IT WEEK • 25 OCTOBER 2004
48 COMMENT Should IT chiefs really know more
about managing suppliers than technical know-how?
48 INTERVIEW Overhaul of
IT department cuts costs
MANAGEMENTWEEK
WHERE TECHNOLOGY BECOMES BUSINESS REALITY
Editor: Madeline Bennett
Whitehall stifles innovation
Madeline Bennett and Lem Bingley
PUBLIC SECTOR COMPETITION LULL
•
Intellect has added its support to a
campaign to drive more compecampaign
to boost competition in
tition into public sector IT propublic sector IT procurement.
curement has won backing from
Research by the OFT suggests the
industry body Intellect, but some experts
lack of smaller suppliers is hamsaid the high cost of bidding could hamper
pering innovation.
the initiative.
Intellect is urging legislative changes
and more government support.
The Office of Fair Trading (OFT) this
month announced the preliminary results
of its research into public sector procureCurrently, government procurement veers
ment, highlighting technology as an area in
towards ever-larger contracts, putting smallwhich competition is being hampered by
er firms at a disadvantage, said Intellect.
government spending policy.
“Although reforms are being made to
According to the OFT, a tendency to
the public sector procurement process, the
favour large IT incumbents in public procurrent situation means many SMEs feel
curement causes a loss of innovaunable to realise the full benefits of
tion, as smaller suppliers are being
this sector,” said Tom Wills-Sandpushed out of the process.
ford, Intellect’s campaigns director.
In response to the findings,
He said legislative changes, supIntellect said it will support the
port from the UK government, and
OFT’s investigation as part of its
advice from Intellect to its members
own Better Deal for SMEs and the
might be needed to achieve a more
Public Sector campaign. The objecbalanced procurement system.
tive of this scheme is to ensure a
Part of the problem could be
tenth of public sector IT procure- Wilman: cost caused by the conservative nature
ment is sourced from smaller firms. of bids is high
of public sector customers, said
A
•
•
IT chief role to see shift
Madeline Bennett
with other departments within the organisation, as investment becomes more drivhe bulk of IT directors’ work will
en by business rather than technology.
soon be to manage business partnerOne third of current chief information
ships rather than to manage technology
officer roles will be transformed or will disper se, according to analyst firm Gartner.
appear by 2009, predicted Gartner.“One of
IT heads should prepare for this change
the primary changes is the need for CIOs
now by contracting out more non-core
to play an increasing role external to the
activities, said experts.
organisation,” said Gartner’s John MahIn a preview of its symposium next
oney. “By 2008, CIOs will need to spend
week, Gartner outlined its view of the IT
more than 50 percent of their time on reladepartment of the future, which it said will
tionships outside the enterprise.”
focus on business partScott Phares, head of
nerships, services integrasolutions management at
AREAS DRIVING CHANGE
tion and multi-sourcing.
software vendor Business
The analyst firm idenEngine, said IT chiefs
Growing use of external
services providers
tified several trends that
should be stripping out
would drive change in IT
non-core activities in preEmphasis on partnerships
departments. These inclparation for the changes.
with other functions
ude more use of external
“IT organisations have to
Increasing business focus
service providers; a growbe ruthless in electing their
on IT value and scope
ing focus on IT value; and
core areas,” he said. “For
Source: Gartner
a need for partnerships
non-core competencies,
T
itweek.co.uk
Wills-Sandford. He added there is a need to
educate IT buyers about the benefits of
appointing smaller firms to larger projects.
But the high costs of entering the bidding process could see smaller firms fall at
the first hurdle, even where they are encouraged to take part, according to Keith
Wilman, UK head of IT services giant CSC.
Wilman cited the forthcoming MoD’s
Defence Information Infrastructure project as an example of the bidding process.
CSC is leading a consortium including BT,
Capgemini and Thales for the £300m-peryear contract, in competition with EDS.
“We’ve spent a huge amount of money
on that bid, and the government has now
announced an eight-week delay,” he said.
“That’s eight more weeks of expenditure.
Even companies like CSC only have so
much to spend each year on bidding.”
Bidding costs need to be cut and
processes improved to attract more competition for tenders, argued Wilman. “We
pulled out of the BBC [a £2bn, 10-year outsourcing deal for BBC Technology]. Not
bidding we probably saved half a million a
month for three months,” he said.
CHANGE IN FOCUS FOR IT HEADS
Gartner is predicting that IT chiefs
• will
soon primarily manage business
•
partnerships over technology.
Experts urge firms to make provisions for the changes by electing
core areas and stripping out others.
they can be offshored, or served through
partnering or a third-party system.”
Phares said mapping core functions
against core competencies could help pinpoint where firms are not getting the best
service for their money. “It’s difficult for an
IT chief to step up and admit he could be
doing things better, but it’s the only route for
survival,” he said. “CIOs need to contract
out the weaker areas, ones they’re not so
good at but are strategically important.”
Phares said CIOs must try to be objective in deciding priorities, rather than simply guarding their empires, and should
view themselves as business people trying
to find the most reliable, low-cost solutions.
Comment, p48 www.gartner.com
www.businessengine.com
CONTENTS
48 COMMENT Experts believe that IT
directors will soon need to know
more about managing supplier
relationships than technology, but
Mark Street begs to differ
37 INTERVIEW Sandra Smith of Toshiba
Information Systems explains how
a departmental overhaul has driven
down technology and communications costs across the organisation
Atlantic adds
BI to project
management
Madeline Bennett
Software vendor Atlantic Global has
launched Corporate Vision, a portfolio
management system to bring business
performance management (BPM)
capabilities to technology projects.
Corporate Vision could help firms
better understand the composition
and performance of their portfolio of
projects, resources and related costs.
Traditional BPM is designed to
offer information on process performance – for example, on whether
sales are on or below target and
whether supply chain delivery times
are being met.Atlantic’s system goes
further by taking the information
about performance and costs and
relating it to people, and the projects
and services they support.
The product offers planning,
budgeting and resourcing capabilities
for portfolio management, and also a
unified source of data. For example, it
compares project requirements with
firms’ available resources and skills.
This can help firms to manage projects according to time, budget and
resources rather than on a task basis.
The system, developed in partnership with Norwich Union and healthcare specialist Pfizer, aims to reduce
firms’ reliance on manual spreadsheets
for project management by offering a
real-time web dashboard feature.
Firms understand the value of
real-time information to manage
tasks such as sales and marketing, said
Eugene Blaine, chief executive of
Atlantic Global.“Yet when it comes
to the management and performance
of the most valuable resource – people – we still rely on reams of manually-created spreadsheets.”
Corporate Vision runs on a Microsoft IIS web server with Windows
2000 or above, and is available now.
www.atlantic-global.net
47
MANAGEMENTWEEK
IT WEEK • 25 OCTOBER 2004
IT managers of the future
Experts believe it will be more important for IT chiefs to be skilled in managing supplier
relationships than to have technology or business expertise. Mark Street is not convinced
A
nalyst firm Gartner predicts
that companies’ growing use
of external service providers will
have far-reaching effects on the
way in-house IT departments
carry out their work, and will alter
the role of IT directors.
By 2008, half of IT departments
will refocus on brokering services
and shaping business demands
rather than on delivering IT services directly, according to Gartner.
And by 2009, design and management of business processes and
relationships will supersede the
management of technology as the
leading value contribution for
more than half of IT departments.
Such a sea change would
require an overhaul of the training
of budding IT directors, because
technology skills would play second fiddle to management skills.
The IT director of the future is
unlikely to be a technologist; they
are more likely to be an excellent
communicator and a tough nego-
tiator with outstanding team management and leadership skills.
It is likely that the IT departments of the future will more closely resemble technology steering
committees than the productive
deploy-and-fix workshops that we
see today. The IT director of the
future will be judged on how effectively they can manage partnerships
with third-party IT providers rather
than on their operational control of
a large, internal workforce.
But the question is whether corporate IT is keeping step with the
rapid pace of change, as senior managers continue to develop skills that
may be redundant in four or five
years’ time. The prescient IT chief
will focus on gaining qualifications
such as an MBA, while honing their
skills in service level management as
enshrined in the IT Infrastructure
Library (Itil), dealing with core disciplines such as performance management and change management.
There are arguments for and
against the wholesale outsourcing of
the IT function, but it is clear that a
balance must be struck.
One of the major problems with
outsourcing IT functionality is that
firms have to have confidence in the
third party they choose as a partner,
whether they are an outsourcing
company or a consulting firm. But
how do you have confidence in a
firm that is providing a commodity
service if they do not have any
expertise in your particular sector?
Firms have been offloading IT to
third-party experts with gleeful
abandon for many years now, happy
to concentrate on their core competencies and get rid of an expensive
cost. But such an arrangement calls
for an extraordinary amount of
understanding between the service
buyer and the service provider
whose organisations are functioning
together as a single entity.
There is a grave danger that many
firms are missing the point. Of
course it is right to offload business
Convergence brings savings
Sandra Smith of Toshiba Information Systems explains how a
departmental overhaul has led to lower IT and comms costs
INTEGRATION INTERVIEW BY MADELINE BENNETT
ITWeek: You were head of information systems at Toshiba UK when it merged with
Toshiba Information Systems in 2000. How
did the move affect your department?
Sandra Smith: When the two divisions
merged, we initially had two IT departments and two IT heads. But at some point
they were going to have to merge. About
three years ago, we brought the two departments together under one management
structure and infrastructure, and I became
head of IS for both. I co-managed the separate divisions over two sites for a year, and
then we fully merged and restructured.
What did the restructuring entail?
We started from
scratch, with a new
design. Effectively
Smith: new
kit cut costs
48
it was a new company and we had to assess
what was needed to support it. So we don’t
have any of the network or communications solutions from either of the previous
companies. It’s all new. The whole security layer was also ripped out and replaced.
Much of our cost saving has resulted from
throwing out the old stuff and putting in
new and better technology.
So the merger has driven down costs?
Originally, there were two departments
with two budgets of £1.5m each. Now we
have one budget of £2.2m and falling, and
this also includes the phone costs.
Which areas brought savings?
We’ve taken over running the phones from
the facilities department, and mobiles
from the human resources unit. Our total
communications bill was £750,000, now
it’s £500,000. The savings have come from
applying IT discipline to communications.
Using voice-over-IP technology, we’ve got
shared lines now, not one for voice and
one for data, for example.
Will convergence bring further savings?
We have four product divisions at Toshiba
– computer systems, business communications, mobiles and consumer products. The
people running these divisions are getting
sales through their individual units. However, the IT department is now helping
them to understand how these separate
areas are converging, bringing new threats
and competition. So the consumer products guys would be told not to worry so
much about other TV manufacturers, but
about those organisations that can sell
directly over the internet.
Are employees embracing these changes?
I had a lot of support from the heads of
the other business units. We spent time
talking about why we were doing one
thing and not another. It’s always better to
promise less than you think you’ll deliver.
You also need to sit down and do the
sums, so you can show the benefits and
operational costs – although it can be
quite hard work to identify those.
functions that are not considered
core competencies. But having a
technology expert in-house with an
understanding of the core business
drivers can generate some extraordinary competitive advantages.
How can anyone guarantee that
innovation, which fuels profitability,
will be maintained if organisations
rely on outsourcers for expertise?
It would be a dreadful mistake if
IT departments were reduced to
being partnership controllers. IT
managers must act now if they want
to continue to deliver competitive
advantage through technology.
Quite simply, this means obtaining
more business acumen and more
business qualifications. ITW
[email protected]
ABOUT SANDRA SMITH
Smith is head of informa• Sandra
tion systems at Toshiba Information
•
•
Systems in the UK.
Following the merger of Toshiba
UK and Toshiba Information
Systems in 2000, Smith spearheaded the integration of the organisations’ IT divisions, leading to a 25
percent reduction in IT costs.
Smith has 20 years’ experience at
Toshiba UK, starting as a systems
development manager.
Another change is the introduction of The
Innovation Programme...
This is a “staff ideas” forum, launched three
years ago and based on Six-Sigma methodology. Under the scheme, employees can
structure an idea, get agreement and funding for the project, form their team and
then carry out the development. The programme is corporate-wide, but 80 percent
of the projects involve IT.
What about IT skills development?
I’m the only manager at Toshiba who has
their own training budget. I encourage people to get certified and take exams. I’m a
great believer in training – but not for the
sake of it. It’s OK if a person has a project to
come back to relating to the training. ITW
itweek.co.uk