How Important Is the CIO...

Yesterday’s MIS manager is today’s CIO, and he’s
running up the Indian corporate ladder. As IT emerges as the critical backbone
of business strategy in Indian enterprises, the CIO is not just determining how
IT infrastructure will help streamline the implementation of those strategies,
he is also being consulted in charting out those plans.

These are some of the findings at the Dataquest—Citrix CIO
meet in Delhi on August 28, 2001, which featured several panelists from key
enterprise segments, apart from a special invitee–a consultant. On the panel
were (from left) Sushil Prakash, vice-president (technology), Bank
of America; MR Sundaresan, director (IT), Whirlpool, Adhunik Chug,
IT account manager, Microsoft; Prasanto K Roy, chief editor, Dataquest
and the moderator, AK Rastogi, director (IT), Indian Airlines; Ambarish
Dasgupta, executive director, Pricewaterhou-seCoopers and SR
Balasubramanian, vice-president (IS), Hero Honda.

The topic for discussion–‘How important is the CIO in
today’s enterprise?’ The finding–Quite big, and getting bigger by the day,
but still not quite where he belongs. There is some more way to go before the
Indian CIO enters his new lair–the boardroom.

"Yesterday’s MIS manager was there just to maintain
the IT applications and infrastructure. He would also buy hardware, limited to a
ceiling of around Rs 15-20 lakh, but was never involved in business decisions.
Today’s MIS manager, the CIO, heads key strategy meetings, and plays a key
role at corporate steering committee meetings. The entire organization depends
on him and he even outlines business procedures," commented Dasgupta, the
first of our speakers at the meet.

"The money he controls is quite a bundle–today’s
CIOs can authorize purchases running into crores of rupees," he added.
"Of course, it’s in industries where there’s high competition–white
goods, airlines, the service sector–that the CIO has really emerged strong.
Where competition is still low, the CIO is yet to evolve. But overall, the
expectations that companies have from their CIOs have increased
dramatically," he said.

Sundaresan backed this view. "There’s an increasing
business linkage to what the CIO does," he said. "There’s an IS
linkage to deliver what business wants. IS now has strong business deliverables,
with business people running it. Moreover, IS has emerged as a more important
function, and is no longer just a screw-driver function of fixing PCs out of
order."

The panel analyzed the CIO’s role in view of the slowdown.
Members were unanimous that the benefits of any IT investments were being
scrutinized far more closely now, given the squeeze. "We are now expected
to justify any expense in terms of quantifiable returns," Microsoft’s
Chug said. "We now follow a process of Rapid Economic Justification (REJ)
before any dollar sanctions are made. Of course, this is a great time for CIOs
in that they can get creative and justify their expertise and existence,"
he added.

BankAm’s Prakash agreed, and talked about the need to have
a "strategic vision on IT". "But this does not imply that IT
spend is on the way down. So long as the tangible benefits of any e-enablement
are weighed against the costs, investments are continuing. At BankAm, IT
expenses have gone up by 20% in the last one year." Indian Airlines’
Rastogi highlighted the need to have the priorities very clear. "One should
act upon those items that need addressing fast from the business perspective and
can’t be put off for later," he said.

The panel was very clear about IT’s ability in cutting
costs. Commented Balasubramanian of Hero Honda, "We have demonstrated that
we can reduce cost by reduction in consumables like toners, ribbons and all that
including stationery. Even though it is only a small reduction is costs but it
demonstrates that IT is in line with the rest of the organization."

We present below some excerpts from our panel discussion, in
order of their having been said:

ON THE EVOLUTION OF THE CIO

Ambarish Dasgupta (PwC): Thanks to my prior experience
with the MIS department, I have seen things from that side as well. To begin
with, expectations from an MIS manager were very limited in early days. He was
supposed to maintain applications and infrastructure in a proper manner. True,
he also negotiated with vendors on projects, software and hardware, but the cost
of such projects wasn’t very high–a few lakh rupees at the most. In fact, I
never saw an MIS manager getting involved in a business discussion. Issues like
how in a competitive market could the company use IT to increase profitability,
or to expand its distribution and reach, didn’t involve us. We were merely
expected to ensure that at the beginning of the month when the closing was
happening, the financial accounting system should run properly. Similarly, the
payroll system or the material management systems that we had bought or
developed should function well.

Sushil Prakash (Bank of America): Traditionally, the
CIO and his team were looked upon to perform administrative support functions,
and provide technical support to the bank.

ON THE NEW CIO

Bank of America: In a banking environment like ours,
the CIO is an officer who not only uses the information but also innovates to
achieve the four Cs of cost cutting, customer care, convergence and
communication. That, in effect, is defining the CIO’s role in the bank today.
He is expected to understand the competitive landscape, changing regulations,
business processes and making value addition to those processes, and at the same
time be on a constant lookout for changes in technology.

The change is well reflected in our management trainee
induction program. Earlier, in the 15-day program, the technology session was
given a slot of about 3-4 hours in which we covered the bank’s e-mail system
and its technological infrastructure. Today, we also analyze the framework to
exemplify how technology can add value to business processes. The CIO, in
addition to performing the routine technical functions, is being expected to
play the role of a business strategist or sort of a future thinker–one who can
help the business garner a competitive advantage.

SR Balasubramanium (Hero Honda): About three years
ago, with the changing markets, Hero Honda decided that IT should be aligned to
the business. That was the time when the management got serious. So we sat down
to make an IS plan to put it through, and a lot of senior people got involved in
the process. Thanks to the exercise, IT is a serious business in Hero Honda now,
and I’m part of the management committee that is involved in all business
strategies.

The role of the CIO has thus changed from that of a
departmental manager to an important member of the senior management team.
Consequently, the ambit of his functions has widened too: his participation in
business has gone up while he continues to manage the technology.

On the technology front, two things are key to the CIO’s
role–initiative, and selection of the right technology. Unlike the yesteryears
when a CIO ‘was told’ to develop an application depending on user needs, he
has to take the initiative and explore business areas where he can contribute.
He has also to ensure that he selects the technology that matches the needs of
the organization. ‘Technology bought but not used is a crime’ and the CIO
must bear this in mind.

MR Sunderasan (Whirlpool): Since we outsource our
entire IT to IBM, there is some difference in the way we look at the CIO’s
responsibilities. The CIO here has to don two hats–one for the technology role
and the other for the business role. Even though IBM handles most of our IT
support functions, the responsibility of design remains with us. The focus,
however, is on business deliverables. Toward that end, we have recruited people
who have performed hardcore business job roles such as sales, treasury and
after-sales in the past.

"All application support has been outsourced to a third-party agency. We concentrate all our energies on delivering business values–and reach our goals" MR Sundaresan director (IT), Whirlpool PCs: 600 Servers: 20 Major PC brand: IBM Major server brand: IBM No of locations: 45 Bandwidth resources: 4 Mbps Major applications: SAP IT model being used (in-house/outsourced): All Outsourced Employees: 4,000 IT employees: 6 Background: BE (Hons). PGDM (IIM) Experience: (Supply chain at HLL 90-96. Supply chain at Whirlpool 96-98. Consumer Service at Whirlpool 98-99. IT/IS at Whirlpool 00-01

So more and more people from business departments are moving
into the IT function. Also, it is interesting to note that our performance
appraisals are purely business-like and we have clear business deliverables.
This has helped us get out of the drudgery like "My PC is not working, or
my printer is jammed". All such functions, including application support
and help-desk, have been outsourced to the third-party agency (IBM). That is how
we have been able to concentrate our energies on delivering business values.

PwC: Today, it’s a changed situation altogether. Of
course, it varies from industry to industry. In certain industries, where
competition is not stiff, the CIO’s role has not changed significantly.
However, FMCG, automotive and white goods sectors, where there is tremendous
amount of competition, the change has been no less than dramatic. As against the
earlier case of various functional heads spelling out their requirements to the
IS person, the entire organization is now dependent on him, so great has been
the shift in his role. Also, there has been a significant change in the cost of
projects–from a few lakh rupees to a couple of crore rupees now. And the
expectations from the CIO have risen in direct proportion to the cost of
projects. Apart from contributing towards improving business processes and
supply chain development, he has also put on the missionary’s garb–going
beyond the organization and trying to integrate the supplier, the distributor
and the vendor.

AK Rastogi (Indian Airlines): In a public sector
enterprise like ours, we have to follow certain guidelines, even in deciding the
system specifications and requirements. Due to the very nature of our business,
IT has become a very important tool and I will say that the CIO in Indian
Airlines is playing a major role in the decision-making on various issues that
include giving discounts in the airline fares.

Adhunik Chug (Microsoft): It’s a challenge to work
for an organization where people can be more technology-savvy than you. It does
make it more difficult because you need to spend more time in order to convince
them. And you get challenges from all parts of the organization, right from the
managing director to the sales guys, and questions that you need to go back and
answer.

As far as involvement in strategic decision making is
concerned, the management may feel that it knows enough about the technology and
may not feel the need for involving the IT person. So we need to go back and add
value to things that they are doing. We need to develop ourselves to such level
that our advice is sought after.

ON TACKLING THE SLOWDOWN

Hero Honda: We have been a bit fortunate in the sense
that our company has not been affected by the slowdowns as such. But certainly
the management is aware of the increased competition in the market and hence the
talk about cost reduction. Given that, we have concentrated in a few areas where
we can demonstrate cost reduction. We have done that in supply chain, inventory
and consumption of consumables. We have shown that we can reduce cost, albeit on
a small scale, through optimal use of toners, ribbons and stationery. But such
efficient use of resources apart, there is no real cut in IT spending in our
case.

PwC: Yes, the tightening of budgets is happening, and
I feel that the allocations to the IS department will definitely be slashed. One
of the suggestions in this slowdown scenario is that the CIO should be able to
justify the cost with returns after the completion of the project.

PK Roy (Dataquest): That is an interesting point; our
CIOs today are increasingly under pressure to justify the money they are going
to be spending in the next three months in terms of clear business benefits for
the company.

Whirlpool: At Whirlpool, three measures are being
taken–cost, retention of talent, and linking IT to business. One cost-related
measure is to defer certain projects. Also, any investment is being broken down
in hardware and software component. We are not against boxes, but if there are
already 600 PCs and you want 10 more, please explain why. The justification has
to come from various functional heads, so the business starts thinking before
placing an order. So the direction that we are trying to take is say: why can’t
the business justify each investment it wants to make? For retention, we offer
intra-business rotations to help people with their career paths. As for the
third measure, we have identified a lot of targets and business deliverables in
our own performance parameters.

Bank of America: We have a different point of view and
our experiences have been slightly different from what has been tabled here. The
technology group at the bank has realigned its strategies in view of the change
in environment. We have taken up three specific strategic directions. First,
continue to support the business by providing the technology infrastructure and
improving the existing infrastructure. Second, define relationship managers for
each line of business at the technology group.

The role of the relationship manager is to assist the
business by doing a bit of strategic visioning, viz., how technology can assist
the business, and come up with some radical solutions using technology. The
third strategy–in terms of the business processes–is to analyze the current
business process and see how technology can improve upon it. Due to these
initiatives, our technology spend has increased significantly from the previous
years, with visible change. Technology has been asked to play a very major role
during major mergers and acquisitions. Whenever a merger or an acquisition takes
place, the technology department plays a very significant role, one of
integrating two different infrastructures together, in terms of applications and
connectivity.

Microsoft: We are coming under a good deal of pressure
to quantify the benefits we get from IT investments, and one is actually looking
for hard numbers. So we need to fight for every dollar that we get, and go back
and tell people how that investment will result in benefits. There are a number
of frameworks available and at Microsoft we are increasingly using something
called rapid economic justification (REJ). That is the framework that we use
across various Microsoft subsidiaries to help CIOs analyze the economic
performance of their IT investments. This framework helps us in quickly arriving
at numbers that are quantifiable and can be given back to the management. We are
able to tell the management the amount of money we need and the returns that
will accrue out of that investment. It makes our job much easier.

The slowdown is the time when we can show that we are
creative, when we don’t have the money but we need to deliver the same value
we did when we had a lot of money. At Microsoft, for example, we had a chance to
prove our mettle with the bandwidth issue: We had a fixed amount of bandwidth
last year. This year, there have been several initiatives to achieve a lot more
from the same bandwidth. We are enabling compression, and also using tools to
make sure that a lot of unloads that are happening off the Internet or the
intranet can be consolidated. We have something called data distribution service
that uses the bandwidth whenever available to push products that people would
otherwise download repeatedly. And we are writing tools to automate download, so
that if someone is downloading something then others can have that too. We are
doing pretty creative things.

Indian Airlines: An airline is constrained by its
priorities. And online booking or distribution is the highest priority for any
airline. Since it involves the distribution of the product, you have to explain
things to the management to get the approval. So even if the item has not been
budgeted for, you are able to get it. It is easier to get approval for priority
items.

ON THE ASP MODEL

ON THE ASP MODEL

Indian Airlines: This is a welcome move and I feel it
can help organizations get certain things developed at a lower cost. However,
since the specifications are never frozen, the ASP model may not work in an
organization like ours.

Whirlpool: We are trying to push a lot of applications
into the ASP model. We have made a beginning and are trying to link to our
suppliers. One reason we chose the ASP model was that it would allow us to test
waters at a low cost. We could do 10 more experiments with the model than we
would by committing to one large platform like Ariba. By experimenting, we will
be able to decide what is the best for us. Then, we will see if we want to go
for a large-scale application.

Hero Honda: The ASP model presupposes a few things.
First is a very robust infrastructure; second the cultural change that needs to
undergo within the organization in order to pick up the model, and third is the
capability of the ASP vendors to take care of various solutions. As of now, only
the small and medium enterprises in India can take up this route, and not the
large organizations. Large organizations have their own infrastructure and their
own applications, and it is fairly difficult for them to adapt or pick up a
different route altogether.

PwC: If large organizations go for some applications
in the ASP model, they may be doing that as sort of an experiment and then
coming back to their organization and having an application inside their
organization.

In case of SMEs, there has definitely been a desire to go for
some applications in an ASP model. But the issue here is: what types of
applications are we talking about? I haven’t really seen many strategic,
value-added solutions being hosted by an ASP. An e-business or CRM application,
an auction site for some trading, or some distribution software can be
definitely important, but not as important as an ERP application. So the
question is: is the ASP service provider hosting applications of that critical
importance? ASPs in our country have generally hosted applications that are not
much of a profound importance for the organization.

"Our strategy is–analyze business processes and see how technology can improve them. IT plays a key role and we keep our senses honed" Sushil Prakash vice-president (technology), Bank of America PCs: 400 Servers: 35 Major PC brand: Compaq Major server brand: Compaq, Sun No of locations: 5 Bandwidth resources: Fully meshed in India and all five locations connected to the bank’s global network Major applications: Custom-designed Banking applications IT model being used (in-house/outsourced): Both in-house and outsourced Employees: 300 IT employees (bank staff): 7 Approximate IT operating budget (as % of operating expenses): 10-15% Background: Masters Degree in communication engineering from IIT (Mumbai) and MBA from the University of Durham (UK). He has more than 20 years of professional experience in the management of national and international telecommunication networks and IT systems, and has successfully completed numerous assignments in Asia and Southern Africa

Bank of America: ASPs are certainly tailored for the
SMEs. Most large enterprises have a good infrastructure in terms of the network,
backup facilities, storage area networks, etc, and implementing a new
application is not much of a problem. So going for an ASP model does not make
good business sense to them.

SLOWDOWN TIPS

PwC: While outsourcing is fast becoming a way of life,
the CIO and his lean staff have gained wider business knowledge. The CIO is
interacting with the senior management and has the responsibility to take IT to
a much higher level of prominence. So the senior management’s participation
has to be increased, but for that end the CIO also needs people who can actually
handle that. I have seen some CIOs having alliance mangers under him who are
given the task of maintaining alliances with different departments.

However, this has its own set of problems–manpower. If the
CIO wants good people, he has to promise them growth opportunities, and good
career movement as well as competitive salaries. Today, few companies have a
structured performance measure and career growth-related programs in their IS
departments. It is imperative that the CIO and his staff be measured properly.

Hero Honda: The slowdown is real and we can’t wish
it away. So if we are not able to get those investments, all is not lost, as we
can get more by optimizing the existing technology. We may not have explored all
the features that we have in the current technology. The CIO today needs to
explore and manage things this way for a year or so, until things are better.
The slowdown is anyway not forever.

Microsoft: Look for some self-funding things, or, with
the same budget, try to get more out of the budget. For example, if you plan to
buy 100 laptops and the price has gone down, you can buy 120. Another area could
be bandwidth: Like at Microsoft, we had VSATs earlier–more reliable but also
more expensive. So we moved to landline, which, even with backups, would be much
cheaper than VSATs.

One thing to be borne in mind is that everyone would have his
or her own requirements and you can’t keep on building systems to suit
individual requirements–that would lead to a flimsy IT fabric across the
organization. So while it is important to listen to what users want but it’s
you who should judge what they get.

CIO-Vendor relationship

Bank of America: It is imperative that there are no
gaps in request for proposals. Such gaps leave scope for ambiguity, which leads
to confusion and chaos. If the RFP from the originator is correct, detailed and
specifies the requirements accurately, puts in time frames, puts in the
evaluation matrix, I don’t see any reason for chaos. In fact, most vendors
prefer the RFP to be very detailed and scientific. It is our experience that
whenever our requests have been technically sound and detailed, we have had very
good equations with vendors, both in terms of deciding the product and the
implementation.

"ASPs are welcome. They can help organizations cut costs and still add value. But given the very nature of PSU functioning, ASPs won’t always work out" AK Rastogi director (IT), Indian Airlines PCs: about 800 PCs and 600 ‘dumb’ terminals Servers: 18 Major PC brand: Zenith, HCL, DDE ORG, IBM, Compaq and HP Major server brand: IBM, HCL, PCL and SIVA No of locations: About 20 locations All airports and booking offices in India and 17 outstation Bandwidth resources: 27 MBps (leased digital links and more than 150 analog, covering various locations in India, and one HVNet link Major applications: Passenger resevations, message switching, ticketing, departure control, frequent flyer, Web-based interface for on-line access of passenger related Information via Internet mangement information system etc IT model (in-house/outsourced): A mix Employees: 20,400 IT employees: 220 employees for network and computer operations and 45 for SW and maintenance in Delhi IT budget (as % of turnover): Less than 1% Background: Post-graduate in engg from Roorkee University and 29 years’ experience in airlines and the networking field

Hero Honda: I think that first the problem should be
discussed with the vendor and he should be asked to offer a solution. The goals
and requirements should also be put up before him so as to get him more
involved. Next comes the negotiation process. Here, sometimes you strip down the
vendor to the extent that he doesn’t have a profit margin, often by playing
one vendor against the other. Since there is hardly any margin left, he starts
cutting corners and that’s when some of the problems begin. So it’s
imperative to negotiate for a fair price. And finally, one should try and
develop a relationship with the vendor so that whenever there is a problem
mutual help is readily forthcoming. If these factors are taken into account, I
see little reason for a project failing because of the vendor backing out.

Indian Airlines: While discussions with the vendor are
good, but a RFP issued after such discussions tends to be seen as a biased one
and people start pointing fingers at you. That is the problem we face, and so we
don’t discuss the actual requirements with anyone; we just discuss the
possible solutions for a broad set of requirements. And if in course of such
general discussions we identify some add-ons we put them on the RFP. Being a
public sector, we cannot do things the way other panel members have suggested,
even though that may be the right approach. There must be very good vendor
relationship because that is how you can move forward quickly.

The CIO and Training

Whirlpool: To begin with, no training is enough. At
Whirlpool, when we deploy any new solution, we have a structured training
program. What is more important, we talk to the senior management about the
seriousness attached to the program. A senior-level push and participation
ensures that people take the programs more seriously. We are thinking of
ensuring that if people are not trained they don’t go higher up in the
organization. Training should also be part of the performance appraisal, so that
it becomes an integral part of the self-development in the organization.

Indian Airlines: One thing about training: there is a
general training and there is a functional training. At Indian Airlines, we
provide functional training to people ourselves so that they know what
information they are getting and how best they can use that information.

Microsoft: Training is part of the problem. It is a
pity when you actually go ahead and spend a lot of money to deploy a technology
and it is not adopted. One reason for that is lack of training or the user not
attending the training program. At Microsoft, training is not an issue because
most of the users are fairly tech- savvy. The issue is that people don’t want
something new. They have been doing things in a way and they are used to doing
it that way. So we reward early adopters. We also conduct promos within the
organization about a new technology, and how it will benefit users.

Dataquest Report