Insource, outsource, everything as a service

I have spent a long time in and around the IT industry - 24 years and counting. During this time I have been a consultant, lead an outsourcing team and now I am a CIO. As a result I have been both a seller and buyer of services.

Currently as the CIO of The Warehouse, I get approached many times a year by vendors who want to sell me something. Some of them (but not many) actually want to help me and my organisation succeed.

Trade magazines and online forums are full of articles about the merits of cloud computing and outsourcing. Most of these stories urge CEOs and CIOs to change the way they buy computing. The current theme is that everything should be bought on demand; don’t own anything as others can do it better and cheaper.

Not so long ago strategic outsourcing and ERP filled the magazines and while the buzz has gone from the media, vendors still knock down doors on a regular basis to impress upon you, your CEO and your team that their services are the ones that will make the difference. It is great to have choice, but how do you decide? Whenever I am approached by a vendor the questions I ask myself are:

• Is the process or functionality being discussed strategic and/or a source of competitive advantage for my organisation?

If the answer is yes then I am unlikely to commit to an externally-provided solution. Why? Because building and maintaining sources of competitive advantage are critical to the future success of the business and core to my job as an executive and as a member of the executive team leading the organisation. While you do need to avoid the tendency to see competitive advantage in everything you do, where it is genuine I will keep that in-house. Because to outsource the most important services, is in effect to outsource the primary responsibility for your job.

• Can the provider meet the service levels that I need?

Many vendors bombard you with a huge list of certifications and performance statistics to show how credible they are. ITIL and CoBIT compliant, ISO X, Y and Z certified, CMM level and so on.

Most vendors talk about availability, many are proud of there 99.99 percent or 99.999 percent availability. This list of achievements is impressive and very few corporate IS teams can match the full array of certifications and point to 5 9’s availability. The real question however is, does it matter? While some of the services I provide do need to be highly available (Eftpos for example) very few of my services need to be at 99.99 percent.

What does matter to me is geographical diversity. I need to provide services into many of New Zealand’s small towns. Greymouth, Alexandra and Kaitaia for example. The point is, I don’t want generic solutions and certifications I want my specific needs met.

• Are your services cheaper than what I can provide myself for the required level of service?

It will not be a surprise that cost is a major factor in any deliberation of how to source. I have had many discussions with sales teams where they have tried to convince me that cost is not all that matters. There are the vast array of value adding services that they can bring. Value adding to who?

As the services that I am looking for an external party to provide are unlikely to be strategic or critical to my competitive advantage (see question 1!), cost for the agreed level of service that I need IS THE criteria and anything past commodity prices is added cost for no value.

• Are you prepared to share my risk?

Most vendors are very good when talking about risk early in a sales cycle. Most vendors however, want no part of risk when it comes to the detail of the contract.

While you can never truly “outsource” risk as it is my business that suffers when a service fails, suppliers need to recognise the critical nature of what they do for their clients.

They also need to demonstrate they believe in the quality of what is on offer and the value of those long lists of certifications. The best way I know to do this is to put some skin in the game and agree to put things right when they go wrong.

So, how do you decide? What will you have to pay in order to meet the required level of service?

First published on www.cio.co.nz

The number cruncher’s guide to delivering IT value

I’m a qualified accountant. I even sometimes read the Accountants Journal … there, I’ve said it!

As an accountant and a CIO I am intrigued by the debate within the IT community about how businesses should account for IT. Should it be a cost centre? A profit centre? Or a stand alone, semi-independent business unit? From what I can tell, the argument is that how an organisation chooses to do its accounting determines, or is an indicator of, how IT is seen strategically in the organisation. The logic seems to be that if you want to be an IT team that is strategic and adds value, then you need to be a profit centre as a minimum, or better yet a semi-autonomous business.

If you find yourself as a cost centre, watch out, because this means that you are seen as a non-value addition and simply a cost of doing business. It gets worse. As a cost centre the only questions that are asked of you is how can you reduce IT costs even lower than they are now. You are never asked about how IS can contribute to the strategic value of the organisation by driving revenue growth or helping to open up new markets.

The recommendation is that you get out of this cost mentality by becoming a profit centre or independent business unit. Charge the business for your services, create a profit, control your own balance sheet and then the business will begin to see you as adding value. As a result, the focus will shift from how can we drive down IT costs to how can we maximise the IT profit and strategic value?

My experience is that this whole debate is spurious. If I use The Warehouse as an example, it doesn’t matter if you are a cost centre or a profit centre your costs are scrutinised mercilessly. How the accounting works does not shield the profit centres at all. I admit that The Warehouse is particularly skilled at cost management. However, every organisation I have worked for or worked in for any length of time is the same. Costs are scrutinised in detail. I hear some of you saying that this cost focus is counter productive, as a company cannot cost cut its way to greatness. This is true enough, however no organisation ever became great by being lazy about its cost control.

To me this whole cost centre/profit centre discussion is a waste of time. In the complex world that we live in value is primarily about perception, not accounting numbers. If you are seen as a non-value addition cost of doing business, your focus should be on understanding why that is and putting in place an action plan to correct it. Most likely the issue will be in one of three areas, or a mix of all three:

• The services you are delivering are not meeting the service level expectations of your business. This can be both under delivery of service and over delivery of service which embeds higher costs.

• You are seen as slow and bureaucratic in working with your colleagues to plan and deliver changes. That is, you are not agile enough.

• And finally, when you do deliver, the projects are late, over budget, cause disruption on going live and do not deliver the planned benefits (or some combination of these).

Delivering solutions to these three issues is core to a CIO’s job. If you have these issues, or are perceived to have these issues, it means you are perceived by your colleagues as not doing your job properly. Mucking around and arguing about how the accounting works is not going to solve this problem. The only resolution to these issues is solid, customer-focused delivery day after day.

First Published on www.cio.co.nz

Using IT for Competitive Advantage

Over the Christmas break I read Nicholas Carr's "Does IT Matter". I figured it was about time I read it as I believe passionately that IT can make a difference to companies and within the community we operate. Based on a very quick skim read of his article and all the hype and hysteria it seems that Carr disagrees with this. If he was right or at least made some relevant thoughts I really should know.

My synopsis of his book is as follows. Competitive advantage is typically gained by "owning" items that are proprietary in nature. This makes them hard to replicate as it is expensive and takes a long time. Thanks to the long running effects of Moore's law and IT's relentless march towards openness and standardisation IT has rapidly become cheap and widely available. As a result competitive advantage cannot be obtained from IT as anything you do can be easily replicated by others so individual organisations cannot use IT for competitive advantage.

This is not true however for countries and or regions. Increasingly IT is becoming an open and easily accessible infrastructure. If a country or region does not have a "world class" IT infrastructure in place to support their local economy then they will be at a disadvantage compared to regions that do. The use of the word infrastructure is deliberate as this is how Carr sees IT evolving like other key infrastructures such as electricity, rail roads and the much more closely related telephone. A region with a good stable electricity supply has an advantage over one that doesn't. However individual firms cannot use electricity per sa to gain a competitive advantage as it is comparatively cheap and widely available.

His arguments make sense. The book appears to be very well researched and very well written and while there is likely to still be some way to run for true commoditisation of IT, particularly software, I have come away from reading the book believing that it is the most likely outcome.

So, if Carr is right what could this mean for the IT industry?

Hardware Manufacturers

Equipment manufacturers will continue to try and differentiate themselves by building bigger, better and only available here features. While this may allow one firm to perform better than their competitors at the margin increasingly this will become irrelevant as Moore's law will overtake all their efforts and continue to drive the industry to commoditisation.

Software Companies

Carr argues that traditional software companies provided the first major step towards commoditisation for software as packaging software made the IP widely available at a fraction of the price of in house bespoke systems. This model however will come under increasing pressure by the next wave of innovation/commoditisation. This includes both SaaS and open source software solutions which threaten to undermine the current model of licence, maintenance and on going expensive upgrades.

IT Service Providers

Whether they are currently software companies, hardware companies, Telco's, outsourcers or one of the many other service providers and contractors to the IT industry the IT service provider of the future will be the equivalent to the electricity company of the present and their support infrastructure. They will truly be "service providers" rather than product companies.

Corporate IT teams

Probably my main area of interest as this is where I work.

I don't see this as the death of the corporate IT team, at least not while I am still in the workforce. I do see the rise of the truly services oriented IT organisation. Many, maybe all, IT services will be outsourced to standardised utility providers. This can only be achieved successfully if the internal IT organisation is service oriented. That is, a service oriented IT department is be a prerequisite to be able to outsource standardised services to service providers. The main focus of the internal IT team will be to integrate these services both with each other and into the businesses operating model. I expect that an increasing number of these standardised utility providers will be open source communities. Corporates will actively contribute to these communities developing the open source software as well as using it for their core operations.

So my starter for 10 from my Christmas reading. I may well revisit this as I think some more about it.

Delivering Real Value

At the Warehouse, we run regular courses on “Managing successful projects”. I often get asked to provide support for these courses on behalf of the executive, by welcoming the participants and leading one of the sessions. The irony is that the session they always get me to lead is “What leads to project failure”? During this session we interactively identify why projects fail. There are many reasons why projects can fail. However, I always emphasise what I believe to be two key causes of project failure.

The first is sponsors who are not active champions for the project. I tell our participants that yes; I and my executive colleagues are one of your biggest risks. Normally this is not because we do not believe in the project or that they are inherently bad leaders. Often it is because we try and do too much too quickly and simply run out of time.

If you have issues and your sponsor is not willing to provide the time and support that you need to resolve issues or align resources effectively for your project, then the project manager needs to have a conversation with the sponsor to resolve this issue.

The potential resolutions are many and varied, however you need to consider the possibility that the project should be stopped or put on hold until it can be given priority. Better to stop early than muddling through with the likelihood of ultimate failure.

The second major cause of project failure is that we stop too soon. A huge effort goes into delivering the project; we get to go live and provide a small amount of post-go live support. We have a party to celebrate success and then leave looking for our next opportunity. We arrogantly assume that what we have implemented the first time is the total and ultimate solution.

We fail to measure on a consistent basis to ensure we get the benefits we expect and we spend virtually no time working with “the users” to ensure they successfully make the transition to the new process. As a result the change usually doesn’t stick and we do not get the benefits we planned, and we wonder why the project didn’t work.

To help reinforce the point, I compare a project to raising a child. There are three phases to each process and below is the short G-rated (approved for general viewing) version.

In stage one both are conceived to high expectations and celebrations. Everybody celebrates what will be and see only the benefits to come, and none of the hard work.

In the project world, we call stage two, implementation. In parenthood it is called pregnancy. During implementation, there is a lot of hard work that needs to be done. There are many reasons for that, however one of the main ones is we often expect people to carry on with our day jobs while at the same time supporting the project.

The culmination of stage two is “go live”. Go lives are often momentous events where everyone is under immense pressure and as a result things are said that perhaps shouldn’t be. The result of go live is, however, miraculous. In one a child is born. In the other a new way of business is given birth too and handed over to the expectant parents.

Stage three is where we raise the child to adulthood so they can effectively leave home and independently contribute to the world. In childhood this process takes years, about 18 years if you are lucky, and lots more if you are not! In projects, however, we spend little time “raising the child”. In essence, we abandon the child to look after itself and seem to expect that everything will work out as it was intended.

In more corporate speak, we spend very little time institutionalising change from our projects. Usually it is a few weeks and we expect everything will work out. The reality is that often it doesn’t.

If as a project manager, or an IS department, we want to add value to our organisations, then I believe we need to ensure the change sticks and delivers the benefits.

Metaphorically, all the value is realised from raising the child to adulthood, it is not in the conception and implementation. If we are truly interested in value creation, we need to stick around for and be active in the terrible twos, through puberty and on into adulthood. If we don’t, the chances of everything working out decrease dramatically.

First Published on www.cio.co.nz

Paid to do nothing

First Published on www.cio.co.nz

One night after a long day at work I came home wanting to chill out and relax. As a father of four that is seldom an option. This particular night I arrived home right on bedtime and soon found myself in the middle of stories and good night cuddles. In our house the bedtime ritual usually includes a period of time where we ask each other questions about our day. On this particular night my daughter asked me, “Dad, what do you do at work?”

This was not the first time she had asked me this question. On this particular night, being tired and not really thinking, I gave a glib “well, I get paid to do nothing”. I followed this up with what I thought was a pretty good attempt at describing what my job as a leader of a fairly large team actually is. It included an analogy between the principal of her school and what I did at work.

The story went that at school her job was to learn as much as she could and the teachers job was to help her learn. The school principal’s role was to support her teacher and all the other teachers in the school and make sure it ran properly so she and her friends could learn as much as possible.

He didn’t get paid to learn, but he got paid to make sure all the children did learn and to help the teachers to make that happen. At work I don’t get paid to work with computers, I get paid to support the managers, team leaders and all of the team to do their work as effectively as possible and make sure the work is done, I told her.

My daughter went very quiet and looked to be thinking about the ramifications of the answer I had given. I was quietly quite pleased with the answer I had given and then she said, “Dad, if you get paid to do nothing, why does it take so long?” I was stunned, quickly said goodnight and left disgruntled.

Now, when I said I get paid to do nothing I was half joking, but it was only half. If I look at how I actually spend my time, virtually all of my day is spent in meetings.

The form and topics of these meetings are many and varied. They may be one on ones, team meetings, executive briefings, steering committees, operating reviews, meet and greets or many other forums and topics.

If I am not in a meeting chances are I am preparing for a meeting, doing the occasional necessary action that comes out of meetings or reading and answering email and occasionally doing some personal research and study. Not a “productive” task there anywhere!

The organisational focus on meetings is often criticised loudly and with passion. How many times have you said or heard others say, “if only I didn’t have so many meetings, I could actually get something done!” Well what if you didn’t have meetings? How would we get our job as CIOs or senior IT leaders done?

In reality, as leaders of large teams, meetings are the job of CIOs and senior IT leaders. It is how we do what we do, which is to inspire, motivate, align, communicate, prioritise, discuss, decide, reward and recognise our team. There is no other effective way to do these things.

So, if you find yourself or your team lamenting about too many meetings, the problem isn’t too many meetings but that your meetings are ineffective and don’t add value. The answer is not to stop your meetings, but to find out how to have more effective, value-adding meetings. How do you do this?

As some of my previous columns have suggested, thro-ugh focusing on the basics. In this case be prepared, have a clearly defined objective and supporting agenda and ensure you have clear outcomes and next steps that are followed through.

Indeed, I believe meetings are so important that anything we do outside of a meeting should be completely focused on making our meetings more effective, so we can make a difference for our teams.

LGP Fundamentals - an Update

LGP Purpose

Games for Living; Supporting New Zealand as a place where everybody is safe and loved by harnessing the power of immersive games technology to foster the development of life skills and positive lifestyle choices.

Values

We believe that collaboration and leadership occurs naturally in an environment where everyone feels safe and loved. We do this by:

• living life with a sense of play
• acting with integrity and for the highest good of all
• learning and improving
• seeing people as the best they can be
• encouraging action
• being open and inclusive

BHAGs

1. Create a self managing framework for the New Zealand IT industry and Educationalists to engage and connect New Zealanders with today's immersive games experience to teach life skills in fun and sustainable ways.

2. Deliver a pilot LGP Project by Christmas 2009

3. Measurably impact the lives of 2,000 kiwis, their family and friends through the delivery of immersive games technology by Christmas 2012 by:

• Establishing 50 effective Games Delivery Operations by Christmas 2012
• Commissioning two immersive games for our communities and for sale

Operations Guidelines

• LGP delivers Products and Services through LGP Projects based around individual Underserved Communities
• LGP people honour the LGP Values
• LGP Teams collaborate to establish and support LGP Projects that deliver measureable outcomes to Underserved Communities

• LGP Projects contribute to the LGP Purpose and BHAGs
• Each LGP Team develops and applies effective Selection Criteria and Outcome Metrics

Finance and Administration

The LGP is looking for an existing and related registered Charitable Trust as a home that will support, nurture and administer us so that we can concentrate on ‘doing stuff.’ Is this you?

Invitation

To participate and Do LGP Stuff, start by joining the LinkedIn Life Game Project Group and Subgroup that suits you best ...

Life Game Project (LGP)

LGP Vision

Games for Living - Harnessing the power of immersive games technology to foster the development of life skills and positive lifestyles throughout New Zealand communities.

LGP Purpose

Creating a self managing framework for the Auckland based IT industry and Educationalists to engage New Zealanders with today's immersive games experience to teach life skills in fun and sustainable ways.

Background to LGP

The concept for LGP was born recently out of a meeting between Ian Howard, Parikshit Basrur and myself. Exactly how it came about is something of a blur to me. However, in my brain this is what happened.

My family and I are committed to making a difference in New Zealand society. The vision we have for this is that we want New Zealand to be a place where everyone in New Zealand can be and is "Safe and Loved". I have been thinking about what I could do to make a difference and move us forward towards this vision. As I thought about this several threads of internal conversations began to form:

• I believe in the power of technology to make a positive difference. It is one of the main reasons that I do what I do as everyday I get to think about and work on real solutions that make a difference for The Warehouse and for New Zealanders. I wondered, how could I apply technology to this broader mission?
• The current trends in technology are beginning to change how people are defining reality and community, and how people interact with each other and can support each other. While this movement has huge positive potential, it also has the potential to simply ingrain the "have and have not's" in our society through the digital divide. Once again, communities most in need could miss out as they cannot afford access.
• I believe in the power of education. When I say education I mean education in the holistic sense. Yes, this includes reading writing and arithmetic; but it also includes learning how to lead a successful life and develop yourself to fulfil your potential. It has been a major part of my life and has provided me many opportunities and there are many examples of programs that show that if people have the skills to be successful in society then virtually everyone will choose a positive role. My favourite example of this is the Delancey Street Foundation who turn around the lives of hardened criminals through peer support and mentoring. Over 90% of Delancey's graduates never offend again. This compares to their peer group where recidivism is typically well over 90%.

I was thinking about all of this and thinking about how I could put it together. As I pondered this my mind turned to the possibility of introducing learning labs into less advantaged communities. That is when I met Ian Howard (thanks to Baz).

Ian introduced me to the huge potential of using modern games to educate in a compelling, fun and personal way. Many modern games today are driven by participants decisions and their ability to complete specific quests or tasks. As Ian showed me some examples I began to see how you could shape the experience in a way that the gamer would begin to naturally assimilate powerful lessons in life in a fun and positive way. I could also see how gamers could be supported by peers and mentors with social networking technologies.

Thus the concept of the Life Game Project was born; and the rest will be history in the making. Game On!

If you would like to know more or contribute in some way then contact me and let's talk!