Link To Strategy

By Gary Bolles  |  Posted 09-01-2003

Technology: Optimization

Tight budgets are no excuse. You can optimize it without compromise.

Not Just Money

Optimization isn't just about cutting costs.

In the same way that IT executives who've lived through the Internet boom will one day reminisce about the time when the laws of gravity were temporarily repealed—"Grandpa, tell us the story about Unlimited IT Budgets again!"—so will they repeat tales about the whiplash effect of the bust: how the CIO went from swapping high-fives with the CEO to enduring pencil-level budget scrutiny by the CFO.

The general perception is that somewhere along the line, IT stopped delivering all the business value expected of it. "Our point of view is that IT is in fact pretty broken," says Ken Klein, chief operating officer at Mercury Interactive Corp., a provider of business technology optimization software. "Not all organizations fall into that category, but IT is, we believe, at a crisis point. They're in a situation where they're being asked to do a lot more, and they're being asked to do it with a lot less."

IT's response: optimize. Taffy-pulled by twin pressures, IT departments are trying to transform themselves into lean, mean, business-focused machines intent on delivering the best value for the lowest cost. That doesn't just mean squeezing every last drop of fiscal blood from the IT stone, through strategies like pooling servers, consolidating storage and packing WAN links to reduce bandwidth costs. It means reshaping IT by focusing on efficiently delivering the best possible value to the business—and doing it with the fewest costly people possible.

Garrett Grainger, CIO at Dixon Ticonderoga Co., an $88.6 million pencil manufacturer in Heathrow, Fla., says he's working with half the headcount he had when he joined the company five years ago. He also says his department is running at about 1.6 percent of corporate spending—less than half his competitors' budgets. Yet even after trimming staff, he's been able to increase IT's service delivery by 20 to 25 percent.

How is such a thing possible? It turns out that optimizing IT doesn't mean simply burying your head in the budget with a paring knife. It requires a different frame of mind, instituting processes that stretch from the nuts and bolts of wringing extra packets out of existing WAN connections all the way up to the organization's strategic goals.

Ask Your It Staff:

  • How much has our service delivery increased or decreased over the past several years?

    Ask your CFO:

  • What's IT's percentage of corporate spending over the past 10 years?

    Tell Your Staff:

  • Find out what IT's percentage of corporate spending is at our competitors—because we have to do better.

    Link To Strategy


    Link To Strategy

    If your strategy to optimize IT doesn't connect all the way up to business goals, how do you know where to focus?

    The drive for IT optimization is inevitable. META Group research finds that four out of every five IT operations groups have already launched an initiative of some kind to improve operations. But META also projects that three quarters of those initiatives will run into "significant inconsistencies" with their projects—which means they won't achieve the desired results.

    How to avoid such a fate? By synthesizing the approaches of CIOs, analysts and consultants, a pattern for successful optimization becomes clear. Some recommendations:

    First, synch up with the business. Without processes to continually ensure that you're delivering the value the business needs, you could be optimizing areas you don't need to—or not optimizing areas where you have the biggest opportunities. Dick LeFave, CIO of Nextel Communications Inc., the $8.7 billion, Reston, Va.-based wireless provider, is adamant: "The alignment part of IT helps optimization," he says flatly.

    As part of that process, infuse IT staff into business units to gain a better understanding of business-unit constituents. And make sure business units volunteer their own team members to help with IT projects, and make sure they take an ownership stake in their technology initiatives. "We do no new initiative here without a business owner," says LeFave.

    Next, manage IT as a portfolio of projects. Portfolio management is critical for understanding the demands continually placed on IT, says Tony Roby, partner for global architecture and core technologies at Accenture. Don't forget outsourcing as a key part of the IT portfolio, so you'll be able to distribute risk outside the organization and ensure you're always delivering IT services for the best possible value. "The IT organization of the future is going to be much more a manager of services rather than the sole provider of all those services," says Roby. Be sure to do your homework first. "Before you outsource, optimize," advises Mercury Interactive's Klein. "That way, you're going to get a better deal."

    Finally, hire and train for the "optimized" mentality. Wherever you can, use seasoned professionals who know how to squeeze costs out of everything they do. Make sure their compen- sation is aligned with your efforts, rewarding them for their ability to execute and save money.

    Tell Your CFO:

  • Our cost-management efforts must be linked to business strategy, so let's put the processes in place to ensure we're cutting correctly.

    Ask Your Staff:

  • Have we squeezed all possible costs out of the operations we're considering outsourcing, before asking for bids?

    Tell Your Staff:

  • Becoming part of cross-disciplinary teams with the business will increase your visibility in the organization.

    Train to Strain


    Train to Strain

    Next, focus on process. A variety of approaches for optimizing IT are delivering results. One of the most important: setting the bar high for IT staff. The best formula: a high-pressure, but not high-stress, environment, where staff members know that expectations are high but also mistakes are tolerated.

    That's the mentality at McKee Foods Corp., a $970 million snack foods maker in Collegedale, Tenn. Says IS group manager Bo Smith, "Any place you walk in, our snacks are going to be cheaper than anybody else's. In the same way, the infrastructure we're going to provide has to be the lowest cost possible. That doesn't mean we're buying the cheapest technology. It means we're spending our technology dollars wisely."

    It's important to standardize that infrastructure wherever possible. "Anything you can standardize, you can optimize those processes and minimize the cost," says Jeff Barlow, IT configuration manager for the retail group at Reliant Energy, a recently deregulated electricity provider in Houston. The business side may dislike the loss of localized control that comes with corporate standards, but it's really just a financial decision: If a group wants you to support, say, wireless BlackBerry PDAs instead of the corporate standard unwired Palms, offer them a pricing model that includes the full cost of support. Drive to make your infrastructure costs as predictable as possible through fixed-price offerings, with the most hard-nosed financial analyses possible. "That shifts it from a science fair conversation to a business conversation," says Nextel's LeFave.

    Software development is one area where optimizing costs has been naggingly difficult. Yet any IT shop that develops in-house software has an opportunity to optimize its efforts by paying increased attention to quality. That means focusing relentlessly on building the right applications in the right way. "With quality, you do it right, or do it twice," says Bruce Woods, manager of software quality and training for Burlington, N.J.-based Burlington Coat Factory Warehouse Corp., the $2.5 billion clothing retailer. "And in this economy, you can't do it twice."

    Ask Your Chief Architect:

  • How much could we save if all our applications and infrastructure were standardized?

    Ask Your CTO:

  • What is poor software development quality currently costing us?

    Ask Your It Architect:

  • Where could software tools potentially help us manage IT better?

    Can IT optimization software be useful? Only if you've already optimized IT.

    IT for IT


    IT for IT

    Gartner Inc. analyst Hams El-Gabri makes the case that IT is—or should be—a project-focused organization much like any professional services business. She maintains that IT can improve its own operations in the same way as any other people-intensive craft, by focusing specifically on better project management practices, and using software designed to automate repetitive project-related tasks. Gartner calls this category Project Portfolio Management, or PPM, and it includes the broad set of functions needed to prioritize and manage projects appropriately, including project pipelines, risk assessment, scope, time, human and other resources, cost management, procurement processes, team communications, reporting and forecasting.

    If you're salivating to run such applications, don't jump in just yet. It may seem counterintuitive that software designed to optimize IT is useful only if IT is already running itself efficiently. But according to El-Gabri, these programs are mostly good at aggregating reports and automating existing processes. "PPM is 90 percent service methodology and 10 percent software," she says. As with virtually any enterprise software, baking inefficient processes into applications simply institutionalizes ineffectiveness, so IT has to get its own shop into order first.

    Booz Allen Hamilton Inc. CIO George Tillmann, a former management advisor himself, hired his company's own consultants to help his team hone its internal practices. Like many, Tillmann's optimization efforts were driven by the need for staff efficiency, since this company of 13,000 went from an IT department of 235 in 2000 to 186 today. Once that work was done, Tillmann was then ready to install Kintana Inc.'s IT governance software. "You can't use a tool to replace bad practices," Tillmann says flatly.

    Still, like other executives overseeing critical corporate functions, CIOs will ultimately benefit from the ability of such applications to provide an up-to-date overview of operations. "I definitely see us evolving toward an executive dashboard with information bubbling up to decision-makers, so they have more information at their fingertips," says Reliant Energy's Barlow. "We're moving from more of a reactive mode to more of a planned mode." Gartner's El-Gabri thinks that's a good thing. "The IT department is the last untouched and unoptimized branch within the organization," she says.

    Ask Your Project Office Professionals:

  • How efficient do we feel our project management practices are?

    Tell Your Top Staff:

  • Figure out where our greatest pain points are, and see if applications can help ease the pain.

    Tell It Software Vendors:

  • We're going to need some hard ROI numbers to justify any software investment.

    Spread Thinner


    Spread Thinner

    To be effective, IT optimization needs to go through several steps.

    A: First, IT's strategic goals must be aligned with those of the organization.

    B: Next, determine the organization's most critical business processes, so you'll make sure your optimization efforts are focused where they'll have the most effect.

    C: Then determine the most efficient use of the applications, servers and storage strategies needed to support those business processes. The goal: to break free of the need for a one-to-one correspondence between processes and their supporting applications, servers and storage, instead sharing applications across fewer servers, and servers across fewer storage units. The result: Better use of fewer resources.

    Optimizing Your Network


    The Best a Wan Can Get Strategies for Optimizing Your Network

    Technologies are now appearing that treat network resources—bandwidth, storage and processors—as pools, allowing IT to allocate them more efficiently than ever before. It's not "grid computing": Rather than running a single application on a single server, the idea is to consolidate resources so they're used more efficiently.

    Peter Christy, a principal analyst at NetsEdge Research Group, says commoditization down in the network means the move to standardization and simplification is going to continue. "I think people are seeing that arbitrary differentiation at the lower levels is irrelevant," he says.Effective network optimization strategies include:

     

  • Wan Links: Some companies are simply including optimizing technology with each new link they order, according to Aberdeen's Michael Hoch. Example: Tacit Networks' vice president of sales and marketing, Jeff Helthall, claims customers can get payback in as little as three months by installing his company's products to enable real-time global file-sharing over wide-area networks.

     

  • Servers: Aggregating processors can provide significant savings, says B.V. Jagadeesh, CEO of infrastructure optimizer Netscaler Inc. The Microsoft Network, which he says had 24 servers, budgeted for growth to 82—and instead trimmed to eight by using server-pooling technology.

     

  • Storage:"There's a massive oppor- tunity to reduce data storage costs," says Accenture's Tony Roby. Some companies are moving to network-attached storage and storage area networks, which decouple storage from specific servers.

     

  • IT Governance:Ensuring internal processes are efficient—and followed through—is the goal of software that helps IT departments stay in step with corporate goals while managing their own operations as effectively as possible.

  • Change Management: These applications track hardware and software changes to ensure that no errors are introduced, patches are up to date and corporate standards are followed.

    The results are available in Adobe Acrobat PDF format. To download the free Adobe Acrobat Reader plug-in, click here.
  • IT Optimization
  • Optimization Chart