice President of R&D at Complete Innovations, a leading global provider of technology solutions for mobile work-force management. (Learn more about their backgrounds in the sidebar “Experience Talks.”)

The picture that emerged from our talks with these leaders is of an IT function that is both stable and innova-tive, fault tolerant and fast learning, reliable and experi-mental. It is an environment characterized by paradox: safe is risky, stable is dangerous. Conversely, constant change ensures resilience, experimentation safeguards continuity. These IT leaders work to seamlessly integrate IT with the business and find ways to innovate while “keeping the lights on.”

The conversations also revealed that the IT function is looking more and more like a web-native company such as Google or Amazon — call it the Google-ization of IT. Organizations that want to take advantage of the opportunities presented by the digitization of everything increasingly infuse information technology into every-thing they do — their operations, their products and services, the way they go to market, their interactions with customers and prospects. IT no longer drives the business. IT is the business.

IT is also innovative. Contrary to the widespread belief only ten years ago that IT’s innovative days were over, new ways to practice enterprise IT and new tools and technologies emerge all the time. The greatest and most radical changes over the past decade happened in web-native companies, where the complete fusion of IT and the business has driven IT innovation on an unprec-edented scale. (See the sidebar “The End of IT Innova-tion?”)


The CIOs we talked to highlighted specific actions they have taken to bring some of the characteristics of web-native companies to their organizations — in some cases with a twist or two of their own.

The list we present here is tentative and probably incomplete. We invite you to refine and expand it by joining the conversation on the CIO Straight Talk Interactive group on LinkedIn. (Visit http://partner.linkedin.com/CIOStraightTalk to request membership in the group.)

1. Never “work with the business”

Web-native companies have built their businesses on IT innovation. Engineers and product managers in these companies are technologists, many of whom are involved in developing and maintaining a vast IT infrastructure.

Outside of the websphere, leading companies are moving toward a seam-less integration, even a fusion, of business and IT. “The paradigm of there being a business and there being an IT department trying to drive an alignment is antiquated,” says Scott Blanchette. “You’ve got to do more than just ‘work with the business’ — really, I’m offended by that term, because we’re as much the business as anything else around here.”

Ed Jurica found a creative way to drive home that point, one that his team members recalled years later. He told them, “When you find yourself saying ‘the business,’ hold your tongue with your fingers and say ‘IT is the business.’ It drives home the point that we are as important as the business and completely integrated with it.”

At Vanguard Health Systems, Blanchette took the idea to its practical conclusion, embedding IT in the business units. “IT is no different than the finance function or the service delivery function or the clinical function,” he notes. “I come from Northern California, and that is just the way companies in Silicon Valley are run.”

True to his roots, Blanchette believes IT should allow for “some level of chaos” but also provide mechanisms for supervising it. (See “Innovation by Amateurs,” page 34.) It’s a cross-enterprise role that has multiple dimen-sions, but its essence is the technology expertise and experience that resides in IT and is embodied by the CIO. These are skills and know-how that are more important than ever to the management of any enterprise.

Being part of the business means taking initiative. And if IT is seamlessly integrated with the business, there is no reason why a CIO should not help lead enterprise-wide change, innovation, and transformation, just like other senior business executives. As Alexandre Kozlov argues, “CIOs shouldn’t wait to be invited to the table; they should make themselves relevant to the

business and contribute to generating revenues.” Ann Alrich agrees: “It’s absolutely imperative that the CIO is a member of the senior business team so he or she is involved in developing the future plans and the strategy for the business.”

Stephen Thurlbeck has done just that at Complete Innovations. “Oddly enough from someone focused on technology, I’m pushing the balanced scorecard approach throughout the business,” he says. “This is a big change: I’m pushing from within IT, but ultimately it’s going to benefit the entire company.”

2. Learn fast, but contain failure

In a 1982 paper, the late computer scientist Jim Gray wrote about “fail-fast” in the context of applying hardware fault-tolerant principles to software engineering — each hardware or software module “either does the right thing or stops.” By insulating each software module from the others, Gray and other experts in fault-tolerant systems achieved what they called “fault containment,” ensuring a quick detec-tion of errors without impacting the entire system.

Since then, the Agile Software Development movement adopted and promoted the concept, which is probably how the fail-fast idea perme-ated the culture of Silicon Valley and became a business philosophy. Now it’s one that IT organizations are using to become an indispensable part of their companies’ product development efforts.

Many IT teams today are using Agile practices, including constructing experiments to see whether something fails or succeeds. Isaac Sacolick points out that his team has been doing that through “spikes,” projects of short duration used to research a concept or

create a simple prototype. “If I have to integrate with a new API and we are not sure how complex it is, we are going to try to experiment with that,” he says. And if the experiment is a failure? That’s OK.

Speed, the “fast” element of “fail fast,” also offers crucial benefits. As Stephen Thurlbeck points out, “Everybody is on the same page at the same time. We are making changes when we can and as we should, rather than going into the development black box for months and months and coming out with something that either didn’t have the right specs or was not produced correctly.”

Scott Blanchette cautions that fail-fast is fine as long as it doesn’t become “fail fast and often.” Sometimes the approach can “morph into a justification for not doing sufficient due diligence or sufficient planning,” he notes.

The key to fast learning is failure containment. If you design your experiments carefully, you ensure that

“'Work with the business' — really, I’m offended by that term, because we’re

as much the business as anything else around here.”

Scott Blanchette,Senior Vice President and CIO,

Vanguard Health Systems


innovative ideas get a well-defined test and do not affect ongoing work, and that lessons are analyzed quickly to identify the next step.

3. Cut time spent "keeping the lights on"

How do you make time for experimentation? As the pointy-haired boss in a Dilbert cartoon tells his team, “If you come up with a good idea, I’ll let you take on the project in addition to your existing work.” But according to the CIOs we talked to, it is possible to find ways to channel the energies of IT staff beyond day-to-day work.

One approach is to take a close look at routine and time-consuming tasks. Ed Jurica notes that his organi-zation set a goal of reducing by 10% the time and effort it would devote to production support, thereby freeing up 15 FTEs for work that could generate more business value. “If it’s a tedious task that has to be done over and over again,” he says, “perhaps a small investment in a tool or developing a utility in-house could alleviate the time spent on it.”

Issac Sacolick has also found ways to separate ongo-ing support from experimental and innovative develop-ment work, directing a lot of routine maintenance work to outsourcing partners. In addition to using “spikes,” discussed above, he dedicates small groups for four to eight weeks to larger experimental projects. “I make these opportunities very transparent,” he says, “creating in the process a culture of innovation. I make it transpar-ent because you don’t know who is going to respond to it in your group and because you want to use the opportu-nity to find business sponsors who want to get involved.”

4. Adopt a few digital natives

Once you make time for experimentation and inno-vation, what are some of the sources of new ideas? It may be worthwhile to think about this in demo-graphic terms. Here are some fairly well known statis-tics: The median age at Google is 29; at Facebook, it’s 28. These companies are leading indicators for the changing face of the global workforce over the next decade. In the U.S., where the overall median age of workers is 42.3, there are an estimated 80 million young Americans who belong to the so-called millennial generation, roughly ages 18 to 35. By next year, millennials are expected to constitute 36% of the U.S. workforce, and by 2020, they will account for nearly half of all workers.

Scott Blanchette has seen this demographic shift in action: “A big percentage of our workforce, especially the clinical workforce — nurses and doctors — are very young. They are not technologists, but they have a tremendous portfolio of technical competencies that we want to tap into, because they are always finding new ways to solve old problems.”

Many CIOs are not targeting young professionals who were “baptized in technology,” Blanchette notes, in large part because of structured R&D approaches, which are hierarchical in nature. “But we spend a lot of our time and effort tapping into the power of the base of the pyramid.”In addition to offering innovative ideas on how

Experience TalksThe six senior IT leaders we interviewed for this article have among them at least 120 years of experience, mostly in managing IT operations and innovation in a variety of industries and types of businesses.

Ann Alrich is the former CIO of Asia-Pacific and various business units at DuPont, one of the world’s largest chemical companies, which is headquartered in Wilmington, Delaware.

Scott Blanchette is Senior Vice President and CIO of Vanguard Health Systems, an operator of hospitals and other medical facilities in five U.S. states. The company, which recently agreed to be acquired by Tenet Healthcare, also an operator of hospitals, is headquartered in Nashville, Tennessee.

Ed Jurica is former Senior Vice President and CIO of Fossil, a global design, marketing, and distribution company that specializes in consumer fashion accessories, with more than 400 retail and 4,000 wholesale locations worldwide. It is headquartered in Richardson, Texas.

Alexandre Kozlov is CIO of the Extruded Products Division at Norsk Hydro, a global supplier of aluminum with activities throughout the value chain, from bauxite extraction to the production of rolled and extruded aluminum products and building systems. It is headquartered in Oslo, Norway.

Isaac Sacolick is CIO at McGraw Hill Construction, which provides data, news, and intelligence to construction professionals. It is based in New York.

Stephen Thurlbeck is Vice President of R&D at Complete Innovations, a leading global provider of mission-critical fleet, asset, and mobile workforce management solutions. It is based in Markham, Canada.


to use IT to achieve business goals, digital natives also help change the way IT does its work, especially in the area of training and documentation. Ed Jurica observes that digital natives, who grew up immersed in Nintendo and PlayStation, approach learning in an entirely new way. “There are no instruction manuals, there is no ‘take a class,’” he observes. “It’s all emergent: ‘Give me the environment and let me play. If I have questions, I will open up three different chat tools and I will pull other people in to look for FAQs and shortcuts. I will learn by doing.’” Consequently, the training materials these professionals like to consume are more like games, allow-ing users to experiment and play with the technology.

In addition to doing the obvious to engage digital natives — reaching out through social media — you may want to appoint a member of your management team to be the “digital natives czar,” responsible for soliciting innovative ideas from 20-something employees through-out the enterprise and addressing their specific IT needs and requirements. That czar could also create a “digital natives council” with representatives from various departments and functions who meet on a regular basis to provide input to IT.

5. Hire some business-savvy seniors

Young people are not the only source of new ideas and fresh perspectives. Experienced professionals can change the dynamics of any team, increasing its creativity through a diversity of views based on deep knowledge and extensive experience and serving as mentors to senior executives. As one of Stephen Thurlbeck’s senior people told him, “I’m going to hire someone who is better than me. I love to mentor my people — but who’s mentoring me?”

“Our senior people are looking for people who have different experience,” Thurlbeck says. But “different experience” means not just experience with technology. “My preferred job description right now is ‘We are looking for a .net artisan who will be missed by both their technology and business colleagues when they leave their current employer,’” he says.

Business savvy is a top hiring criterion for Ann Alrich. “If I could have ten people on my team who know every

thing there is to know about IT or ten people who under-stand various aspects of the business, I would take the business people any day,” she says. “You can buy the technology and the knowledge of the technology, but the ability to connect with the business and have a business-level conversation is absolutely crucial. When I interview people I always look for the softer skills — I try to find out whether they have a customer focus, if they care about the fact that this is a business we are running. What we do is not just technology for technology’s sake; it is applied technology.”

The business experience does not have to be industry-specific. Observes Alrich: “IT skills are transfer-rable from one industry to another. I’ve seen people tremendously successful in an area where they have never worked before, because they were willing to adapt and they had a well-rounded skill set, including soft skills.”

Stephen Thurlbeck agrees. “It doesn’t matter to me if you are in our industry,” he says. “A smart person who cares and wants to make a difference is worth ten indus-try insiders.” Alexandre Kozlov knows this from experi-ence, having been hired at Norsk Hydro after a long tenure as a CIO in the consumer goods industry. “Fortu-nately, the executives who interviewed me saw that my lack of immediate hands-on experience in the aluminum industry was not a showstopper in my case. There are several important leadership skills — for example, how you position IT in relation to the business — that can be easily ported from one industry to another.”

6. Understand those business buzzwords

Learning is a key to innovation. The CIOs we interviewed stressed the importance of business learning, in particu-lar, for developing the careers and skills of IT employees. “IT people need to enmesh themselves in the area of the business where they are working and take advan-tage of business-related educational opportunities inside and outside the company,” Ann Alrich says. An IT employee working in supply chain manage-ment, for example, could attend a conference on that topic, she notes. Alexandre Kozlov is also adamant about the value of business education for IT but urges people to look outside their own areas: “Attending gatherings that are not directly related to

“We hoped that a couple of lightbulbs would go off and that the event would help [business and IT] innovate together.”

Ed Jurica,Former Senior Vice President and CIO, Fossil

“CIOs shouldn’t wait to be invited to the table; they should make themselves relevant to the business and contribute to generating revenues.”

Alexandre Kozlov,CIO, Extruded Products Division, Norsk Hydro


“It doesn’t matter to me if you are in our industry. A smart person who cares and wants to make a difference is worth ten industry insiders.”

Stephen Thurlbeck,Vice President, R&D, Complete Innovations

your industry might even spark better ideas because you find things that people do in other industries and it may force you to think. The wider the spectrum, the better.”

But in an era of tight budgets, it’s important to get a return on the investment in outside events and training. Stephen Thurlbeck does that by requiring people to present what they learned at conferences to their teams and to use it to develop a plan for a change in the organization. Ed Jurica manages the costs of attending conferences by focusing on local events, where he sends both an IT manager and his or her business partner. “That can be cost-effective, and it can cement those relationships,” he notes.

Learning can happen in a variety of ways, includ-ing the do-it-yourself kind. At Fossil, Jurica’s IT organization put together a business conference for the entire company, in which IT employees gave presentations and demonstrations and answered questions about new tools and applications. Hedefrayed the cost of the conference by asking IT vendors to sponsor it. “The intent was not to use three-letter acronyms or talk about feeds and speeds but to talk about our company, what we could be doing, and to encourage discussion with our business partners,” he says. “We hoped that a couple of lightbulbs would go off and that the event would help us innovate together.”

7. Raise your visibility outside your organization

Web-native companies have broken the boundaries between the “corporation” and the outside world, allow-ing and even encouraging employees to be externally visible through blogs, conference presentations, interviews, and social media. That visibility goes hand in hand with communicating and promoting what the company does and what it’s all about.

This attitude is now more prevalent in traditional companies and is even changing what they used to regard as one of their most insular positions — that of the CIO. “Speaking at conferences may not necessarily be the best way to make sure that you are driving every dime you can out of your operating budget,” says Scott Blanchette.

The CIO’s ChoiceThese are the best of times and the worst of times for CIOs. Information technology is omnipresent, exerting a significant and growing influence on the way we live and work. What CIOs have been doing for a living for so many years — managing digital data and information — has become an integral, sometimes crucial, component of business success, improved government services, disease prevention, and help for the disad-vantaged. It has permeated all aspects of our lives, including playing a prominent role as a required companion for most of our leisure activities. Data is now talked about as the “oil” that fuels the digital economy. Data’s new status means, however, that there are many new players interested in owning, excavating, and managing it. Chief marketing officers (CMOs) are investing heavily in IT tools to collect and mine external data, in some cases poised to overtake the CIO in the scope and depth of their responsibility for IT resources. CEOs who want to make sure their companies thrive in the digital economy, or are simply annoyed by their competitors’ successful data mining exploits, are appointing veterans of the web as Chief Digital Officers (CDOs), in charge of all the digital assets of the business and responsible for identifying and pursuing new data-driven revenue streams. Data scientists and data entrepreneurs are distinguishing themselves in business, government, and nonprofits as the new go-to experts for everything related to data and its analysis. IT is everywhere, and “gigabyte” is something most people understand and talk about — which means that everybody is now a CIO. Says Alexandre Kozlov, CIO at Norsk Hydro, a global supplier of aluminum: “It’s very difficult to explain to an executive that it takes so many days to get a new computer installed when he says, ‘My nephew, who is ten, configured and installed my new iPad in minutes. How come you guys with university educations and so many years in the industry are telling me that it takes all this time to get a standard image for a Dell laptop?’” CIOs everywhere face a career-defining choice. They can aspire to be indispensable facility managers, “keeping the lights on” and making sure the “trains run on time,” and let others turn data into an opportu-nity. There’s nothing wrong with that approach; in the digital economy, maintaining a robust and efficient information infrastructure is bound to become ever-more important. But CIOs can also leverage their expertise in managing and refining the new oil to lead their organizations in benefitting from the data deluge.


“But if you’re focused on things like innovation and transformation and moving the business in a different direction, I think those types of engagements are things you have to participate in to be successful.”

Of course, social media increasingly is the method of choice for raising your profile. In addition to performing his duties as CIO, Isaac Sacolick is a prolific blogger and Twitterer. “I’m not sure blogging is for every CIO,” he says, “but I think it’s important to find what’s important to you, what you are good at, and find a way to express that. In my case I do that through blogging, through the

articles I tweet, or giving public presentations.” Sacolick’s social media prowess increases not only his

own visibility but also that of his company, McGraw Hill Construction. “We are not a technology business,” he explains, “but we sell technology and data to contractors and manufacturers in the construction industry — they need to understand that we develop great technology. I blog, I write articles for our magazine for construction engineers, I participate in events, I run a council for construction industry CIOs. Part of my job is to be customer facing, provide thought leadership, be outgoing and engaging with our community.”

Raising your profile outside your organization can bolster your position in it. External exposure — through an active blog or by attracting hundreds of Twitter followers — can give you newfound credibility internally, validation in the public forum that will subtly change people’s perception of you in your organization.

Furthermore, it can be easier to gain the support of those who are skeptical about IT when you meet them “off-site,” on the neutral turf of a social network. “Find content that’s relevant and valuable to a business person in your company who is negative about IT and share it with him,” Ann Alrich suggests. When you make your next IT presentation, she notes, that person may be a proponent instead of an opponent. As more and more companies infuse information technology into their product and service offerings, we could expect to see more blogging CIOs, more visible CIOs. Social media, however, is not only a platform for creating content

The End of IT Innovation?Ten years ago, in the aftermath of the technology bubble of the 1990s, IT didn’t seem to matter anymore. There was a widespread reluctance to fall again for the hype and overselling by IT vendors and a movement to contain and control IT, to focus its role on maintaining an efficient infrastructure. According to this view, innovation — and the competitive advantage resulting from it — was to be found somewhere else.

Today we can see how wrong that conventional wisdom was. Server virtualization, just one example of the recent impact of IT innovation, not only has made IT infrastructure much more efficient but also has made it possible for the IT organization to be flexible and responsive like never before, effectively supporting new strategic business initiatives. Without virtualization, there would be no cloud computing, yet another significant develop-ment in IT delivery. Instead of spelling the end of the IT organization, as some predicted only a few years ago, cloud computing has provided new opportunities for CIOs to manage resources more efficiently and has freed up internal IT resources for more strategic work.

The space where IT innovation has really exploded, however, has been web-native companies, which derive their competitive advantage from IT. These companies — the likes of Amazon, Google, and Netflix — have demonstrated through their innovative infrastructures and use of IT that IT-spurred disruption and the transfor-mation of entire industries are far from over.

Isaac Sacolick,CIO, McGraw Hill Construction

“I’m not sure blogging is for every CIO, but I think it’s important to find . . . what you are good at and find a way to express that.”


but also a tool for filtering it and finding what’s most relevant for one’s job. LinkedIn has emerged in recent years as an important source of experience-based advice and opinions, through the personal networking it facilitates as well as content from established content producers.

“There’s so much that you can learn by reading the articles on LinkedIn or by searching for people who have certain characteristics in their profile,” Ann Alrich says. The social network “can add a level of enrichment to a person’s professional develop-ment that they may not realize.”

Scott Blanchette also finds his LinkedIn network to be a valuable mechanism for filtering informa-tion. “It’s not just the interpersonal aspect but also the general content that tends to get socialized through the network — there are key groups, key companies, key people that I follow pretty exten-sively and regularly look at their circulation of relevant material.”

So that’s the consolidated view of our virtual focus group. Now, what do you think? Have we missed any items on our list of CIO must-do’s? Are there some clunkers among the items we’ve included?

Tell us. Or, rather, tell your IT peers by joining the CIO Straight Talk Interactive group and sharing your thinking with group members. Your addition to our list — a piece of wisdom hard-earned from your own experience — may end up being exactly what a fellow group member most needs.

Ann AlrichFormer CIO, Asia-Pacific, Dupont

“Find content that’s relevant and valuable to a business person in your company who is negative about IT and share it with him.”

Other VoicesThe advice in this article comes from members of our virtual focus group, drawn from the CIO Straight Talk Interactive group on LinkedIn. But in conversations with other IT leaders, we frequently ask what sorts of things CIOs should be doing to ensure their success in the digital economy. Much, but not all, of their advice echoes the prescriptions of the virtual focus group:

“The investments we made in IT strengthened Covance’s technical profile. But they also did more than that — they opened up entirely new business opportunities…The technology capabili-ties allow us to offer a different set of services than our competi-tors and to differentiate our services in a way that becomes compelling.” — William E. Klitgaard, Corporate SVP and CIO, Covance

“You can't just look at your own industry to measure yourself. You have to look much more broadly to consumer technology. Beyond that, more and more technology is being delivered by smaller firms. Software delivery approaches are increasingly being influenced by technology start-ups. CIOs who want to differentiate themselves must look beyond the boundaries of corporate technology and embrace the ideas coming out of smaller firms.” — Richard Roberts, Head of Client Access and Electronic Distribution, Deutsche Bank

“[Our 12-step recovery from fear of failure program] is about small failures early in the development cycle, quickly learning from them, and teaching the rest of the organization about these failures so that it can learn and not repeat the mistakes and be more agile. That same model also fits into an environment where you have to have stability. It is the small mistakes that are made, that are covered up, that are not brought to light and pile up and eventually cause stable environments to crash. This fear hurts not only IT but also all facets of the business.” — Mike Benson, EVP and CIO, DirecTV

“It is okay to be making some mistakes, but we want it to be more of a fail-fast environment. Do not wait to the end of a very long project to find out we made a mistake; find out right away.” — Annabelle Bexiga, EVP and CIO, TIAA-CREF

“If you demonstrate to top management that you can give them something that they like to use, that is valuable to them personally, it generates a different conversation about what’s possible and creates a positive perception of IT‘s role. We’ve done this with several mobile analytics apps that we’ve deployed all the way up to the board level, and that generates a new conversation about a) what’s possible and b) what is IT’s role.” — Michael Golz, SVP & CIO, SAP America

“CIOs have a bad rap. By blogging, you hope that people see that you are human and that you suffer the same challenges as everybody else.” — Dr. John Halamka, CIO, Beth Israel Deacon-ess Medical Center

“Don’t be afraid to adopt best practices from other industries. People always told me that you couldn’t use IT approaches from other industries… But you can and you should.” — Simon Hollins, CIO, EMI Music

“How do you institutionalize the IT function’s adoption of a more sophisticated business perspective? One way is to create career bridges between IT and the rest of the business.” — Jean-Marc Chicco, Chief Group ERP Program and Information Officer, Lafarge


Straight Talking


CROSSING THE FINISH LINE TOGETHER

A conversation with

PATRICIA K. POPPE VP, Customer Experience & Operations Consumers Energy

MAMATHA CHAMARTHI VP and CIOConsumers Energy

Several successful initiatives at Consumers Energy vividlyillustrate the importance of IT-business collaboration indriving customer value and corporate performance


Serving the state of Michigan for more than 125 years, Consumers Energy is one of the largest combination utilities in the U.S., provid-ing electric and natural gas service to nearly 6.6 million residents. It has recently been making significant investments in energy efficiency, renewable energy, environmental and customer service enhance-ments, and advanced meter infrastructure.

As with other utilities today, a large part of this investment is in new technologies, including upgrades to the IT infrastructure. At Consumers Energy, IT-based improvements and new services have been driven by a customer-focused strategy. The hallmark of its implementation has been an exemplary collaboration between the Vice President and CIO, Mamatha Chamarthi, and the Vice President of Customer Experience, Rates and Regulatory Affairs, Patricia Poppe. (For a variety of perspectives on the potential for collaboration between CIOs and Chief Marketing Officers, see “The CIO-CMO Dream Team,” page 44.)

The following is an edited transcript of Chamarthi’s and Poppe’s conversation with CIO Straight Talk Editor Paul Hemp.

How has the new customer-focused strategy evolved?

Patrica Poppe: I would suggest that Consumers Energy has always been customer-focused but has not had a distinct strategy for trans-lating that aspiration into the delivery of safe and excellent operations to the customer. Our CEO, John Russell — who comes out of the customer side of the business, including distribution and call centers — is a true champion of the customer, and our senior leadership team would like to make Consumers Energy a very customer-centric utility. Our brand tag line is “Count on Us,” and Mamatha and I were hired specifically to make that vision a reality and improve overall customer satisfaction.

Mamatha Chamarthi: I was hired as the first CIO in the history of Consumers Energy — we had an IT Director before — and I thought that it would take me years to get the senior leadership team to under-stand how technology can help Consumers Energy serve customers better. To accelerate this learning process, I decided to immerse them in the technology Mecca: Silicon Valley. My objective was for them to observe firsthand how technology is driving value to the bottom line of companies there.

Poppe: Three years later, they still reference that visit.

Chamarthi: About ten of us went for a weeklong visit to Apple, Google, HP, Cisco, and SAP. We did a debrief at the end of the trip, and many on the senior leadership team, including our CEO, made the point that our customers are being served by the likes of Apple and Google. Would they expect anything less from us in the quality of the services we provide?

Poppe: I think this is especially important for a utility, where technol-ogy applications have tended to be more for generating plant emissions controls, gas infrastructure inspection, or distribution equipment — not for customer-facing experiences. It was important to open the eyes of our senior leadership team to what was happening in technology-driven innovation outside the utility space, a great platform to gain support from the senior management team for technology-driven innovation.

POSITION: Vice President and Chief Information Officer

COMPANY: Consumers Energy

WORKS FROM: Jackson, Michigan

PROFESSIONAL BACKGROUND: As

Vice President and CIO for CMS

Energy and its principal subsidiary,

Consumers Energy, Chamarthi

oversees the company's information

technology systems and is responsible

for engaging with other CMS Energy

executives to promote innovative

technology practices. Her career

spans more than 16 years, and she is

viewed as a thought leader in the

implementation of new technologies,

systems, and processes. Besides her

MBA from the Kellogg School of

Management, Chamarthi holds

master's degrees in computer science,

software engineering, and English

literature. She serves on the boards

of the Michigan Council of Women in

Technology (MCWT) and Midwest

Technology Leaders. She is a member

of the Wall Street Journal Executive

Task Force for Women in the

Economy and serves as an Elevate

Mentor for the “We Build Character”

Mentoring Program. In 2005,

Chamarthi was recognized as a

“Technology All Star” by the Women

of Color in Technology Institute. In

2012, she was selected as one of

Computerworld’s 2012 Premier 100

IT leaders and was appointed to serve

on the Michigan Asian Pacific

American Affairs Commission by

Governor Rick Snyder.

EDUCATION: MBA, Kellogg School

of Business, Northwestern University

Mamatha Chamarthi


Patti, what were you asked to do when you were hired?

Poppe: Like Mamatha, I had a newly created position. In many companies you’d call it Chief Marketing Officer. Chief Customer Officer might be more appropriate. I oversee customer-facing opera-tions such as call centers, billing services, business customer accounts, market research. But I’m not a marketer; I’m an operator by training. I ran power plants for DTE Energy for five years, and before that I ran assembly plants for General Motors for 15 years. I am an industrial engineer by training.

So why were you hired to do this job?

Poppe: Before I joined Consumers Energy, the leadership team had combined many of the customer-facing organizations within the utility under one umbrella, whereas before they were distributed throughout the company. I came in January 2011, and in August of that year I presented to the board of directors our new Customer Value Initiative.

I think another reason I was hired was because they liked the operator’s mind-set and a data-driven, rather than opinion-driven, approach to customer value. Because of my experience, that’s what I brought to the table.

Was it obvious that you were going to need to work with the IT team?

Poppe: Without a doubt. Early on I could see that we were behind the curve in implementing customer-facing technology solutions. It was clear that we were going to have to partner very closely to change that. The Smart Energy program, for example, became a major focus of collaboration between Mamatha’s team and my team. Smart Energy transforms the customer experience. We think of it as the re-introduction of Consumers Energy to our customers, with a new level of service that they can now expect from us.

As part of this program, we will install 1.8 million new electric meters and 600,000 gas meters with existing customers. When their power is out, we will know. Today, we don’t know — they have to call us. Customers will also have a 98% accurate meter reading. Today, it is totally dependent on weather and the availability of our personnel to read meters manually.

All these things that customers naturally expect are technology enabled. We could not do it without Mamatha and her team. They are the backbone of our Smart Energy program. What used to be purely a meter exchange program is now a technology-based project.

Chamarthi: Together, we made a joint commitment to implement the Smart Energy program. It was not Patti saying, “Well, here is my commitment,” and then me saying, “Here is mine in support of Patti.” It was a joint commitment to the company about what we were going to work on together.

Poppe: We sit side by side on all decision making and all program commitments. Neither one of us can sign without the other signing. It’s a mutual ownership.

POSITION: Vice President, Customer Experience, Rates and Regulatory Affairs

COMPANY: Consumers Energy

WORKS FROM: Jackson, Michigan

PROFESSIONAL BACKGROUND: In

her role as Vice President, Patricia

Poppe oversees customer service,

marketing, Consumers Energy’s Smart

Energy program, quality, and rates

and regulatory affairs. Before joining

the company, in 2011, she worked as

director of DTE Energy’s North Region

power plants, overseeing 3,000 MW at

five generating facilities.

EDUCATION: MBA, Kellogg School of

Business, Northwestern University

Patricia K. Poppe


Smart Energy appears to be a success, and the credit goes to both of you. But what happens when things don’t go that well? Chamarthi: With our new CRM project, we both put our necks on the line. The project had been initiated by IT before we both joined, and the business case for it wasn’t clear. So we put the project on hold and said, “Let’s understand why it is we’re doing this. Let’s understand the business value of this and decide if it’s the right thing to do.”

And then you decided to proceed?

Chamarthi: Yes, and that was a significant step in our partnership.

Poppe: It was an agreement that we are going to do this together. That little phrase sounds small, but it was significant. It wasn’t that IT is going to do this, and we will then make it work.

Chamarthi: I would say the partnership only became stron-ger because of the hardship we went through.

Poppe: That project actually didn’t go very well.

Chamarthi: And when the project did not go as expected, we never once pointed fingers at each other. Instead, we said, “Let’s come together and lead the team.”

Poppe: I think there’s a lesson here that can be applied to any business in any industry. You can be great partners when things are going well, but when trouble happens, does that partnership stand the test? There was no benefit in us not supporting one another. I was heavily reliant on Mamatha and her technological expertise. She was very much reliant on my ability to motivate and align my organization around changes in business practices. I think we both learned that no technology project can be implemented without people, process, and technology. I own the people and a big chunk of the process, and all three of those things have to come across the finish line together. If they don’t, the technology solutions don’t succeed. The CRM project was not our favorite imple-mentation, but we learned a lot.

Chamarthi: We learned so much about the teams and their expertise. There were vendors that tried to play

Patti and me against each other, but no one could touch our partnership.

Poppe: And this attitude then trickles down into the organization. We didn’t have people feeling like they had to fight with one another. We were very publicly and privately in support of one another, and we wanted to cross the finish line together. That was the goal. There was no advantage to one of us crossing without the other. The only victory was if we could cross that finish line together, and I think that was a strong theme that perme-ated the organization and set the stage for the next several technology projects.

Give us an example of another successful collaboration between the two teams.

Poppe: Well, here is a story with some real takeaways for any kind of technology implementation. A critical touch point for our customers is how we communicate with them during power outages. We had on the books a plan

to launch an outage map, but when we started looking at the plan, we realized that the outage map is only an online representation of estimates from the field. It is only as effective as the reliability and accuracy of the estimated time of restoration, as delivered by our field organization.

Chamarthi: We actually had two distinct projects. One was a technology project to develop and launch the outage map, and the other one was a process project to correct the estimated time to restore.

Poppe: But they were initially decoupled from each other. Our VP of energy delivery had a project on his radar to improve our estimates, but this was unrelated to the project to implement an outage map. We had formed what we call the

Customer Council, a group of officers responsible for all the key customer satisfaction drivers. In a meeting of the council, we discovered the two previously decoupled but very much related projects.

While the input from our customers was very clear — they would cut us some slack on getting the power back on after a major storm, but they wanted to know when the power would be restored — it turned out this was never communicated to the field organization. So the line crews did not think it was worth their while, when they were busy trying to fix the problem causing the outage, to take a few minutes to input their estimates for the time of

Together, we made a joint commitment to the company of what we would do for the

Smart Energy program. It was not Patti saying, “Well, here is my commitment.” And then I

saying, “Here is mine in support of Patti.” It was a joint commitment, about what we

were going to work on together.


power restoration. When they found out how important these estimates were to our customers, the line workers changed their behavior. You know, “I’m up on the pole, I’m the only person in the world who can estimate when this power will be back, and I guess it’s worth it for me to take three minutes to call dispatch or enter it in my on-truck device.” Previously, they put in their estimates in only 20% to 30% of cases, but now that happens 80% to 95% of the time. We now have accurate estimates, and we can communicate to the customer a one-hour window for when the power will be restored.

Chamarthi: And the outage map is now available on smartphones. Computers don’t work in a power outage, and customers have to rely on their smartphones. They can also access our social media, where we show estimated power restoration times for their region. If we had gone just with the outage map project, and imple-mented only the technology, customers would be looking at bad information, the wrong estimated time to restore. They would be even more unhappy with us. I think it was Bill Gates who said that when technology is not imple-mented with the corresponding process changes, it only highlights all the flaws in your process.

What is the key lesson you learned from your collaboration?

Chamarthi: We have seen huge success when we empow-ered people and told them they are accountable, but also insisted on collective responsibility and not letting them deliver just in their own silos. All our projects have been measured by how collaborative we are, how well we bring together technology, process, and people.

Poppe: We have created a technology road map for all customer-facing projects for the next three years and have included in that road map the people and process

changes that will enable those technology solutions to work. That is a huge change for us. This is why it’s not a stretch to say that the business and the technology team are completely integrated. We now know how to do this. We have learned how to combine people, process, and technology to deliver a solution that creates a new standard of excellence for our customers.

I think that is a lesson here that can be applied to any business in

any industry. You can be great partners when things are going well, but when trouble happens, how well does that partnership

stand the test?• A successful IT-business partner-

ship requires shared commitment and accountability – and a refusal to point fingers when things go wrong.

• For a technology implementation to succeed, you need to bring together technology, process, and people. For example, when technology is not implemented with the correspond-ing process changes, it can actually highlight all of the flaws that exist in the process.

• Two projects launched in different organizational silos can undermine one another – or, if integrated, reinforce one another.

The Takeaways


UKAR is the holding company for the mortgage lending units of two midsize UK banks — Northern Rock Asset Management and Bradford & Bingley — that were forced into nationalized ownership during the credit crunch of 2007-2008, creating the sixth-largest lender in the UK.

Straight Talking


Transforming IT for an organization whose mission is to run down the balance sheet requires strong change leadership, a great partner, and a lot of nerve.

WHEN EFFICIENCY AND FLEXIBILITY TRUMP ALL

Mathew Jackson [email protected]

POSITION: Services Director

COMPANY: UK Asset Resolution

WORKS FROM: Bingley, Bradford, United Kingdom

PROFESSIONAL BACKGROUND: Mathew Jackson is a member of the UKAR Executive Committee and is responsible for IT, change, property services, and procurement. From 2010 to 2012, he served as Head of Transformation, leading the integration of Northern Rock Asset Management and Bradford & Bingley, where he had worked for 20 years, holding senior positions in operations, retail, strategy, lending, and change.

EDUCATION: MS, University of Huddersfield

PERSONAL PASSIONS: Now that the IT transformation at UKAR is nearly complete: spending time with his wife and ten-year-old daughter, walking, undertaking DIY projects, and reading the occasional book


UK Asset Resolution was formed in October 2010 with a unique mission: to wind down the £110 billion of assets on the balance sheets of two previously independent midsize UK banks — Northern Rock Asset Management and Bradford & Bingley — that had been forced into nationalized ownership during the economic downturn.

Our primary objective is to repay the UK taxpayer the money we owe. At the time it was £49 billion; that’s down to £43 billion today. Because of our nationalized status, we’re not able to lend money, and we’re not trying to grow.

Once we’ve paid the taxpayer back, probably in 2023, we’ll have around £20 billion in assets under manage-ment in terms of mortgages. We’ll still be nationalized, so we’ll continue the journey to run it off. But it’s possible that something will change to enable UKAR to generate growth opportunities. We recognize that we will likely have to create opportunities for employees, possibly through a separate operating company, while continuing to run down the balance sheet.

That is the business and financial context for what has been a two-stage transformation, nearly complete, of UKAR’s IT capabilities.

Stage 1: Data Rationalization and Migration

A key condition of state aid was to separate Northern Rock Asset Management from the new Northern Rock, which was subsequently sold to Virgin Money. The most effective approach was to combine North-ern Rock Asset Management and Bradford & Bingley. This removed the asset management business from the Northern Rock infrastructure and maxi-mized economies of scale from the new organization.

Our first task was to migrate data and people away from Northern Rock into a scaled-up Bradford & Bingley infrastruc-ture. There were £50-plus billion of assets — or around 700,000 mortgages — held in Northern Rock’s legacy infrastructure, along with all the archive data, the general ledger, treasury management systems, and so on. Bradford & Bingley previously had been right-sized and reshaped from a trading, savings, and mortgage bank into a mortgage lender and servicer in run-off mode. So we had to scale that infrastructure up and undertake the process of transforming, rationalizing, and migrating the Northern Rock data.

Northern Rock had 33,500 mortgage products; we reduced that to 3,500. We did the same across all key areas: general ledger, treasury management, and histori-cal data. There were over 80 million historical images that we brought across — probably about ten terabytes of data.

We were facing an EU deadline to migrate the data as part of Northern Rock’s original loan agreement — we had just over 12 months to do what was probably one of the most complex mortgage book migrations in the UK. There’s nothing better than having a fixed date to focus the mind. The executive team had to be recruited and appointed into roles in the newly formed UKAR organi-zation, from the CEO on down. We had an open recruit-ment and selection process across the two heritage businesses. Once we had a single management team with a single focus, we made a big effort in the first three months to ensure that everyone, top to bottom, was aligned with the mission, the strategic objectives, and the values of the new business. As a result, we were able to make decisions quickly.

We retrained our 1,700 colleagues from Northern Rock on new systems and processes. Everything changed in terms of the systems and the telephony infrastructure, so it was a people as well as a technology transformation. We also consolidated sites, migrating 700 people’s work from Northern Rock in Newcastle to UKAR in Bingley and Sunderland.

The heritage Bradford & Bingley IT function was largely outsourced, with our core retained IT organiza-tion focusing primarily on architecture and governance. We didn’t have people experienced enough to manage what amounted to a £95 million IT program, so we had

to go out and build a team to do program management. Overall, Stage 1 was very successful, taking around 15 months, with only a two-month delay to the mortgage book migration to avoid the year-end reporting period.

Stage 2: IT Transformation and the Move to a New Partner

Given UKAR’s mission, our primary operational focus is cost efficiency and effective-ness. IT was a substantial part of our fixed cost base. We

needed our costs to be as variable as possible, but we knew we had to invest in our technology infrastructure, which was somewhat aged and starting to create service issues, particularly as we doubled the number of custom-ers and colleagues.

We reviewed our operating model and reaffirmed that a primarily outsourced model was right for our organization. Our first-generation, ten-year outsourcing contracts — one for servers, application development, and maintenance services, the other for telephony and networking — were coming to an end. We went to a whole market tender and selected HCL as our new partner. HCL was our choice for a number of reasons. The

Not many UK financial services organizations have

moved to a completely outsourced model, so we’re a great showcase account for an outsourcing partner that

gets it right.


work. What was most impressive about HCL was that it embraced the revised program and didn’t insist on renegotiating the contract before responding to the challenge. HCL’s professionals have continued to exhibit that kind of willingness to work through problems — for example, compromising on the governance and structure of the program. This flexibility, unlike anything I’ve seen with previous suppliers, along with great technical capabilities, has made HCL an excellent partner.

Although the entire journey has had its twists and turns, we’ve recently completed the migration with no significant issues. It takes a lot of nerve to effect this kind of transformation, from the chairman, the board, and the chief executive on down. If you don’t have that universal sponsorship, you will never be able to do something like this. That’s been one of the overriding messages of the past couple of years, from the integration to the migra-tion. The program team had that unflagging support.

The benefits have been enormous. We’re now one organization — in terms of systems, processes, and culture — coming from two different heritages. We’ve reduced our cost base by £50 million. And we’ve got a platform that offers flexibility to allow for continued contraction — or growth if we find the right opportunities.

We had just over 12 months to do what was probably one of the most complex mortgage book migrations

in the UK. There’s nothing better than having a fixed date to focus the

mind.

• When choosing an outsourcing partner, don’t underestimate the importance of the partner’s willing-ness to be flexible when conditions change unexpectedly.

• You may be able to position yourself so that you are an attractive customer to a service provider for reasons other than the financial terms of the contract.

• Undertaking a particularly challeng-ing transformation requires the steadfast backing of senior manage-ment.

The Takeaways

company’s proposal was much better from a pricing point of view, and it gave us a great opportunity to variablize our cost base because of the way the infrastructure was to be architected. It also included some innovative approaches and embodied a lot of flexibility in both the commercial model and a service-level arrangement based on business outcomes, as opposed to a typical availability-level model.

Of course, the attractiveness of the offer reflected the attractiveness of us as a customer. Unlike our incumbent partners — who I think miscalculated our potential as a holding company for two failed financial institutions — HCL saw us as an opportunity. Being wholly owned by Her Majesty’s government made us an attractive client in terms of future potential. Moreover, not many UK finan-cial services organizations have moved to a completely outsourced model, so we’re a great showcase account for an outsourcing partner that gets it right.

Benefits and Challenges

HCL built two new UK data centers. We’ve gone from being about 30% virtualized to about 85%, and we’re already starting to enjoy the benefits of that in terms of agility and the ability to scale up and repurpose different parts of the infrastructure.

The key challenge involved our move to a new service provider. The original hypothesis was that we would build the new data centers, clone the existing application infrastructure, reinstall that, and then undertake the data migration. But we weren’t able to do that because one of our former service providers claimed ownership of the IP around the configuration of the system installation and wouldn’t give us the access needed to carry out the migra-tion. So we had to effectively start from scratch, documenting all the applications in terms of the design architectures and the installation process, and bring in third-party vendors to help us through that.

It’s taken probably a year longer than we had antici-pated. The benefit to me, though, is that I now have a fully documented infrastructure, and HCL has had to learn the hard way how those applications are knitted together and


Straight Talking

Covance Inc., based in Princeton, New Jersey, is a contract research organization providing drug development and animal testing services. Spun off from Corning Inc. in 1996 as a public company, it today has annual revenues of more than $2 billion and 11,000 employees in more than 60 countries. Its centrallaboratory network is one of the world‘s largest.


BUSINESS-DRIVEN IT AND IT-DRIVEN BUSINESS

POSITION: Corporate Senior Vice President and Chief Information Officer

COMPANY: Covance

WORKS FROM: Princeton, New Jersey

PROFESSIONAL BACKGROUND: As Senior Vice President and CIO of Covance, a provider of drug development services to pharmaceutical companies worldwide, Bill Klitgaard leads the Covance Global IT organization, serves as a member of the Executive Committee, and chairs both the IT Investment and the Executive IT steering committees. Although he has spent the majority of his career in finance — he served for almost 12 years as Covance’s CFO before becoming CIO, in May 2012 — he has always had a passion for technology.

EDUCATION: MS, MIT Sloan School of Management; BA, University of California, Berkeley

PERSONAL PASSIONS : Bicycling, hiking, backpacking, any quiet and beautiful location

We know that IT needs to be tightly aligned with the business. But in a world where IT can drive valuable new revenue-generating opportunities, the business may sometimes find itself falling in line behind IT.

William E. [email protected]


IT is becoming increasingly important to the success of our business of providing drug development services to pharmaceutical companies. So let’s first look at some significant investments we’ve made in IT over the past few years.

Building the IT Foundation

Our big investments have been in three areas: modernization and consolidation of our data center; modernization of our business platforms — the systems that run our central labs and that we use in our clinical business; and modernization of our end-user platforms.

We are moving our applications to modern, state-of-the art, highly secure, always available data centers running a virtual environment. As a result, we expect to lower our risk and have fewer performance issues due to power or hardware failures, or having different things on different pieces of technology. We’re able to reuse or recommission capacity and to blend workloads.

We’re using architectural designs that are consistent with the cloud, so we can explore a hybrid environment as we mature. We expect to be able to compare our activities and costs to outside resources, and to communicate more clearly with our business partners about what they’re consuming. For the first time we will have transparency. Our business partners can choose — and pay for — the level of service they need.

We’ve built on a reference architecture employed around the globe. We use data de-duplicate technology to reduce our storage footprint. We’ve increased our speed of provisioning — for example, recently we were able to stand up a server, storage, and network solution for an internal customer in 15 minutes; it used to take a month. This speed will increase reliability and lower incremental costs, and it will allow us to exploit the cloud over time.

Similarly, we’ve modernized the systems in our central labs and clinical trial management businesses, which will improve collaboration, processing, and efficiency. We are establishing a master file for managing trial data centrally, with a controlled workflow and only one file to audit, rather than having it all over the company; this alone has provided huge efficiencies in clinical development activities.

Analytics: The Art of Data Science

Informatics, an increasingly important part of our business, sits on top of this new infrastructure. We made

a strategic decision to hire people exceptionally talented in informatics and analytics, assembling a team of data scientists. We’ve built a number of tools that help clients choose sites for their clinical trials and do trials faster and more efficiently, among other things. We can look at the performance characteristics and track records of all the clinical sites we’ve worked with and then overlay information about projects in the pipeline to predict workload and what sites will likely perform best on the next trial. As a result, we’ve gotten better at site selection and have outperformed our competitors in the execution of trials.

Business-Driven IT: Focus on Business Outcomes

All of these investments have been made with the strategic needs of the business in mind. The idea that IT has a monopoly on technology is passé. Business leaders can go out and get services and IT systems on their own. The CIO who says no is going to get run over.

As a former CFO, my advice to CIOs who want to elevate the role of IT is this: Show the CFO and other company leaders the business impact of new technolo-gies and get them excited about the possibilities. These

technologies have the power to transform what we do. Start with the business outcomes and let the technology be secondary. Once that connec-tion is made, the discussion becomes easier: What do we want to do and what can we afford?

Don’t get caught up on cost, because that’s a losing battle. If you think about IT as a cost, you’ve lost. At the same time, it’s important to have financial transparency so end users know what they’re being charged for and why. We should be able to compare what we’re doing with what’s

available externally — that’s healthy for IT and it’s healthy for the business.

Companies will suffer if CIOs don’t get out in front of this. What’s alarming is when people act on a rogue basis and just go around IT. Pretty soon there are scores of people using some new database or software. Over time those “uncontrolled” investments can become critical to operations, but they’ve never gone through a system development process. They’re full of bugs that IT is left to fix.

To avoid that, we need to engage much more with the business about its needs and get out of the role of just taking orders to install a particular piece of software. We have to approach things from the perspective of, “Let me understand what you’re trying to do here — let’s try this.” Ultimately it’s about transparency, stakeholder engage-ment, being open to externalizing some parts of IT and

We should be able to compare what we're

doing with what's available externally —

that's healthy for IT and it's healthy for the

business


being able to integrate that into the rest of what the company is doing.

IT-Driven Business: Create New Revenue Streams

The investments we made in IT strengthened Covance’s technical profile. But they also did more than that — they opened up entirely new business opportunities.

A lot of companies haven’t made the kind of investments we have and may not want or be in a position to do so themselves. Now we’re considering whether we can offer what we’ve got to others doing clinical work in a software-as-a-service or platform-as-a-service model in a private cloud environment.

If everything comes together, a year or two from now we’ll also be selling IT services to enable clinical trials. We’re already selling the provision of those services — clinical trial processes, central lab work, and preclinical work. And we’re selling the analytics capabilities to help with decision making and portfolio optimization. The technology capabilities allow us to offer a different set of services than our competitors and to differentiate our services in a way that becomes compelling. We become a one-stop shop. If you can get from Covance something that allows you to perform better on your clinical trials and do the trials faster and more efficiently, and we can get the capacity to do the work — that’s powerful. The customer gets high-quality work and the analytics to do the work more intelligently.

IT is often process-intensive and subject to a lot of structure — systems development life cycles, releases, testing. But as we’ve seen, there’s a time and a place to be more nimble and innovative. We started the informatics group as part of Resource Management when I was CFO, and we began to look at predictive models to balance supply and demand. We’ve approached some of this like it’s a sandbox where we can try different things and explore what’s possible. It’s about how we come up with new tools and ideas to better manage our company.

At the time, I was accused of running shadow IT; fortunately for us, it’s now all part of the same group. But this is a cautionary tale for CIOs who aren’t taking the initiative on innovation.

• Now that business leaders can procure technology on their own, from multiple sources, companies can end up saddled with ineffective and incompatible products. CIOs can head off that scenario by engaging business stakeholders in transparent discussions about their needs and what IT can offer.

• Substantial investments in IT don't just strengthen a company's technical capabilities — they can also open up new revenue streams and opportunities for differentiation.

• IT is a process-driven, structured endeavor, but it needs to be an integral part of initiatives aimed at innovation and experimentation.

The Takeaways

The idea that you have some space to play…is very healthy, and that’s something I want to

keep within IT.

Now that Informatics is part of IT, we’re strengthening that capability and exposing the innovation lab aspect to our operational people and our IT people. It’s starting to generate a little bit of a buzz internally. The idea that you have some space to play — some air to go try things out just for fun and see how they work — is very healthy, and that’s something I want to keep within IT.


Straight Talking

SAP Americas is a subsidiary of SAP AG, a global enterprise software and services company with operations in more than 130 countries. SAP Americas oversees the company’s business operations in the U.S., Canada, Latin America, and the Caribbean.


HOW TECHNOLOGY MADE IT HAPPEN

SAP RUNS SAP:

Michael [email protected]

POSITION: Senior Vice President and Chief Information Officer

COMPANY: SAP Americas

WORKS FROM: Newtown Square, Pennsylvania

PROFESSIONAL BACKGROUND: As SVP and CIO, Michael Golz is responsible for aligning IT strategy with SAP’s business strategy, directing IT investment, and providing best-in-class processes and operations for all SAP lines of business in the Americas. He leads the unique global SAP Runs SAP program, which highlights the role of SAP’s own IT function in using and helping to develop SAP products in areas such as enterprise mobility, in-memory and database technology, green IT, and cloud computing. As a result, SAP Global IT has become the company’s best customer reference, and Golz frequently speaks to customers about IT’s firsthand experiences with SAP software.

EDUCATION: BS, European Business School, Oestrich-Winkel

PERSONAL PASSIONS : Tennis (“Especially with my twin boys — though we have passed the point where I can still win”), scuba diving, family travel

When the IT function at SAP began rolling out pre-beta versions of the company’s latest enterprise products for use across the organization, it moved from a support role to an integral part of the business.


I came to the U.S. in 2002 for a two-year assignment — and never left. It was a total change in culture, in terms of both the differences between Germany and the U.S. and the difference between being at headquarters, where the concerns are more around corporate functions, and being out in the field, where there is a direct connection between IT and the business — in particular sales, marketing, and field operations. I learned that you have to bridge the gap between what you can do from a global perspective and what’s possible on the ground. We’ve now made that capability part of the DNA of the entire IT organization, and as a result we’re able to deliver business results very quickly with a shorter planning cycle.

Driving Product Development

Three years ago we reviewed what strategic contribution IT could make within SAP and decided that we could be at the forefront of using SAP’s own technology and solutions. So we brought our entire system landscape to the latest release levels and strategically chose areas such as mobile and in-memory technology/HANA (for “high-performance analytic appliance”) to implement SAP solutions even before they were in beta status. We now provide feedback to the product teams, and our feedback makes it into the product release that gets shipped to the customer. We’ve learned a lot through this process; development, global support, and the business have learned a lot, as well. For example, we were one of the first companies to do a mass deployment of iPads, very shortly after they became available. Using the SAP mobile platform, we proved we could deploy thousands

of mobile devices in a large enterprise — we are now at more than 50,000 iOS devices — with full connectivity to corporate systems in a way that is secure and allows you to provide apps in an enterprise app store. More generally, our BYOD (bring-your-own-device) program has made it possible for employees to use a variety of their own devices in the workplace instead of having to use a single company-issued device at work. The iPad program is an example where we started early, generating traction by sharing our experiences internally and externally to demonstrate what is possible with the consumerization of IT and, more important, how it can provide business value by allowing employees to become more mobile and efficient. This is a new business role for us: to make available to the business side the information we get from those deployments, including success stories that we can use with customers. It gives us the ability to talk to the CIOs of our customers and prospects about how you implement a new technology or solution, the business case behind it, the benefits and pitfalls, and what combination of solutions was an immediate hit with the sales organization, for example, or what has really proven valuable for finance. That always sparks a lot of good conversations with our customers.

Fostering Innovation

We’ve also reserved 5% of our build budget for innovation that is driven by IT. If we do ten prototypes, and only three or four get real adoption, and we just learn something from the rest, that’s fine. You have to be willing to try a lot of things and accept that not everything is going to get traction. Normally in an IT

THE THREE PILLARS OF IT VALUE

When we defined our IT strategy, we thought about the things we really need to do well to deliver the most value to SAP. They fall into three categories.

The first pillar is the transactional, regular IT business. It’s important to make sure you get the basics right: doing things on a global level, finding the right standards, keeping costs down, handling security and compliance. If you don’t have those under control, all the rest becomes almost irrelevant.

The second pillar is the transformational, helping different units from across the company become more efficient by transforming the way they operate. Our role is to understand the businessrequirements, bring in ourexpertise and new ideas from a process perspective, and help implement theright solutions.

The third pillar is the strategic — in our case, how do we introduceinnovation, how do we adopt oursolutions as early as possible, how do we ourselves implement SAP solutions in order to give feedback to the development organization and bring these experiences into conversations with customers. In some cases, Global IT has been able to contribute ideas to products in development.


For details and the entire report of the survey, visit www.futureofsap.com.

SAP, one of the largest providers of enterprise appli-cation software, is at a turning point. Although the company’s enterprise software and software-related services continue to be critical to the business opera-tions of thousands of organizations across the globe, the market for those services is mature, raising ques-tions about SAP’s future.

A global survey by HCL Technologies of 220 CIOs at companies with revenues in excess of $1 billion across industries indicated that the very proliferation of SAP systems suggests an answer to the question of where SAP, and its customers, are headed: the consolidation of the numerous systems found at most large companies. In many cases, this will involve not only the integration of existing systems but the trans-formation of the IT infrastructure through the adop-tion of a single enterprise platform.

The survey, commissioned by HCL and conducted by independent research company Vanson Bourne, found that, on average, large enterprises are running more than five separate instances of SAP, with nearly 39% of respondents reporting that they were running more than six. The data showed that the average cost per user (more than $1,500) for enterprises running multiple SAP instances is 25% higher than for those running a single instance. So consolidation could create huge savings. In fact, across SAP’s more than 22,000 large ERP customers, the potential annual IT cost savings amount to more than $30 billion globally.

More detailed research of enterprises that had made the move to a single instance found that for every $1 saved in IT, the business expects to find $3.4 of leveraged savings. This raises the total global benefits opportunity to more than $130 billion, on an annual basis.

While these findings present a clear business case for consolidating SAP instances, many companies may run into substantial political and operational hurdles, preventing them from achieving that Holy

Grail: the single SAP instance. One hurdle is the seeming cost-effectiveness of integrating existing SAP, as opposed to investing in a single consolidated system.

But such a move is unlikely to represent a savings in the long run. That’s because disruptive trends such as cloud, in-memory, and mobile computing will require the transformative creation of a single enter-prise system.

Some 75% of respondents reported both that they had implemented cloud services in some form and that SAP technology played a significant role in their cloud plans.

Similarly, more than three-quarters of those surveyed said they planned to deploy in-memory computing, with its tremendous potential to speed up existing applications and enable previously unthink-able applications through the mixing of transactional and analytical functions within a single application. Some 80% of respondents said that SAP HANA would play a major role in their in-memory initiatives.

SAP technology on-premise, on-demand, and on-device. Certainly, having fewer instances of SAP will make this journey a lot smoother for many organi-zations. With Business Suite now available on HANA, the adoption rate is likely to be even higher.

In the case of mobile computing, more than 90% said they were planning or already had a mobility strategy, while more than half of those said that SAP technology would be the cornerstone of that strategy.

Of course, the challenge for CIOs is how to pay for these disruptive technologies. The study found that the savings generated by the consolidation of SAP instances could be applied to the adoption of such technologies, which would likely create competitive advantage for the future.

Where does SAP go from here?


project you plan it out, you have a deployment schedule, and you manage risk. These initiatives are different in that failure is OK. The biggest challenge at the beginning was to carve out the budget, time, and resources to get started. Once we had the process for IT-driven innovation up and running and could show it was beneficial, it became almost a self-funding exercise, because people liked what they got out of it. However, this is one area that you don’t want to turn over to the business to prioritize, because then budgets might be used to fund the regular implementation of certain business priorities. This is a big challenge for a lot of CIOs: When demand is much greater than capacity, it’s not easy to go back to the business and say, “Not only do we have budget and resource constraints for what you’re asking, but I’m also withholding some of the capacity that I have in order to do innovation.” At the same time, we bring the latest solutions and technologies into our regular implementation projects wherever possible. Innovation has become pervasive in our IT portfolio.

Serving as Innovation Broker

That’s not to say there isn’t a role for the business in IT innovation — quite the contrary. The CIO has to be in charge of the big picture and the overall technology road map — enterprise architecture and implementing and running the backbone of the company. But the CIO is also becoming more of a broker for the rest of the business. In our case, we opened our mobile platform to the entire company so that employees could develop mobile apps. IT checks each app for security and then makes it available to the rest of the company for download. Basically, our community members “vote” on the value of the app with their downloads. If enough people download it, we’ll take it into the IT catalog and support it. The traditional way would have been to build out a mobile road map and not develop anything until a final framework was defined and we had UI standards and had made sure it would work with everything else. It would have been a very lengthy process, and it would have been 100% driven by IT. But there’s a lot of creativity out there, and a lot of people now have the ability to develop solutions. It’s our job to make sure the best ideas find their way into the official set of IT solutions that we roll out and support. This is a different way to think about innovation —

but it shouldn’t be confused with having no controls at all. With cloud computing, some business users are in a position to implement something without going through IT. This is rarely a good idea. IT should be the broker, making sure the right solution is selected and that it is configured in the right way for security and reliability.

Many solutions these days are hybrid, and IT has a key role in their implementation and integration.

Consulting with Customers

The last area in which IT has become part of the business is in rolling out our new HANA Enterprise Cloud offering to the market. Our infrastructure colleagues have implemented HANA-based business systems internally: Our CRM system runs on HANA, our ERP system runs on HANA, our BW (business information

warehouse) system runs on HANA, and many other systems have been put onto the HANA platform. So it was a logical move to say that the unit that has been deploying it for SAP as a large enterprise customer should be a key part in forming the new offering. This team merged with other resources throughout the business to form the HANA Enterprise Cloud unit, which provides services to external customers in addition to running and operating all of SAP’s internal systems. I think it’s a great statement that IT was a key partner in launching this offering.

SAP’s IT function has become an early adopter ofthe company’s own technology, deploying SAPsolutions, sometimes even before they are in betastatus, and providing valuable feedback to productdevelopers.

In this new strategic role, IT is able to talk moreeffectively to customers and prospects about howto implement SAP solutions and the business case for doing so.

The CIO can be an innovation broker, ensuring thesecurity and reliability of new solutions — no matter where in the company they are developed.

Normally in an IT project you plan it out, you have a

deployment schedule, and you manage risk. These

initiatives are different in that failure is OK.

•

•

•

The Takeaways


CBA RUNS SAPHow the Australian financial services giant used technology to transform its core banking systemFor Commonwealth Bank of Australia, the country’s leading provider of integrated financial services, install-ing SAP software represented more than an investment in new technology. It was the basis for a total transforma-tion of CBA’s core banking system. In this interview with CIO Straight Talk, Tim Whitely, former Executive General Manager, Service Development, at CBA, who was responsible for technical solution delivery for the Core Banking Modernization project, explains how the project was carried out and the resulting benefits to the company.

Instead of working to improve customer expe-rience through a succession of piecemeal initiatives, the bank undertook a massive overhaul of its core banking platform. Why?

For years, we in the financial services industry did our best to give the impression that we offered real-time banking. But as Internet banking grew in importance and the number of channels through which customers could interact with the bank increased, it became clear that we weren’t really capable of providing a truly immediate experience. We provided what might have seemed like real-time information, merging data from disparate sources, including batch systems, to generate an accurate balance for a customer, but the details were never there. As customers began to expect a more immediate, person-alized banking experience — the ability to bank when, where, and how they want — we realized that our core legacy systems would never be able to keep up.

What was involved in creating this system?

Instead of simply building a customer-facing layer on top of our existing systems or launching a new digital bank beside our legacy infrastructure, as some banks have done, we chose to invest in a $1.1 billion replacement of our core banking system. The five-year project, which began in 2008, was made more challenging by the fact that we were charged with effectively replacing entire systems without affecting the daily services of the bank and its customers. But our goals were just as business critical as the risks: to support the bank’s continued focus on customer service; to increase the agility of our infrastructure; to eliminate the risks associated with our aging legacy systems; and to build a platform for the functionality and services our customers would demand in the future.

I assume that a transformation project of this magnitude had its share of challenges.

That is true. For example, we underestimated how much change would be required in our payments capabil-ity; in the end, we had to overhaul that process through complete payments hub integration. And this was a massive project. At its height, the project involved more than 1,300 IT professionals, with SAP as the application vendor and Accenture, HCL Technologies, IBM, and Tata Consultancy Systems as implementation partners. But with a clear vision and objectives, a disciplined approach to project phasing, effective vendor management – we were the prime service integrator so that no one vendor was trying to manage the others – lots of communication, and a little elbow grease we have overcome the challenges.

As you look back on the project, was it worth it?

Today, the new core system supports more than 12 million retail and commercial customers, who benefit from real-time banking, everyday settlement, and faster account opening. On the back end, we’re experiencing fewer outages, a 250% increase over five years in changes going into production, the elimination of 26 processes, 15% call center reduction, and more than 100 reusable and interoperable capabilities, to name just a few benefits. It used to take two days for a customer to open an account; there was a batch process overnight, followed by another process the next day. Today, a customer can open an account and start transacting right away. A rules engine allows us to configure different combinations of products for different customers. Because we invested the time, money, and effort needed to completely overhaul our core systems, we are able to leapfrog competitors in some emerging technology applications.

In what way?

The new platform has served as a launching pad for leading-edge applications, such as the mobile app we introduced in 2011 called Kaching, the classic sound of a cash register. The tool offers customers all the basics of mobile banking: bill payments, account transfers, and statements. But it also integrates contactless credit card payments at the point of sale, as well as payments to friends via e-mail address, mobile number, and Facebook account – even by “bumping” two phones together using the handsets’ accelerometers and GPS to confirm the transfer. Thus far, nearly a million customers have down-loaded the app and now log in an average of twice a day. In the first 18 months, those customers used the app to transfer or pay more than $6.7 billion. The core transfor-mation has been the driving force behind a much larger transformation, in which we are tackling every layer of technology and operations in order to meet our custom-ers’ evolving needs. We have reevaluated everything IT does, from the way we build our applications (we’ve embraced agile development) to our architecture (we’ve embraced cloud computing where it makes the most sense). We are trying to innovate on the back end and the front end because we think we need to excel at both to deliver the real-time relationship our customers require.


Straight Talking

Vanguard Health Systems owns and manages a $7 billion portfolio of health care assets, including hospitals and hospital systems, ambulatory clinics, health plans, lab companies, and more than 50 related business ventures across five U.S. states: Arizona, Illinois, Massachusetts, Michigan, and Texas. The company recently was acquired by Dallas-based Tenet Healthcare Corporation.


INNOVATION BY AMATEURSRelaxing constraints on technology experimentation by people outside the IT function can lead to a robust system of self-funded R&D — one that generates solutions business users want and need.

Scott Blanchette [email protected]

POSITION: Senior Vice President and Chief Information Officer

COMPANY: Vanguard Health Systems

WORKS FROM: Nashville, Tennessee

PROFESSIONAL BACKGROUND: Scott Blanchette is responsible for technology strategy, execution, and business operations across Vanguard’s network of health care businesses. Prior to joining Vanguard, Blanchette was Senior Vice President of product development and CIO at Healthways, a health and wellness company, and had senior management roles at Stanford University Medical Center, Ernst & Young, and Booz Allen Hamilton. He received CIO magazine’s CIO 100 Plus One award for social impact in 2010 and the MIT Sloan CIO Leadership Award in 2013. Prior to corporate life, he spent ten years in the U.S. military.

EDUCATION: BA, James Madison UniversityMS, University of North TexasMBA, University of Maryland University College

PERSONAL PASSIONS: Alpine climbing (recently summited Mont Blanc), diving (“Nothing so deep that I need to wear a hard hat”), and Wounded Warriors (an organization that provides support to injured members of the military).


Several years back, one of our doctors wanted a way to track “near misses”: clinical mistakes that are caught before they seriously harm a patient. Did he come to us, the experts in IT, to place his request? No, he went to his next-door neighbor. Together they created a simple iPad app that now provides our whole company with informa-tion that has greatly improved the quality of the care we provide our patients.

This is an example of one of the most significant trends in IT today, what I call “innovation by amateurs.” At Vanguard, two forces have intersected to drive the open IT innovation process. The first is our team of highly educated and entrepreneurial physicians, most of whom operate as independent contrac-tors. The second is what I refer to as the “Applification of IT.” Apple made the computing experience both simple and appealing, and it has become extremely easy for people to research, implement, adopt, and scale solutions. Suddenly, CIOs find themselves on the back side of the R&D curve, with key constituents way out in front.

Rather than try to bend the curve or regulate behavior, we decided to make the curve work for us. Since joining Vanguard as CIO, in 2011, I’ve encouraged our user base to find and vet solutions, and to look at IT as the arm that will industrialize and scale them in a way that makes sense for the rest of the enter-prise.

Those Persistent Calls from the OB Nurse

One of the early examples of this kind of innovation was with a group of our obstetricians in San Antonio. Every blip in the labor and delivery process tended to trigger a call to the doctor from the OB nurse, who would try to explain what he or she was seeing on a paper strip coming out of the fetal monitoring equipment. The doctor would have to figure out if it constituted a problem that required immediate attention. Imagine you’re delivering multiple babies at the same time — that’s really hard to do.

So this group of physicians went out and found an OB-monitoring waveform application built by a local physician. They installed it and got some IT folks to populate it with monitoring data. They fell in love with it, because it eliminated many of the phone calls and alerts, they no longer felt detached from their patients, and they didn’t have to worry about what was going on if they weren’t getting any calls. It helped them make sound clinical decisions remotely and become more efficient in their practice.

Think about it — what I’ve just described is the world’s best self-funded R&D scenario. The doctors went out and identified the problem, identified the solution,

vetted it in a traditional R&D way, and then came to me with a proposition to scale it across the enterprise. We have lots and lots of clinical specialties that have gone through the same exercise.

This is a huge shift. During my previous stint in the hospital space — about nine years ago, at Stanford Hospital, where I was the director of IT — this kind of activity was verboten. Something like this would have been considered a rogue application, and we had policies and procedures, up to and including termination, that forbid this kind of behavior. We had an R&D group that

worked on building or buying solutions; nothing got into production without coming through that group. Today at Vanguard we don’t have an R&D team; instead, we have one R&D guy who is essen-tially the gatekeeper for other people’s ideas.

Of course, we’re still some-thing of an outlier. The hospi-tal industry overall is very conservative. We were founded and are run by a serial entrepreneur, and that’s in our DNA. Many of my peers — especially in for-profit hospi-tals — think very differently. But this will change. And I

think the kind of experimentation we’re engaged in will become more common in many industries, from finan-cial services to retail to transportation.

Managing the Process

Early applications, like the one created by the OB doctors, created a bit of a floodgate effect at Vanguard. We had to convince people that our welcoming their ideas wasn’t an anomaly — it was going to be our new way of operating. But once it was clear we were serious, a deluge of ideas came pouring in; I think people were afraid that the floodgates would be closed again once we came to our senses!

Our next step was to define a governing process to deal with the introduction of new ideas. It had to be understandable, and we had to let people know this wasn’t an opportunity for us to say no but a way for us to say yes, at scale. We wanted everyone to understand that there would be a commitment from us to scale their ideas once they passed through the appropriate gates.

We have a dedicated vice president of technology innovation, growth, and strategy who vets these ideas according to criteria we’ve developed: 1. Is this a solution that we could scale to solve many

problems?2. Can it make it across all the regulatory hurdles?3. Does it fit into a reasonable support model? (If some-

one comes across an esoteric system and I have 50 esoteric systems that we have to integrate it with, it won’t be economical to scale.)

If I’d grown up as a help-desk manager

getting yelled at six times a day, I’d probably be

much more risk averse than I am.


articulate the business problem and IT would write that down, go into conclave, come up with a solution, and go back to the business people. There would be multiple cycles to design, implement, test, vet, and finally get to the point where the solution could be scaled. All of that created huge interpersonal issues between IT and the business. It created a financial burden, and it had cycle-time consequences. All of that is gone now. It’s taken the albatross off the backs of people on both sides of the table.

Letting a Thousand Flowers Bloom

So far, people at Vanguard have developed hundreds of ideas and dozens of apps. Some of these have been really profound in terms of their impact. Take, for example, the “near misses” app. One of the things that’s pervasive in health care is the under-reporting of mistakes that have been caught before they seriously harm a patient. We do a great job of report-ing the mistakes that cause harm, because we’re legally obligated to do so. But we do an awful job of reporting the near misses — for example, when someone is almost given the wrong medication. At some point in this kind of incident, there was an intervention that prevented the patient from being harmed, but there may have been six process break-downs before that happened. Organizations rarely have visibility into that.

A doctor in our advanced leadership program was doing a study on under- and unreported serious safety events. He (and that next-door neighbor of his) wrote a very simple iPad app that captures the date of the event and the unit where it occurred. It has a free text field for a description of what could have been done differently. The response we got when we rolled this out enterprise-wide was astounding — a huge number of near misses had been either under-reported or unreported. This provided incredible insights for us, and responding to these near-miss safety events, rather than focusing just on the ones that actually harmed someone, has had a huge impact on our quality of care.

A New Role for the CIO

I hope that in my lifetime I get to see the day when the CIO really is the chief innovation officer helping to trans-form the business, not the person who runs the data center hogging all the electricity in the basement. CIOs have three main areas of prowess. The first is technology — and hopefully all CIOs have that box checked. The second is business operations; more and more CIOs have that box checked. The third is market prowess — an understanding of how the marketplace is changing, the nature of the competitive landscape, and what the organization must do to adapt and remain viable. If we as CIOs can master the first two areas, it frees us up to provide opportunities to drive innovation investments and transformation and to contribute to the business in all sorts of meaningful ways.

4. Is this something that’s going to drive meaningful growth, profitability, or clinical quality? Actually, that goes at the top of the list.The ideas don’t need to be fully formed, with a fully

developed business case — some of the best ones haven’t been. Just a few years ago at Vanguard, you didn’t bring forward an idea unless you had a fully vetted business case, with a multiyear pro forma and a reasonably defen-sible implementation plan and resource model. People didn’t bring that many ideas forward, because there was sort of a haze around how they were vetted. Now I tell people, just bring your ideas — we’ll develop the rest. We’re not soft about the business case; when we do scale something, we expect to see tangible benefits. But we didn’t want to temper people’s enthusiasm with an overly bureaucratic process.

The Last Mile: Security, Compliance, and Scale

In an environment of distributed innovation, IT is basically responsible for the final part of creating and implementing a solution. It’s our job to vet things like security and privacy. In our case, anything that involves patient information obviously has to be vetted. Making sure we meet HIPAA requirements is the first bar, but we have to treat certain types of patient information with particular care. For example, in California the transmis-sion across state lines of data related to substance abuse, HIV, STDs, or clinical conditions associated with being the victim of a violent crime triggers fairly onerous penalties.

Once a solution makes it over these security and privacy hurdles, we have to see if it can be scaled in a way that allows physicians to benefit from it. Although we don’t get much credit for it, scaling isn’t all that easy. We’re a large, complex enterprise that’s grown through M&A, and we’ll get larger and more complex with our recent acquisition by Tenet Healthcare. We have multi-ple OB applications in different markets and even in different hospitals within a market. Scaling the applica-tion across the enterprise requires integrating those various OB monitoring systems, and that’s somewhat technologically complex.

IT’s job these days is not so much to drive develop-ment but to complete the last mile — to industrialize and scale a solution. In the past, business owners would

We had policies and procedures, up to and including termination, that forbid the development of

“rogue apps.”


Suddenly, CIOs find themselves on the back side of the R&D

curve. Rather than try to bend the curve, we decided to make

the curve work for us.

believe there’s always a way to accomplish an objective, and I try to imbue a lot of the special-ops principles in my team.

We know we can achieve things that others find too difficult. We can do them on a timeline that seems irrational, using techniques that others consider to be highly unconventional. These values are wrapped in a corporate culture founded on trust, teamwork, mutual respect, and selflessness.

Demanding as that philosophy is, it’s one that CIOs need to embrace in these demanding times.

For example, we had six old data centers that were about to fall down. Rather than just replace them, which would have required a ton of capital for no extra return, we decided to create an IT services company with a cloud offering surrounded by some IT support services. Our intention is to migrate the six data centers to this cloud — and at the same time to offer this service to small and midsize hospitals and hospital systems, which struggle to make the necessary investments in IT. The creation of a new business like this is one way IT can provide a new source of value for Vanguard.

The Benefit of an Unconventional Background

If CIOs want to add value to their organizations in this time of significant disruption, they must be willing to take risks. Not having followed the traditional CIO career path, I got to skip lots of the awful lessons CIOs learn in IT. If I’d grown up as a help-desk manager getting yelled at six times a day, I’d probably be much more risk averse than I am. A lot of negative behaviors get reinforced as people move along that career path, and it creates a risk-averse corps of CIOs.

Instead, I was fortunate to come out of a community — the U.S. military’s special operations community — that’s known for accomplishing things that most people think are completely impossible. We were trained to

• The doctors at Vanguard Health Systems identified a problem, developed a solution, and vetted it. IT got involved only at the end of the process, clearing regulatory hurdles and scaling the solution across the enterprise.

• It’s important to establish a process for handling new ideas that bubble up in a company. The ideas don’t need to be fully formed, with a fully developed business case — but they do need to drive meaningful growth.

• To add value to their organizations in this environment of significant disruption, CIOs must be willing to take risks, to try unconventional approaches that might seem impossible.

The Takeaways


Points of View

The biggest business driver of outsourcing has always been cost savings. And while cost continues to influence decision making in the IT and business process outsourcing markets, increasing and expanding demands on IT organizations are compelling them to seek more from their service providers. As mature enterprises enter into the next generation of outsourcing deals, they’re embracing new — and sometimes risky — models to achieve more than the old-fashioned “your mess for less” value proposition. “Certainly there is an evolution under way,” says Arno Franz, a partner with outsourcing consultancy Information Services Group (ISG). “Buyers have matured to such an extent that they are looking for something quite different in the marketplace.” CIO Straight Talk spoke with five of the outsourcing industry’s most respected consultants about six emerg-ing trends and what they mean for both buyers and service providers.

1. The Rise of Managed Services

Mature buyers of IT services are opting for managed services deals over staff augmentation arrangements, thus moving from input-based to output-based pricing. But while the potential benefits of the model are clear — increased value and flexibility — the approach requires significant behavior changes from both the provider and the customer. “In a staff augmentation deal, the client knows the people and they’re used to working that way,” says Ralph Schonenbach, CEO of Trestle Group. “When you take that away, it’s a big cultural change. It requires a higher degree of trust, because you are allowing the supplier to take over operations to run as they see fit.” Suppliers likewise may not be used to taking such a proactive role. “They need to be much more innovative in reorganizing the way people work,” he says.

NEW-AGE OUTSOURCING

A number of trends are changing the nature of IT and business process outsourcing, often to the benefit of both the buyer and the outsourcing vendor.


These managed services deals are significant in size, according to Schonenbach, from $100 million to $500 million, and the customers that pursue them are looking to cut costs by at least 20% to 30%. “It’s an easy number to communicate to the market, but what comes with that is risk because you don’t own the process anymore,” Schonen-bach says. Clients who pursue the managed services model must spend more time up front mapping out the scope of the deal and the desired outcomes in the contract. Some “are going through them too fast, which creates a lot of ambiguity,” says Schonenbach. “You need to spend enough time together to create a mutual understanding.” The biggest risk, however, is that the client will continue to treat a managed services arrangement like a staff augmentation project, failing to give the supplier the flexibility required to deliver the promised savings. These relationships also require strong senior management support in the initial phases. “It can’t be a bottom-up type of engagement, because there’s too much resistance to this kind of change,” says Schonenbach. Managed services make most sense in operational areas, like application maintenance. Application development, however, may not be a good fit, because these are often one-off projects rather than ongoing processes. While still in the early days, there have been a number of large deals in this space in Europe, says Schonenbach.

2. Betting on Business Outcomes

When it comes to outcome-based pricing, outsourcing customers are increasingly interested in business — rather than basic technology — results. “It gives everyone a chance to benefit from that linkage of the value of what’s paid to the vendor to the value that the client receives,” says Ben Trow-bridge, the founder and Chairman of outsourcing consul-tancy Alsbridge. “If you can get those two to sync up, it’s just wonderful.” It’s a challenge for both buyer and seller to define what those outcomes are prior to signing the contract, but early adopters and BPO providers are hard at work in this area. Providers who already have a business processing auto claims, for example, have a distinct measure of what it takes to process an insurance claim. “They’ve got a situation where they control the outcomes and it’s easier for them to control the prices,” says Trowbridge. “And everyone under-stands the metrics and pricing structures.” That’s not often the case. In an environment where clients want to move the procurement process along as fast as possible, some are reluctant to give bidding vendors the time to figure out individual business-outcome-based pricing. And a vendor with 100 customers may not want to take the time to develop distinct outcome-based pricing for each business. The client needs to take the time to make sure it wants to head in this direction; the provider needs time to get the metrics and pricing right. “Sometimes the desire is there, but the metrics just aren’t available,” says Trowbridge. Other times, business-outcome-based pricing just makes no sense — say, if you’re buying 100 images of server capacity.

“It takes a sophisticated seller and buyer to understand the outcomes. Both have to want to do it, and both have to want to devote the time to do it.”

Ben TrowbridgeFounder and Chairman, Alsbridge

“Everyone is looking to see how effective managed services will be for both parties.”

Ralph SchonenbachCEO, Trestle Group


3. Turning the RFP on Its Head

Historically, the outsourcing request-for-proposal process was a highly prescriptive affair. Buyers would describe, in great detail, what they wanted and how they wanted it. The similarly detailed service provider responses enabled buyers to make a clear apples-t0-apples comparison, based largely on cost. It was a fairly risk-averse approach, says ISG’s Franz, with the solution determined from the start by the buyers — for better or for worse. But what if it was the wrong solution? Time and again, buyers found that “they got the solution they asked for, but it may not have been right for the environment,” says Franz. That’s beginning to change. While outsourcing clients are still looking to control costs, they are also interested in taking advantage of the latest and greatest technology advancements like mobility, cloud computing, and big data analytics. And they don’t know what they don’t know. So some are turning to a much less prescriptive RFP process. It’s a welcome change for service providers. With the traditional approach, “they end up having to artificially construct a solution that’s not differentiating for them and ultimately costs them and the buyer more,” says Franz. “The less prescriptive approach enables them to do some-thing in their sweet spot.” For clients, it’s quicker and less costly than the custom-ary process. They spend a week or two drafting an engage-ment document versus three months on an RFP. The approach also narrows the field of competing vendors significantly, says Franz. It requires a more mature and trusting client, he says. “[Buyer and supplier] are going on a journey together versus buying a bunch of widgets.” Governance, likewise, has to be taken up a notch. “It’s much more evolved and really requires strong engagement on both the service provider’s and the buyer’s behalf,” says Franz. While there still are traditional KPIs, everything from the procurement process through delivery is much more collaborative. That requires more frequent meetings to test the solution and make changes as needed, says Franz. And the governance process must be stipulated in the contract, including who is involved, what the guiding principles are, and the methods of escalation. “All of those have to be front and center,” Franz says. While it’s unlikely to take hold in the government sector, this less prescriptive procurement process could become the norm in industry. “There’s so much new technology available,” says Franz. “And clients want to adopt and adapt to that technology in their sourcing.”

4. Commercialization to Fund Innovation

Cost containment is still top of mind for CIOs, so some are getting creative about how they fund their transformational work. One option is the commercialization of the outsourc-ing relationship — that is, the bundling and marketing of systems and processes that an IT service provider initially develops for one client. Some clients see an opportunity in selling their assets to their service provider in order to finance other projects in the near term and potentially generate a revenue stream in the long term.

“Clients are looking for something, but they’re not quite sure what the answer is. So they are better off describing their environment and the problem and asking suppliers for their solutions.”

Arno FranzPartner, Global Head Execute Services, Global Head Technology,Information Services Group


A bank, for example, may outsource the development of its reconciliation system to an IT service provider. The service provider develops a system for the bank, buys the rights to the system from that customer, and then modifies or enhances the system for marketing to other companies. If those companies sign on, both the outsourcing provider and the original customer share in the profit.

The key word is “if”: There have yet to be any high-profile examples of vendors able to take these commercial-ized systems to market in a meaningful way, says Schonen-bach, of Trestle Group. “The model itself is a nice idea, but commercialization is not the core competency of either party,” he says. “That’s where it runs into challenges.”

Customers also need to consider what the exit strategy might be if the arrangement doesn’t work. “If you’re not able to take it to market successfully, then what happens?” asks Schonenbach. “Do you have an agreement to bring it back in-house? What about your loss of key resources?”

But there are benefits beyond additional revenue to outsourcing customers’ taking a chance on commercializa-tion. They rid themselves of the legacy system burden, which presumably has been upgraded and is now managed by a third party. And, as other clients come on to the system, they benefit from the larger investment in system enhance-ments over the long haul.

“People within IT find it exciting — developing an appli-cation and selling it to the market,” says Schonenbach. “The go-to-market strategy doesn’t happen in your typical outsourcing arrangement.” It requires customers to be much more involved and visible in the marketing and sales of the product. And the IT service provider needs the sales capabilities to succeed.

Initially, Tier Two providers were most likely to enter into such commercialization arrangements, but interest has been increasing among big players as well. “There needs to be an appetite to do it,” Schonenbach says. “The more entre-preneurial suppliers are moving faster in this direction.”

5. The Increased Significance of Service Integration

The single-sourced mega-outsourcing deal — the shifting of the majority of an organization’s IT or business process work to a single provider — is dead. In recent years, the market has seen a significant move toward multisourcing, which can provide the flexibility, cost competition, and access to skills that enterprises need. “If you get the right service providers with overlapping capabilities, it creates a natural tension and competition,” says Lee Ayling, head of KPMG’s technology sourcing practice in the UK. If there’s a service failure, the customer can take that percentage of their wallet share and give it to another provider. Service providers are getting used to that fact. “They don’t have a choice,” says Ayling. “If it’s a global [customer], the deals are so big anyway, it’s in the service providers’ best interest.”

For buyers, the effective management of that multipro-vider environment has become increasingly important — and increasingly complex.

Ayling says. “The more strategic parts of service inte-gration are being brought in-house.”

J. Marc MancherPrincipal, DeloitteConsulting LLP

“They’ve got four vendors in three locations and then another five locations where they do the work themselves, and they want to figure out whether or not they put the pieces together right.”


The goal of service integration is to manage providers in a way that accommodates business demands. Third parties — from consultants to the service providers themselves — have offered this service to clients. But, says Ayling, “historically that hasn’t worked,” and increasingly, organi-zations see the benefit in doing it themselves.

Setting up a service integration shop from scratch isn’t easy. Buyers have to find the 20 or 30 professionals with the right skills and often must work in conjunction with their service providers to develop the appropriate capabilities.

6. Stepping Back to Look at the Big Picture

Over the years, clients have outsourced various components of organizations to various vendors in various countries for various reasons. This silo-by-silo approach to building up a sourcing portfolio did not necessarily translate to the best delivery strategy. Today “clients want to take a look at all the different pieces,” says J. Marc Mancher, the head of Deloitte Consulting’s insourcing and outsourcing advisory services in the U.S.

Buyers on their second- or third-generation deals want to figure out if the Philippines was the best source for that call center or whether they should narrow their vendor portfolio from four down to two or if they should bring some towers back in-house. “That initial gap of labor arbitrage has been captured, and now they want to look at the overall operating model and do a global reset before heading into the next generation,” says Mancher. “We stop and look at all the pieces within the operating model for IT and business processes and see if it makes sense.” Those pieces include not just IT work but also business process outsourcing and shared services operations. “It has to be a holistic look,” Mancher says.

Sometimes that reassessment leads to big changes; other times, it may make more sense to stay the course. A customer might find that achieving more efficiency in a certain area would cost more money and take two years that they don’t have. “It all depends on the case for change,” says Mancher.

However, the case for exploring new outsourcing models — whether introducing managed services or service integration, managing by business outcomes, rethinking the RFP, inventing new ways to fund innovation, or taking a more holistic approach — is clear. IT services customers who want more from their next-generation outsourcing relationships should step out of their comfort zones to explore new approaches.

“If you have three providers looking after your IT, there’s quite a lot that the buyer needs to do to integrate those services.”

Lee AylingHead of technology sourcing practice, KPMG UK


Spotlight on

THE CIO-CMODREAM TEAM


I wanted to share with you some thoughts that I believe are relevant as our company transforms itself – or is transformed, like it or not, by the business environment – into a digital enterprise.

First, a few observations about your customer – our customer – in this context:

I’m not telling you anything new when I say that customers have changed, as has their purchase process. It’s no longer enough to create a great television spot or print ad, then sit back as the customer walks into the store or calls a toll free number. For that matter, it’s no longer enough for us to hire a top-notch sales force as a means of generating revenue growth from our business customers. The leverage that you – or Sales – once had over the customer in terms of controlling the interaction is quickly becoming irrelevant.

Today’s buyer is smart, resourceful, and connected through social media, someone who does his or her own research before entering the formal marketing and selling channels. What Google breathlessly calls the “zero moment of truth” – when a buyer goes online to learn about a product or service, usually before any interaction with the company that offers it – is reversing traditional information asymmetry, in favor of the buyer. Whatever you think of the term, a marketer that is able to positively interact with or influ-ence a potential buyer at this moment will regain some of the power that has migrated to the customer.

Next, a few thoughts on technology:

Influencing a buyer online is a very different undertaking than influencing a buyer in the traditional way. Smart CMOs like you – and, if I may, business-savvy CIOs like me – are seeing opportunities to influence customer behavior through technology. This is ushering in an era of marketing and technology conver-gence, as marketers try to grow the top line by leveraging customer data – much of it “big data” – and using technology to enhance the customer experience.

Again, you probably already know most of this. Here’s something you may be less familiar with. Market-ing technologies are proliferating at a dizzying rate. According to my last count, some 350 different com-panies are offering marketing technology services in five broad areas: digital marketing channels, marketing automation, analytics, data integration, and product extension. Some people predict that we’ll soon see a new position – in fact, a new profession – on your team: the marketing technologist.

Hence, the oft-quoted Gartner prediction that, by 2017, the CMO will spend more on information tech-nology than the CIO will. Well, I want to be clear about this: I don’t care who spends the money. But I want to be sure it is spent intelligently. Collaboration between the two of us can help ensure that happens.

Attached are several interesting articles I’ve collected on this topic. Let’s talk when you’ve had a chance to look at them – a conversation that I hope will be the first of many. Working together would benefit both of us – not to mention the enterprise!

I’m happy to swing by to chat about this, if you want to suggest a time. In the words of a famous actor, “I think this could be the beginning of a beautiful friendship.”

Subject: IT-Marketing Collaboration

From: Chief Information Officer

To: Chief Marketing OfficerCc: Head of Sales


Spotight: The CIO-CMO Dream Team

The increasing overlap — if not the total convergence — of the marketing and IT functions will create a powerful new hybrid executive in many business organizations: the Chief Marketing Technologist.

By Scott Brinker

THE RISE OF THE CHIEF MARKETING TECHNOLOGIST


There’s little question that the marketing department is fast becom-ing the big spender of corporate IT dollars.

In the past few years, marketing has been inundated by a sea of new technologies. It’s no longer a matter of selecting the right CRM system or web analytics provider. The market-ing group has to implement bid management, campaign manage-ment, marketing automation, social media marketing, behavioral target-ing, and conversion optimization — to name just a few crucial activities.

Marketing is also managing mobile apps, dynamic ads, landing pages, and microsites. The market-ing technology landscape is littered with more than 350 companies, from small start-ups to Fortune 500 giants, across 45 categories, from agile management to video market-ing.

All those technology decisions are of strategic business importance. There’s just one problem: While marketers are accountable for their IT choices and for developing a vision for what they need, they usually lack the technical depth truly to take charge. And relying on their counterparts in IT to keep up with technology changes and needs in the marketing space has proven frustrat-ing.

Now that IT and marketing strategy are inextricably entwined,

it’s time for marketing to control its technology destiny. A new role is emerging: the Chief Marketing Technologist. Part marketing maven, part skilled technologist, this hybrid executive may be the most critical hire for CMOs today.

The Bad Old Days

As the first generation of web technologies were introduced, marketers had no capacity to imple-ment them themselves. They had to either turn to the IT department or engage a third party. Marketing would come up with ideas and throw

them over the wall to IT — or to an outside agency — which would spec out the work and bill them.

That was inherently problematic. Because the people in marketing lacked a fundamental understanding of technology capabilities, these efforts weren’t as effective as they could have been. Often what is technically possible inspires what’s creatively possible. Meanwhile, those in the IT department who knew the technology inside and out had little understanding of the things that were valuable to market-ing, like user experience. That lack of cross-functional understanding led to dysfunction.

“Marketing wasn’t concerned about how much a system would cost or if it was standardized or if it was completely bulletproof. What they cared about was experimentation and innovation.”

The Largest Enterprise Software Market in History Marketing technology, without a doubt, will grow to be the largest market for enterprise software in corporate history. The scale will be unprecedented. But will things shake out as they did with ERP — eventual consolidation into a handful of enterprise packages that do everything marketing needs? I don’t think so.

A lot of people are making the case that a marketing software vendor should bring all these applications together. And that would, it’s true, seem to make life much easier.

But the marketing environment is in tremendous flux. If you have one huge application that tries to cover all the bases, the number of changes you’d have to make across the system to keep up with market demand would be untenable. The maintenance would be outrageous. It would be difficult for a big suite to keep pace with market forces.

Sure, there will be consolidation. And there will emerge some backbone systems — a single content management system or CRM system or customer record, for example.

But those will be continuously augmented by innovative point solutions. And the makers of those backbone systems will pursue a more open strategy that makes the experience much more plug-and-play. I think they’ll move to looser coupling, allowing these systems to share data through well-defined interfaces and enabling marketers to take advantage of this ever expanding market of new applications.

Scott Brinker is a cofounder and the CTO of ion interactive, a devel-oper of software-as-a-service products for online marketers, and the author of the blog Chief Marketing Technologist. He tweets @chiefmartec. Scott can be reached at [email protected].


deployments. And that skill is critical, because, frankly, this isn’t just about digital marketing. It’s digital business. And in the age of big data, everything has to connect.

A New Marketing Role

Let’s face it, though. Marketing technology is a small subset of the challenges CIOs face today. They’re maneuvering the shift from on-premise applications to the cloud. They’re wrestling with the fact

that employees now bring their own hardware and software to work. And they’re juggling multiple business stakeholders.

When it comes to digital technol-ogy, there may not be the kind of clear cost-cutting ROI that IT is used to. CMOs may be investing in technology for growth or innovation or competitive innovation. That’s why leading marketing organiza-tions are developing their own internal technology group, led by the new Chief Marketing Technologist.

It makes great sense. If you can hire professionals who, to varying

degrees, possess both technical knowledge and capabilities and a solid understanding of and passion for marketing’s mission, they will bridge the gap between legacy marketing and legacy IT. So much innovation can come from that kind of cross-pollination of skills. Just look at Facebook. Mark Zuckerberg clearly understands the technology; he wrote the first version of the site. But the way he applies that technical knowledge is very much focused on building a market.

The Marketing Technology Ecosystem

Marketers today must manage an extended web of technologies. I like to think of it as a solar system, with many systems orbiting around a central marketing strategy and new planets entering each year. These technologies fall into three categories:

Digital marketing technologies: Websites, search engine management, online advertising, post-click marketing, behavioral targeting, social media, online communities, mobile, semantic marketing, reputation management, e-mail

Automation, intelligence, and internal reporting technologies: Web analytics, predictive analytics, business intelligence, customer relationship management, campaign management, competitive intelli-gence, sales force automation, digital asset management, content management, dashboards

Product extension technologies: Tablet applications, digitization of businesses (e-commerce sites)

And by the mid-2000s, the concern wasn’t just the company website. More advanced digital marketing tools hit the market. Enterprise applications technology — once the domain of back-office functions like finance, HR, and operations — were coming to front-office functions like market-ing. The marketing technology space exploded, seemingly overnight. Much of it was what I would call “net new” technology — that is, systems that didn’t exist before. And it was impossible for IT departments to keep pace.

It also became clear that marketing and IT had opposing priorities. IT’s mandate was to cut costs, increase efficiency, stand-ardize technology, and make sure systems were secure and avail-able. ROI was king. Marketing wasn’t concerned about how much a system would cost or if it was standardized or if it was completely bulletproof. What they cared about was experimentation and innovation. That’s when everyone began to realize that something had to change.

The CIO–CMO Relationship

There’s plenty of room for increased collaboration between the offices of the CMO and the CIO when it comes to spending on traditional marketing technology. Indeed, the best marketing organi-zations are working more closely with IT than ever before. Market-ing is going through such a funda-mental shift, and there’s plenty to learn from IT. The CIO’s strengths in reliability, redundancy, govern-ance, integration, compliance — even change management — can be a huge asset to marketing. CMOs have more responsibility for technology than ever before, but they absolutely have to partner with CIOs on those critical issues. Even in the realm of digital technology, applications are becoming increasingly complex. The CMO simply doesn’t have the experience managing large-scale technology architectures and

People who natively understand the technology, but also understand how it could be leveraged for some sort of market advantage, are incredibly valuable. That’s the Chief Marketing Technologist. It’s not just a liaison role between IT and marketing, though that is a big part of it. It’s someone who can play the part of agent provocateur and inspire new ways of thinking.

As many as 70% of marketing organizations claim they have some-one in a hybrid marketing–IT role, although there is no standard defini-tion of the position. Still, really good marketing technologists are hard to


technical infrastructure and capabilities, at the end of the day it is simply a means to the end of deliver-ing remarkable customer experi-ences and differentiating yourself from the competition.

The biggest challenge for marketing isn’t figuring out how to get the technical plumbing right. Between the new tech skills market-ing has acquired and its closer relationship with IT and third-party vendors, most organizations will get there.

The biggest challenge is how to leverage new technologies to do some really amazing marketing. It’s so easy to get caught up in the technology, but marketers need to keep the focus on how to be creative and innovative and wow their customers.

Frankly, most marketing technology vendors will tell you that their customers are using only 10% to 15% of the capabilities they offer. Although these customers have the technical capability when it comes to doing the work these systems offer — whether it’s real-time analytics or customer personalization — most are pretty far behind on the adoption curve.

It’s a change management challenge, one that CMOs and their new marketing technology teams must confront. And the larger an organization is, the more difficult such change is. Once you’ve bought the systems and gotten them running, you have to figure out how to turn that technology into action. How do you get this marketing team

find. They must not only under-stand marketing and technology; they also need to be capable of serving in a senior leadership position. They have to be good managers, good hirers, and good leaders — at a time of incredible cultural change in the marketing group. Five or ten years from now, I think folks like these will be in greater supply.

But it would be a mistake to wait for that. Most marketing organizations can’t afford to sit on the sidelines until the unicorn appears. They’re working around it, creating a team of people who each bring something to the table if they can’t find everything they need in one person. Others are building technology skills among their traditional marketers or immersing technologists in the doctrines of marketing.

The ratios of skills required are going to be different for every enterprise. Some may benefit from greater strength in data and analytics. Others need to focus more on customer experience. You can’t boil the ocean. Marketing leaders need to define what their focus will be and hire the right mix of marketing and technology skills to get there.

From Technology to Action

I think CMOs need to be wary of going too far in the other direction, though, placing all their bets on these new technologies and related skills. For all the talk about tools and

that has been working and thinking in a certain way for decades to adopt new ways of working and thinking?

It’s not just process change; it’s a cultural shift. Moving from doing “one big campaign and you’re done” to the notion of agile marketing, for example, is a great leap.

Some of the companies that have been able to overcome that culturalresistance are those that are creating the new marketing technologies themselves. They are eating their own dog food, and they have lessons to share with their customers. They’re proving that this can actually be done.

“People who natively understand the technology, but also understand how it could be leveraged for some sort of market advantage, are incredibly valuable.”

"It’s so easy to get caught up in the technology, but marketers need to keep the focus on how to be creative and innovative and wow their customers."


Spotight: The CIO-CMO Dream Team

Living the CIO–CMO convergence

A Conversation with Rom Hendler

DOUBLE DUTY


exhibition facilities, and celebrity chef restaurants, among other amenities. The company, with revenue of $11.1 billion in FY12, currently has a market cap of around $60 billion.

Beginning in December 2012, Hendler spent seven months as interim CIO, in addition to his duties as CMO, which gives him an unusual perspective on the potential andthe pitfalls of the CMO–CIO relationship.

Hendler joined Las Vegas Sands in 2000, when it had only one property — the Venetian — and he introduced scientific revenue management to the Las Vegas market.

Helping establish Las Vegas Sands as a serial innovator and participating in its rapid growth, Hendler moved quickly through various roles of increasing responsi-bility in marketing and operations. “Because the founder is very entre-preneurial, the company was not very structured,” he says. “This was frustrating to me — I like org charts and I like well-defined roles and responsibilities.”

The lack of structure, however, turned out to be a blessing in disguise: “It allows you to branch out, to do things that you don’t have the opportunity to experience in a traditional organization. I got a lot of experience in a lot of different areas while the company was growing and expanding.” As more of a traditional corporate environment was estab-lished to support the company’s growth, Hendler in 2009 became Corporate Vice President of Strategic Marketing and, a year later, CMO.

The following is an edited transcript of Hendler’s conversation with CIO Straight Talk Editor Paul Hemp.

Why did you take on the CIO role, in addition to your CMO responsibilities?

Even with the added structure as the company grew, there was resistance to hiring a CIO. The general attitude was, “Do IT people really need a

Right-brain versus left-brain. Oil versus water. CMO versus CIO.

Industry analysts tell us that battle lines are being drawn in the C-suite, as marketing heads embrace the rapid digitization of their work on one side and infor-mation technology heads try to make sense of new technologies on the other. Given the combatants’ different personalities and back-grounds, IT is doomed to be “disin-termediated,” warns Gartner’s Laura McLellan, who famously predicted that by 2017 CMOs will spend more on IT than CIOs will.

In contrast, Forrester’s Sheryl Pattek warns CMOs not to go it alone but to align with the CIO on a joint vision for customers. Blogger Scott Brinker offers similar advice, telling CMOs to collaborate with the CIO and find the sweet spot of division of responsibilities between marketing and IT. (See “The Rise of the Chief Marketing Technologist,” page 46.)

Faithful to CIO Straight Talk’s mission of presenting the viewpoint of those working on the front lines of IT transformation, we were delighted to have a conversation with Rom Hendler, that rare senior executive who has practical experience in both the CMO and CIO roles. Before a recent promotion to the position of Chief Administra-tive Officer, Hendler was Corpo-rate Senior Vice President and Chief Marketing Officer at Las Vegas Sands Corp., a developer of integrated resorts in the U.S., China, and Singapore that feature premium accommodations, gaming and entertainment, convention and

CIO? Can’t they just turn the computers on and off?” I argued for and succeeded in getting everybody to understand that the CIO position is very important and impacts every element of our business. We hired a CIO, and when he left, I stepped in to fill the role temporarily.

Why you?

About 40% of my time at work is associated with technology. When I say “technology,” I don’t mean simply that I’m using technology. What I mean is I’m developing and evaluating and selecting technology. Although I’m technical for a CMO, I’m not very technical for a CIO. But because marketing is so affected by the performance of technology and IT, I felt it was an opportunity to bring the two closer together and move in the right direction, where the business needed to be.

What do you think about the “CIO versus CMO” talk?

You want to bring the two together, and you don’t want to create more friction. There is no doubt that spending on technology related to marketing is going to grow. Technol-ogy in marketing is changing much faster than the technology you need to run the infrastructure. Today, marketing has new requirements as it merges many elements — big data, analytics, e-commerce, social media, revenue management, pricing, to name just a few. Marketing is trying to have a 360-degree view of the customer, so you can understand who they are and how to talk to them, and what to offer them and how to price your product based on what you know about them. And then you want to do everything in real time. How do you split the IT budget and who owns it? That’s more of an internal finance and accounting decision. At Sands, we have a capital budget for technology, and we decide together what projects we want to work on next year.

Rom Hendler is the Chief Adminis-trative Officer of Las Vegas Sands, where he previously was Chief Marketing Officer. For seven months in 2013, he simultaneously served as CMO and interim CIO. He can be reached at [email protected]


And what’s new with the CIO role?

CIOs used to be all the way on the other side. They were technicians. Normally, creative people don’t really get along with technicians. The creative person wants the newest thing, even though they don’t really know how to use it. The technician just wants to make sure that everything is working. The traditional CIO just wanted to keep the lights on and didn’t want to hear about new stuff, because new stuff can break and cause issues and take down their systems.

Today, you see the CIO becoming much more business-oriented, someone who is looking out all the time for new technology and innova-tion, and understands the value this brings to the organization. They understand that if they don’t bring in new technology, eventually their value will be diminished.

As the two roles are evolving, they’re getting much closer. You would think that CMOs and CIOs would work much better together. But they need to know how to reach out to each other and ask for the professional help to get things done.

Does the growing importance of technology make you prefer developing applications in-house?

With the help of technology, you can differentiate your customer experi-ence, you can enhance it and create efficiencies. Companies that don’t control the experience find it more difficult to compete.

We, as a company, realize — and it took us a while — that we are not a technology company. We are not an IT shop. We are in the experience business. As much as possible, we would like to leverage partners for the technology aspects of our business, as long as we find the right partners. We would like to do devel-opment as much as possible outside, not internally. We are sometimes limited by regulations

What’s new in the CIO and CMO roles?

Both roles are evolving, and the skill set is changing for both the CIO and the CMO. Traditionally, the market-ing guy used to be a creative guy, usually from an agency or a big consumer brand background, and mostly worked on the brand, the advertising, and the communications. Today, that’s not enough. Everything is shifting online. The moment that started to happen, everything became much more measurable. If you can measure stuff, and you’re mainly a creative person, there is some kind of conflict. No wonder many CMOs have had problems in the past five or ten years with their CFOs.

In addition, big data is such an important part of the overall work today in marketing. Doing analytics is a very different skill set than just being a creative person. I think that the analytics part is becoming a more prominent skill, and the creative part is one that you can outsource more.

So the future belongs to quantitative skills?

I think that the mix of creative and quantitative is very important. Take pricing: Is it art or is it science? It’s kind of in between. When I was responsible for pricing, I used to think of myself as a creative person; every-body else thought I was just a numbers guy. But there is a lot of creativity in how you present the price and how you position it and what you show first and how you talk about your product when you price it.

CMOs today have a better under-standing of technology and how to leverage it. And they know how to use all the data from social media and other sources to better understand customers and their behavior. What is the right time and the right offer to give to a specific customer? It’s important for the offer to be creative, but if I give it to the wrong person at the wrong time, it’s no good. CMOs are moving from a very creative skill set to a much more technical, analytical skill set.

about what we can do outside. But in general, we always prefer to work with outside vendors.

What are you most proud of that you've done in your CIO role?

I think it was establishing the process for setting up the priorities for IT.

The challenge is that everybody’s asking for stuff from IT all the time, and IT is saying no all the time, because they just can’t do everything. You should never say no. You should always say, “Yes, we can do it, but here’s the cost associ-ated with it. Either we need to hire more people or we need to go outside.” This helps you set priori-ties that are dictated by objective financial considerations, instead of saying yes to the people who make a lot of noise, at the expense of some-one whose business needs may be more important. I pushed on the business in each unit, in each region, to have one senior owner who decides priorities and what’s going to be done by IT. Now we sit around a table, there is a process, we understand what resources we have, we understand what the ROI will be and what is the cost. Every-body argues for their project, and then we decide which project is going to be done and when.


5000

partner.linkedin.com/CIOStraighttalk

That’s the number of IT leaders – and thought leaders – who have engaged with CIO Straight Talk this year,whether at events, as part of the LinkedIn community, or as magazine contributors and readers.

Join our group interactive

View from the Technology Blogosphere

ALWAYS ON, ALWAYS IN CONTEXTRobert Scoble


Who has more than 350,000 Twitter followers, 4.3 million Google+ followers, and 6 million views on YouTube?

The paragon of our hyper-networked era is Robert Scoble, one of the most prolific and sought-after commentators on everything digital. He travels the world looking for what’s happening on the bleeding edge of technology as Startup Liaison Officer for Rackspace, a provider of cloud computing services. Scoble has interviewed thousands of executives and technology innovators and reports what he learns on social media sites, YouTube, and his Scobleizer

blog, and in books. More than seven years ago Scoble

published (with coauthor Shel Israel) Naked Conversations, a book that helped define the business use of social media. In September, Scoble and Israel released Age of Context, which promises to shape the conversation about the next round of trends in our digital lives. The book, based on more than 300 inter-views conducted over 18 months, is an engaging journey through the five “con-verging forces that promise to change virtually every aspect of our lives”: social media, mobile computing, data prolif-eration, sensors, and location-based technology. Context is about how we relate to everything around us. In the age of context, according to Scoble and Israel, our relationships with our devices will become far more personal; in fact, those devices will accurately predict what we will want to do next.

Blog: scobleizer.comTwitter: @scobleizer


The book provides a vivid portrait of Scoble as networked tech junkie:

Robert Scoble was the 107th person to receive a Google Glass prototype. He put them on and started posting short notes on his social networks about his experience. He took them with him as he bopped over to Europe delivering speeches at tech confer-ences and letting hundreds of people give his Glass a quick try.

After two weeks, he posted his first review to Google+, the default social network for Google Glass users: “I’m never going to live another day without a wearable computer on my face,” he declared.

To illustrate his point, his wife photographed him in the shower wearing the device.

In the first two weeks, Scoble also produced over a thousand photos taken with Glass, as well as six videos.

Scoble is a noted lover of shiny objects. His career is built on meeting with developers of innova-tive technologies. He is known for both his candor and his enthusiasm.

Google Glass will be a flagship for contextual wearables. They will know when we are walking, skydiving, running, skiing, surfing, sleeping or watching TV. They will give us data and alerts in the context of what we are doing. They will understand our words and gestures, as well as our little taps and blinks.

In between Scoble’s flights and filming and blogging and interviewing, CIO Straight Talk Editor Paul Hemp caught up with him and turned the tables on the Scobleizer, getting him to answer a few questions, in context.

Which of the five forces has the most pointed impact on a for-profit business?

Every business is going to have more and more sensors every year for the next ten years. That means you are going to have more and more data coming in, and you need to keep up with that data and see the patterns so that you can beat your competitor and thrill your customers.

Union Pacific is putting sensors on its rails so it can tell about a month beforehand which car needs to be maintained. General Electric calls this the “industrial Internet,” and it is exactly what we are talking about here — contextual computing, sensors, big data. Beyond the industrial infrastructure, sensors have a big impact on agriculture, for example. Farmers are putting sensors in the ground to measure fertilizer and water levels. They are using GPS-driven tractors to plant and big data analytics to optimize crops.

Given the rapid digitization of health care, you would think that’s another sector where sensors will play a big role.

You are going to be wearing a tattoo on you pretty soon that will tell all sorts of stuff about your health, even

whether you have cancer. I have seen prototypes of sensors that are going to study whether a person has cancer or not, and give the health system an early warn-ing, which means the cost of treating the patient is going to be far less than waiting another year until the disease shows up as a symptom. How much of the health care system is even using electronic records right now? It is still a paper-based industry. It is really struggling to come into the future. If I were a health care CIO, I would be looking at these new techniques of trying to get people to lose weight and stop smoking. In other words, if I can change that by a couple percentage points, that is a huge cost savings. If I can get people to go to the hospital before they really are in trouble, that is a huge cost savings. If there is a new sensor that comes along that detects blood sugar levels, it can greatly affect the efficiency and effectiveness of health care. Somebody just showed me a way to take a picture of yourself every day, and that senses whether you have skin cancer or not by looking at your face for mole growth. The faster you can sense that, the cheaper it is to treat and the better the outcome is.

What other force of the five you discuss in the book will have a profound impact on businesses?

Data from social networks. You are going to know your customers in far deeper detail than you know them today. For instance, the Ritz is right by my house. I have been there 220 times, according to Foursquare, but they still have no clue who I am. Even the social media team that gets paid to watch this has no clue. You can tell by how they write back to me. They have no clue who I am. They do not know that I buy Oban whisky when I go there, that I smoke cigars, that I go swimming there, that I bring friends there, and that I live nearby. They have absolutely no clue. In ten years, that is not going to be the case. They are going to know me in a very deep way; so, when they talk to me on Twitter, they are going to know exactly how to talk to me. When I walk in the front door, they are going to know exactly what I am there for.

Why don’t they have this comprehensive view of the customer today? There are multiple systems collecting data about custom-ers, but the data is not shared. I have never stayed in a room there, so they do not know who I am. I have never gotten into the official, companywide database. They care about hotel room nights. They do not really have an idea of anyone else who is coming through the property. If you go to their Navio restaurant, you may use Open Table. If you go to their spa, you may use SpaFinder. These are separate IT systems that are not talking to each other and not sharing data with each other. One of the companies that collects data on the people using the Ritz facilities eventually will sell the Ritz a combined system that will make their customer service much better.


The Ritz is actually known for keeping tabs on and remembering what customers like and dislike.

Once you are a hotel customer — once you actually stay at the Ritz — they know what you like, but they do not integrate with the other systems serving all the people who use their services but don’t stay overnight. When you fly internationally and go to another Ritz somewhere else, they have even less of a clue. At least the bartender, locally, knows who I am.

That was the original social media, but the bartender cannot be scaled.

Right. Why is he not putting all of that data into a database? So when I go to London, they go, “Hey, you’re Robert Scoble. You are already in the system. Thanks for coming here. Do you want your usual Oban?” which would make me go, “Oh, this company has a clue.”

If I’m a knowledge business — say, a law firm — does this apply in any way to my business?

A law firm is still a people business and still needs to know more about its customers. The more you know about your customers when they walk in, the better service you can provide. If you know what this guy has been writing about on Facebook and you can analyze that in real time some new way, that will help you figure out, “Is this a real client I want to deal with?”

When you talk to CIOs, what piques their interest most?

Generally CIOs are interested in learning about what is at the bleeding edge. At General Motors, when I talked about 3-D sensors, they told me that they are working on putting those in their cars so they can understand better what their customers are doing. There is always an interesting discussion when you bring the future and show them the holistic view of patterns that I am seeing. Very few of them have seen the entire pattern. They typically see only a piece of it.

You are a happy guy about the future, I think.

Yes. Generally, the future is pretty bright. There are a lot of challenges we are going to hit, but technology is pretty cool.

The Many Lives ofDr. Halamka

In Scoble’s new book, Scoble reports he was the 107th person to receive a Google Glass prototype. He put it on and headed off for two weeks of giving speeches in Europe. At the end of the trip, he declared on Google+: “I’m never going to live another day without a wearable computer on my face.” To emphasize his point, his wife photographed him in the shower wearing the device. (https://plus.google.com/+Scobleizer/posts/TcaqNeYJWXo)


View from the Technology Blogosphere

BEING A CIO: IT’S NOT A JOB, IT’S A LIFESTYLE

John D. Halamka


Can a blog help humanize the CIO? The CIO position used to be one of the most sheltered C-suite roles, hidden from the outside world, especially in non-tech companies. Not anymore. As technology becomes embedded in all business activities in all industries, more and more CIOs are communicating externally, whether speaking at conferences, serving on public service committees, or blogging. Dr. John Halamka, CIO at Beth Israel Deaconess Medical Center, in Boston, and the engaging author of the blog Life as a Healthcare CIO , is one who does it all. In addition to his CIO role at BIDMC, Halamka is Chairman of the New England Healthcare Exchange Network, Co-Chair of the national Health Information Technology Standards Committee, Co-Chair of the Massachusetts HIT/HIE (Health Information Technology / Health Information Exchange) Advisory

Committee, a professor at Harvard Medical School, and a practicing emergency physician. He is also a part-time farmer and an avid rock climber, and he considers Japan his second home. (For more on Halamka’s path to becoming a CIO, see the sidebar “The Many Lives of Dr. Halamka.”)

Halamka writes that he uses his blog to record his experiences “in the world of healthcare IT, supporting 3,000 doc-tors, 18,000 faculty, and 3 million patients.” The blog also gives him the opportunity to “muse on topics such as reducing our carbon footprint, standard-izing data in healthcare, and living life to the fullest.” This description prompted a lively phone interview, as you’ll see in the following edited transcript of Halamka’s conversation with CIO Straight Talk Editor Paul Hemp and Contributing Editor Gil Press.

Blog: geekdoctor.blogspot.com

Twitter: @jhalamka


What are you trying to achieve by blogging?

Generally, the CIO is not the most popular guy. He or she is the person who says no or the person who, apparently, is so under-resourced and over stressed that something simple like, “Oh, we can get it at the Apple store,” becomes a big production for the organization.

CIOs have a bad rap. By blogging, you hope that people see that you are human and that you suffer the same challenges as everybody else. I bring my family and my personal challenges into my blog so that people can relate and say, “Well, maybe I did not get what I wanted from IT, but I believe in the process and I see that the CIO is basically a good guy, a person I can relate to.”

It is somewhat unusual for a CIO to be publicly visible. You also speak at conferences and serve on public service committees, and you write quite a lot about your personal life. Is this something that you think is important for a CIO to do?

Being a CIO is not a job — it is a lifestyle. You would love to believe that you can just check in at nine, leave at five, do the work, and then it is done. That is just not true. In some ways, as you suggest, I do not really separate my work life, my personal life, my international life, and my conference life. It is all part of one life. Engaging in constant communication through social media is truly a part of that combined lifestyle.

What made you decide, when you started writing the blog, to report on all dimensions of your life, not just IT issues?

I guess my role is to try to serve multiple constituencies with multiple purposes. I use the blog as a mechanism for sharing: Here are the experiences of a fifty-one-year-old, who is in the sandwich generation, the kind of person dealing with those you manage above — your parents — and those you manage below — your children. I some-times look at particular incidents in life, even serious ones like my wife’s breast cancer or my father’s death, with an IT perspective. What was it that IT did, or should have done, that it did not? That, in some ways, becomes part of the important information-sharing role as we create policy. The Health IT Standards Committee has been working on end-of-life-care preference standards. I am driving that, in part, based on my experience with my father. Sometimes the personal is just meant as “get to know me,” and sometimes it’s a means to drive policy.

If I am a CIO who is not contributing to the national health care debate but am working for, let’s say, a trucking company, is there a reason for me to blog the way you do?

As I mentioned, CIOs have to say no a lot. Everyone internal to your organization or in the companies associ-ated with your organization — the business partners, the vendors, the customers, and all the rest — may know you as the guy who says no. Your blog may help explain that it is not that you want to say no; it is the nature of the job that forces you to make these kinds of decisions. What I find is that when you communicate, when you get people together in a room, when you take them out to dinner — or when you blog — the tensions and sometimes the animosity just disappear. If there is anything that I have learned from my blog, it is that being extremely public with my professional and personal issues, and sharing my highs and my lows, has really decreased the animos-ity that people may have toward me, either inside or outside the workplace.

So would you recommend that other CIOs engage in social media?

Absolutely. Of course you have to do it carefully. You will notice in my blog that I do not specifically endorse a vendor. I may say, “I tried this, and it worked,” or, “I had a unique problem to solve, and here is how I approached it,” but I do not say, “Buy this. It’s $49.95.” Or, if I serve on the board of directors of a company, I wouldn’t highlight its products as important or revolutionary. I stay away from things that people might perceive as a conflict of interest.

Speaking about evaluating products, I’m writing a blog post about my experience with Google Glass. The idea is that an emergency physician can walk into the room and immediately see a heads-up display of all relevant documentation, the vital signs, and any diagnos-tic tests on the patient he is about to see.

And how would this be different from the doctor looking at his cell phone?

The advantage to using Google Glass is that you can actually put eyes on the patient while looking at the data. We will have to experiment with a number of user interfaces, but with Jester and Touch, you could imagine being able to look at the patient and then to instantly inquire about the data on the body part you are looking at. It is an interesting paradigm. Patients do not particu-larly appreciate when you are staring at a keyboard instead of at them, and I have a feeling that in the emer-gency department, Google Glass may very well provide the best of both worlds: the ability to interact with the patient while consuming data, and to do it at a very fast pace. Just as the iPad has become the chosen form factor


At a time when “microcomputers” were considered just playthings for enthusiasts, Halamka was the first undergradu-ate at Stanford University to have a computer in his dorm room. “That was because I built it myself,” he notes dryly. Using that “computing power,” he started developing payroll tax applica-tions, first for the CP/M operating system and then for the first IBM PC. He also created a birthday surprise for Apple cofounder Steve Wozniak’s thirty-third birthday at the request of Wozniak’s mom: an electronic birthday greeting with synchro-nized audio and video delivered on a computer — this more than a decade before e-cards became popular. His under-graduate honors thesis, “Espionage in Silicon Valley,” was published in book form.

While starting up Ibis Research Labs, which became a 25-person software consultancy specializing in medical and financial information interchange, Halamka furthered his education. Thinking that the melding of technology and biology would be interesting for him, he went to medical school, where he realized that the “bionic” world was still a very distant reality. So instead, he combined his passions, pursuing a career in emergency medicine and building clinical information systems.

In 1996, Halamka joined the faculty of Harvard Medical School as an Instructor while pursuing a postdoctoral fellow-ship in medical informatics at Harvard and MIT. “People knew that I was a doctor who had the capacity to mine data,” says Halamka, so he was made Director of Analytics at Beth Israel, responsible for what “today would be called big data, aggregat-ing all of the hospital data, doing all of the quality measures, and figuring out how to enhance workflow with analytics.”

When the Beth Israel and Deaconess hospitals merged, in 1997, “it was believed that the only way to accomplish the merger electronically was to rip up and replace everything in both hospitals, and put in a very large and very expensive vendor-based application,” says Halamka. “My postdoctoral work was titled “Using the World Wide Web to Interlink Disparate Hospital Organizations.” So, I went live, for free, with a web-based application that unified the existing applications of the two hospitals, and the CEO said, ‘Fifty million for a new system, or free and web? I like free and web.’”

Halamka became the CIO of Beth Israel Deaconess Medical Center in 1998, serving concurrently, for a time, as CIO at Harvard Medical School. About his tenure at BIDMC, he writes in his blog: “Sometimes we're a leader and some-times we're a follower. Deciding which to be is the innova-tor's challenge. BIDMC decided to ignore the entire client/server era in the mid 1990's. As others were creating Visual Basic, Filemaker Pro, Delphi, and Access front ends to applications, we continued the use of roll and scroll termi-nal emulators. When the web appeared, we jumped in with both feet and moved all our clinician facing applications to thin client, cloud hosted, web-service architectures in 1998. That approach has served us well. It still feels modern in 2013.” He says: “The web is just the mainframe all over again.”

When we talked to Dr. Halamka, we discovered that his insatiable curiosity and energy were evident at an early age. “When I was eight years old, I was a latchkey child in Southern California, as both of my parents were in law school,” he recalled. “I would come home from school, and to entertain myself I would go to the local surplus store, which at that time, early 1970s, had integrated circuits that were being tossed out by local defense contractors because they didn’t meet military specs. As a twelve-year-old, I got myself analog and digital objects, microprocessor technology, and assembly language, and started designing systems.”

The Many Lives of Dr. Halamka


for clinicians today, I can definitely see a day when computing devices are more integrated into the clothing or body of the clinician.

In the current environment, how do you find time to spend on an experimental project like that?

I end up doing a fair amount of the design work myself, and I bring in talented members of my team who do it through pure strength of will. A few hours at night, and a few hours on the weekend, as it can be fit in with opera-tional constraints.

Speaking about finding time, you are now becoming a professional farmer, in addition to everything else you do. You have blogged about “building a brand” for your farm and formulating “a multi-year strate-gic plan leading to full recognition as an agricultural enterprise.” Is this your new start-up?

Yes. This weekend we harvested honey from eight beehives. We have honey. We have the fiber from the alpaca, and we have the hoop house going in this summer, which means that I will be able to have quite an array of vegetable production for at least about eight months per year. Then we will have about 500 pounds of shiitake mushrooms fruiting this spring. We are getting there.

The Toad and the Snake: An Excerpt from Dr. Halamka’s Blog

Over the weekend while working in the orchard, I found a small garter snake trying to eat an enormous toad. [Halamka includes with the post a photo he took of this unusual encounter.]

Did the toad not realize that by wriggling its feet, it could easily escape? Was the toad unaware of the impending threat? Might the toad have given up and thought that the end was inevitable?

Did the snake not realize that the toad was much larger than it could possibly digest? Garter snakes have special jaw hinges that allow them to swallow things wider than their bodies. Was the snake so optimistic about the benefits of an enormous meal that it was willing to discount the risks it faced in the swallowing process? Might the garter snake have seized the opportunity because the conditions were right for eating the toad slowly over time?

As is often the case, I tried to find deeper meaning in this encounter with survival of the fittest. On a daily basis, I examine my life, asking who I am, where I've been, and where I'm going.In my early years as CIO, I did not know the risks I faced, what I had to lose, and who I might upset along the way. I was the garter snake. Out of this period came new advances in interoperability, patient portals, and clinical applications. Everything was developed in a disruptive rapid cycle improvement fashion.

Today, might I have become the toad? Have I become too risk averse in a world of enhanced regulatory enforcement? Have I evolved from the innovative rogue to the keeper of the status quo? Have I become too attached to the customer relationships I've formed, the incumbent vendors I've chosen, and the strategy I have shepherded for 15 years?

In analyzing my behavior, I do not believe I've become the toad quite yet, but I am very sensitive to the warning signs. In 1996, when I was faced with impossible tasks for which there was no technology, no standards, and no policy, the answer was simple — create them and if they failed, try again. In 2013, with auditors reviewing my every project, government agencies scrutinizing my process maturity, and boards wanting to minimize risk, how can we reduce the barriers to innovation?

I do not have a complete answer, but I have an idea. I would like to begin raising funds from inspired philanthropists, grateful BIDMC patients, and partner companies to create what I'll metaphorically call the New Organization for Transformative Outside-the-box Application Development (NO TOAD).

Of course we'll continue innovating in all my operational BIDMC IT groups, but somehow NO TOAD has to be constructed and chartered to do work unconstrained by convention, risk aversion, or anxiety about the things that create overhead in 2013 and did not exist in 1996. . . .http://geekdoctor.blogspot.com/2013/05/the-toad-and-snake.html


For interactive digital edition of Issue Number 2, go to http://magazine.straighttalkonline.com/issue2

For interactive digital edition of Issue Number 1, go to http://magazine.straighttalkonline.com/issue1

STRAIGHT TALKING: DISPATCHES FROM THE FRONT LINES

SOLUTION SPOTLIGHT: CLOUD

Experience-based insights about current CIO challenges

Articles by the CIOs of Dr. Pepper Snapple Group, AEGON, SunAmerica Financial Group, Quest Diagnostics, Old Mutual PLC, Teradyne, Cummins and more...

WHAT LIES AHEAD?Three outside perspectives on tomorrow's CIO

Essays by Maryfran Johnson (Editor-in-Chief, CIOMagazine), Jeanne W. Ross (Director, MIT Center forInformation Systems Research), Ellen Kitzis (former Group VP, Gartner)

Including a pullout poster: “Envisioning Our Cloud Strategy”

A systematic approach to deciding which business tasks and applications to move to which types of clouds

CIOs assess the emerging CIO roleREINCARNATE CIO ? ARE YOU A

Highlights from Issue Number 1

www.straightalkonline.com Issue Number 4

DIAMOND

AWARDWINNER

2013 ITSMA Marketing Excelle

nce

Awar

dsThou

ght Leadership

Read CIO Straight Talk on your mobile device — for free!

Apple Newsstand Magzter - Magazine Store Nxtbook Nxtstand


Join our group


magazine.straighttalkonline.com/issue4

interactive

Issue Num

ber 4

C

IO Straight Talk

Read CIO Straight Talk on your m

obile device — for free!

Apple New

sstandM

agzter - Magazine Store

Nxtbook N

xtstand


Join our group


magazine.straighttalkonline.com

/issue4

interactive