Anticipating 'Real' Recovery in IT

By Brian P. Watson  |  Posted 01-11-2011

Anticipating 'Real' Recovery in IT

In Summary

  • Who: Tom Murphy, CIO, AmerisourceBergen
  • What: AmerisourceBergen is a $78 billion pharmaceutical services enterprise. Murphy's IT organization, ABC Integrated Business Services, numbers 175. The team includes 100 IBM Strategic Outsourcing & System Integration members, as well as IBM SI and SAP Consulting resources. 
  • Where: Valley Forge, Pa.; Orange, Calif.; Pune & Kolkata, India.
  • Why: Murphy's views on governance, social media and cloud computing reflect major shifts in the IT landscape. His advice? Use the year ahead to prepare an IT strategy that positions you to make the most of rapidly shifting cultural, technological and organizational needs.

New technologies are emerging at lightning pace. Economic pressures are bogging down strategic planning. Demand on IT is escalating to untenable levels. Sound daunting? Well, CIOs had better buckle up, because these are some of the challenges AmerisourceBergen CIO Tom Murphy sees on the horizon for 2011. Murphy, a former CIO at Royal Caribbean, is deep into a multiyear, multimillion-dollar SAP implementation at AmerisourceBergen, the $78 billion pharmaceutical services giant. He's also looking to strengthen governance policies and go deeper into social networking and cloud computing. Murphy recently shared his predictions and priorities for 2011 with CIO Insight contributor Brian P. Watson. What follows is an edited, condensed version of their conversation.

CIO Insight: 2010 brought many challenges for CIOs. Will 2011 be a repeat?

Tom Murphy: I don't see any significant change economically, at least in terms of the focus on "doing more with less." But, looking ahead, the pressure to keep pace with technology growth is going to increase exponentially. How do you do that when you can barely get enough money to upgrade a server, let alone start looking at alternative sourcing, social networking, etc.? It's going to add a lot of pressure.

And demand on IT from the business keeps going up. What does that mean for planning?

Murphy: CIOs need to have a well-understood, transparent governance process that controls the input of [business] demands. It's very unsexy, but very important in being able to meet the demand. If you're transparent about what it takes to run the day-to-day operation and what you're working on that's nondiscretionary, that leaves you with "X" time and resources for the discretionary. If you've put into place a solid governance model that engages the business in that conversation, they can understand where that demand is coming from.

[Businesspeople] are living under the same limitations, right? You're trying to break the [impression] that IT has endless dollars to do anything. [Instead you want to say]: "Hey, business partner! You need to work with me to figure out what the highest priorities are in this organization, because these times of constrained resources are never going to change."

It doesn't necessarily take the pressure off, but it changes the pressure, and it helps to spread some of the pressure to the business while taking it off IT. It doesn't mean Joe Director isn't giving Jane Business Analyst a hard time because he can't get what he wants. But, it does level-set the organization in a way that shows we're all in this together.

The staffing situation also seems daunting. What's the reality around available talent and the jobs CIOs need to fill?

Murphy: We're having a hard time finding qualified applicants--particularly SAP resources, which is the bulk of what we're hiring. On average, it takes three to four months to fill a technical SAP position. That's way too long.

The conventional wisdom is that there are so many resources out there. But "relevant skills" is the operative phrase. When companies downsized, they weren't downsizing their top performers. ... Hiring in 2011 will be very limited, and it will be limited to those critical positions you need to operate your organization. Therefore, the bar will be very high.

A lot of companies still see IT as a good place to look for high-cost, low-perceived value, just because of a lack of understanding of what IT does. And that's a dangerous place to be.

Are there any bright spots? What's going on inside the mind of the CIO right now?

Murphy: I'm probably one of the few CIOs with a bright spot. My company didn't back off of this huge SAP investment. While anyone who's done one knows it doesn't necessarily equal a bright spot, at least it's something new, and it's giving me new opportunities. My leadership team has allowed me to build a new organization called Integrated Business Services, which is a conglomeration of business process and analytic resources, as well as traditional IT resources.

So, in that sense, I'm having the time of my life. But that's highly, highly unusual right now in the marketplace.

There's a perfect storm around us and ahead of us: continued outsourcing--or near-sourcing or rural-sourcing--with the chance to do more; financial pressures for the corporation; and the perception that IT is very, very expensive and low-value, or [that it's] harder to monetize that value [than it is for other business areas]. Couple [these factors] with the youngest generation [entering the workplace], whose expectations of IT are very different. They don't believe in IT as a function. It's truly integrated into everything they think and everything they do--that really amps up the utility model to a significant degree.

As you get to know that generation and feel where this thing is going, you have to ask how relevant the role [of the CIO] will be in the future. We have to evolve the role of CIO. We've been accustomed to the need to change and adapt for the last 20 years. But we need to continue to integrate with the business, and to break the perception of IT as a separate entity that's not part of the business. [We're] just like marketing, sales, or the supply chain. I'm pressing hard to eliminate this notion of "us" and "them." If we can integrate and be perceived as adding value to the operation of the organization, then our place will be secure.

Hot Technologies for 2011

Which technologies will make a true impact in the enterprise next year?

Murphy: If you look at what we've done with human sourcing--looking for the lowest-cost sourcing models that can still meet the needs of the organization--I see that the cloud is going to create the same type of model for platforms and technology. The "doing more with less" pressures are going to continue. The limited resources are going to continue. The skills gap from where we are and where we need to be is going to grow. You're going to have a new generation whose expectations are highly amped. So what do you do?

Companies are looking for opportunities to move their low-value-add but high-overhead applications and technologies to a reliable environment. That allows you to eliminate a bunch of costs from your balance sheet, to smooth out your costs over 12 months (which CFOs like), and not have to worry about that skill set anymore. It just becomes another sourcing model, akin to the human sourcing model, in that it will complicate the governance of IT, but it will simplify the technical aspects of IT. That's the bet.

Obviously, none of this happens without risk, but all the pressure points are right for a more concerted push to move this stuff out.

Social networking (or collaborative) tools are similar in terms of hype versus reality. Will enterprise adoption change in 2011?

Murphy: You now have this mass of Internet-enabled population, this kind-of-new way of communicating, a new generation of workers coming in who grew up with [social media]--and most traditional companies that have treated this stuff like the plague. And yet, look at LinkedIn, for instance: It is, in a sense, the perfect knowledge-management tool--the kind we've talked about for 20 years but haven't done a good enough job building ourselves.

There's tremendous power in reworking social networking tools into true business tools. We have to figure out which parts we want, how we get them, and how we piece them together into something that makes sense.

There are new protocols and standards being developed because this is so serious: You wouldn't see this happening if social networking didn't have real legs. The new technologies that are coming are at the very core of how the Internet works, and they're coming because of the explosion of social networking, the new capabilities we're seeing, this new way of communicating.

There are pieces of it out there. It's going to be an organic, grassroots kind of thing that you prove out on a small scale. If you can show a return associated with this type of a model, then you might be able to move that forward.

Given all of this change, what key things should CIOs expect to do in 2011?

Murphy: The first thing is the least sexy: To truly understand your supply and demand. [Then you can] put in place governance that incorporates ... the business into the decisions around how to apply your supply to your demand. That is fundamental, but it's amazing how few companies have actually done it.

Once you've done that, you can focus on where you have ample supply to go after the real value-add. It requires a degree of transparency that makes a lot of people very uncomfortable. For me, it's all about transparency.

The second is to explore social networking tools. They're coming fast and furious, and you should investigate their capabilities and how they might apply to your company. If it becomes a competitive disadvantage, you don't want to start from scratch. The CIO is absolutely responsible for looking ahead and avoiding risk caused by something you didn't see coming.

The last is to look at all the sourcing models you have--both human and asset--and develop a strategy. You might not have the money to actually implement or build, but you can put a strategy together, knowing what you know about the business today and where it's going, so that you don't get caught flat-footed. India wages are changing. China, Latin America and Eastern Europe are evolving. These are all things we should be watching. And, of course, the cloud introduces platform options. So CIOs should build a strategy around both platform sourcing and human sourcing.

Those are three things I would do. One is foundational; the other two are strategic look-aheads, anticipating a time when the economy will really recover, and people will look at how they can separate themselves from the competition.