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VOLUME 4, NUMBER 3 / 2010 SMARTENTERPRISEMAG.COM
VOLUME 4, NUMBER 3 / 2010 SMARTENTERPRISEMAG.COM

G R E AT E R
EXPECTATIONS
CIOs venture farther into new territory created by dynamic
delivery models and increased agility. PAG E 1 2

CASE STUDY NEW MEASURES

At Baker Hughes, Key Performance
IT is the Business Indicators for the Cloud
PAG E 2 2 PAG E 42
Copyright ©2010 CA. All rights reserved.
can you change
the game?
But do it predictably. Go for more than marginal improvement.
But don’t create the kind of change that creates chaos and disruption.
Change the game. But change it effectively and intelligently.

CA Technologies can help regardless of platform — whether you’re

moving from physical to virtual or virtual to cloud. With our approach,
we can help you get to market faster, with new applications — bringing
“managed” change to the entire enterprise. Step by step, starting
where the demand is greatest, our virtualization management and
cloud technologies can help you change the game while making your
business more agile and more secure.

To find out more about robust virtualization and cloud

management solutions from CA Technologies, visit ca.com.

you can
Contents VO LU M E 4 , N U M B E R 3

SPECIAL REPORT FEATURES

18 SMART MANAGEMENT
IT Budgets for
the ‘New Normal’
Now that IT is the business, IT
funding needs a refresh, too. An
innovative approach to budgeting
can help CIOs reserve funds for
vital business innovation.

22 CASE STUDY
When IT Fuels Growth
At oilfield services company
Baker Hughes, CIO Clif Triplett’s
department not only supports the
business — it is the business.

26 CASE STUDY
DHL Walks the Talk
At international shipper DHL, IT
staff from the supply chain division
literally sit side-by-side with their
business colleagues. The results
include an IT project that should
reduce power consumption by 30

12
percent and costs by even more.

32 SMART TRENDS
The Strategic CIO
When it comes to the CIO’s role,
reactive is out, proactive is in,
finds a new survey of 300+ IT

Greater Expectations executives. In fact, today’s IT

leaders set enterprise standards,
create corporate strategies, and
develop skills.
Business is demanding more than ever before from IT. To deliver,
smart CIOs are following a new path and treating IT as a supply
38 SMART PRACTICES
chain. Just as manufacturers use their supply chains to source parts
The Greater Data Center
from both internal and external suppliers, so can CIOs pick and The cloud changes everything
choose IT services from the best possible source, whether internal, — including the data center.
external or in the cloud. The result: nothing less than the dawn of a Floating in: new tools for
managing cloud-connected data
new era for IT. centers, just-in-time delivery of
IT services, even a return to the
PLUS: Five Steps to Creating Your Dynamic IT Supply Chain modern mainframe.
By Larry Lange

4 SMARTENTERPRISEMAG.COM (12) FREDRIK BRODEN

22
42 SMART BUSINESS
Measuring the Cloud
How do you measure the
performance levels of IT service
providers in the cloud? The answer
could lie in giving a traditional
metric — key performance
indicators — a fresh update.
Plus: How service assurance
solutions provide greater visibility.
48 SMART RESEARCH
The CEO Factor
Keeping senior business
executives involved is the best way
for IT to deliver business benefits,
new research finds. When CEOs
support IT, CIOs flourish.
26 32
54 LEADERSHIP PERSPECTIVE
The Best of Timing
Virtualization, the cloud, and
a mandate to deliver business
services faster than ever before
challenge and enable CIOs.
DEPARTMENTS
8 TECH CHATTER
The CIO Rainmaker
Emerging solutions can help CIOs
looking to manage and automate
the dynamic IT supply chain —
while still maintaining control,
security and compliance.
52
30 MARKET STATS
Mobile devices move to the cloud
... virtualization and the cloud clear
space in California’s data centers
... the surprising growth in new
IT jobs ... growing demand for
security SaaS ... and more.
52 CAREER SMARTS
What Comes After CIO?
Hervé Gouëzel, the former IT
leader of European banking giant
BNP Paribas, has a new career
guiding the company through a
merger worth 1.3 billion euros.

SMART ENTERPRISE EXCHANGE:

COLUMNS A GLOBAL CIO COMMUNITY
To view valuable CIO resources, visit Smart Enterprise Exchange, the premier
6 EDITOR’S PERSPECTIVE online community for senior-level IT executives.
Greater Expectations
Business wants more from CLOUD’S MESSAGE TO CIOS: APPLICATION DEVELOPMENT WELCOME HERE
IT — much more. With the cloud, David Buckholtz, VP and Division CIO for Enterprise and Corporate Technology at
virtualization and management Sony Pictures Entertainment, is proceeding cautiously when it comes to application
tools, CIOs are responding. development on the Web. What’s holding him — and countless other CIOs — back?
join-see.com/cloud
7 ONE TRUE THING
NEW IT SUPPLY CHAINS
Message from the Edge
Michael Kirwan, CIO, Corporate Systems, at Yahoo!, reveals how the company
Looking for your next IT
does business with external and internal value-chain constituents in a cloud
investment? Start with your
environment. join-see.com/supplychain
people, advise innovation gurus
John Seely Brown and John Hagel.
PRACTICAL INNOVATION: A THREE-PART PODCAST
Brian Gillooly, Editor-in-Chief, Events, at InformationWeek and Smart Enterprise
Exchange, interviews IT leaders from CA Technologies, the Beth Israel
Deaconess Medical Center and Aviat Networks. They discuss the impact of
practical innovation. join-see.com/podcast

(22) KIM KULISH; (26) COURTESY OF DHL; (32) BRIAN STAUFFER/ISPOT; (52) COURTESY OF BNP PARIBAS )'('›SMART ENTERPRISE 5
Editor’s Perspective

Insights and Perspectives for the CIO

Greater Expectations PUBLISHER Gabrielle Lukianchuk

Business wants more from IT than ever. ASSOCIATE PUBLISHER Loni Frazita
EDITOR IN CHIEF Peter Krass
New delivery models, greater agility will help. EXECUTIVE EDITOR Karen J. Bannan
COPY CHIEF Claire Meirowitz

For forward-thinking CIOs, it is the best of times. True,

VP/DESIGN DIRECTOR Gene Fedele
IT leaders are under new and intense pressure to rapidly
CREATIVE DIRECTOR David Nicastro
and efficiently deliver innovative business services. But
thanks to several emerging technologies, today’s CIOs ART DIRECTOR Giulia Fini-Gulotta

can do just that. Cloud computing, virtualization and PRODUCTION Adeline Cannone, Laura Alvino
new management tools are helping boost IT agility and
customer satisfaction. CONTRIBUTING EDITORS
This issue of Smart Enterprise, our 12th, is your guide Leon Erlanger, Tom Farre,
to gaining similar skills and capabilities, helping you meet Tam Harbert, Alan S. Horowitz,
or even exceed your company’s greater expectations. For Larry Lange, Jean-Christophe Latournerie,
example, our lead feature, “Greater Expectations,” will John W. Verity, Bob Violino, Todd Wasserman,
Lamont Wood, John Zipperer
share insights from CIOs who think like manufacturers.
And in Tech Chatter, “The CIO Rainmaker” reveals the
new solutions you can use to incorporate cloud comput- ASSOCIATE PUBLISHER, SMART ENTERPRISE EXCHANGE
ing into the business. Penni Geller
IT budgeting is another area that’s evolving as CIOs meet the greater expecta- MANAGING DIRECTOR, CONTRACT PUBLISHING
Scott Vaughan
tions. The Smart Management article, “The New World of IT Budgeting,” introduces
several CIOs who are experimenting with dynamic budgets that enable innovation MANAGING DIRECTOR, CUSTOM CONTENT SERVICES
Elliot Kass
and agility, while still maintaining vital core systems.
PROGRAM DIRECTOR
Your data center is changing, too. In Smart Practices, “The Greater Data
Ellen Lalier
Center” explores how cloud computing and virtualization are becoming vital
to the data center, and how the revamped mainframe is transforming the way
today’s data centers are run.
Two other articles explore the implications of your CIO career. Our case study To subscribe to Smart Enterprise magazine,
of Baker Hughes profiles an entrepreneurial CIO, Clif Triplett, who has created please visit
an IT-based service the company now sells to external customers. And in Career smartenterprisemag.com
Smarts, Hervé Gouëzel, former CIO of BNP Paribas, explains how he has forged To contact Smart Enterprise, e-mail us at:
contactus@smartenterprisemag.com
a second career, advising the bank during a huge merger.
Looking for the numbers? You’ll find them in Smart Trends. There, “The
Strategic CIO” presents results from a recent InformationWeek Analytics survey
For information about advertising in Smart Enterprise,
of more than 300 senior IT executives — and bolsters those results with com- e-mail us at: advertising@smartenterprisemag.com
ments from CIOs at Biogen, Pacific Gas & Electric, Bowdoin College and others.
Copyright © 2010 CA Technologies
How about you? Are you using the cloud, virtualization and management All rights reserved. All trademarks are the property of their
tools to meet, even exceed, the greater expectations of the business? I welcome respective companies. Reproduction of material appearing in
Smart Enterprise is forbidden without permission.
your answers and other comments at the address below.
Smart Enterprise (ISSN 1934-6107) is published three times
a year by United Business Media LLC, 600 Community Drive,
Manhasset, NY 11030, in conjunction with
CA Technologies, One CA Plaza, Islandia, NY 11749.
Peter Krass PRINTED IN THE USA
Editor in Chief
editor@smartenterprisemag.com

P.S. Have you joined Smart Enterprise Exchange, our exclusive online community designed
specifically for senior IT executives? You’ll find resources such as a new video by Peter
Hinssen, one of Europe’s leading IT thought leaders. To view this insightful presentation, 2010 Azbee Awards
“The New Role of IT,” please visit join-see.com/hinssen. of Excellence/Design

6 SMARTENTERPRISEMAG.COM

Message from the Edge
Looking for your next IT investment? Start with people.
| By John Hagel and John Seely Brown
T he role of the IT organization is changing
— and not just because of the emer-
gence of new technologies. The business
environment that IT supports is changing
dramatically, too. For 30 years, IT has focused
on automating the formal, standardized
work processes of the enterprise, gaining
productivity by reducing the need for manual
interventions, and force-fitting the business
to the infrastructure. But in all that time, IT
has never handled the edge cases.
Yet increasingly, opportunities for growth
and innovation will come from the edge.
PHOTOGRAPH: COURTESY OF JOHN SEELY BROWN
The edge is where people improvise across
enterprise boundaries. They do so to cobble
together project teams, development pro-
cesses, even supply chains that are not
confined within reporting structures or
authorized processes.
It’s time to bring people back into the
IT equation. Rather than removing people,
the next generation of IT investment must
support the people who are left, giving them
access to resources and expertise, and helping
them to collaborate, wherever they are, on
demand. IT investment that merely sup-
ports the traditional ways of doing business
is missing the greater opportunity to enable
new ways of doing business. The new charge
for CIOs is to support the experimental,
collaborative practices at the edges, and to
bring people more effectively into the loop.
Of course, IT, like a Mississippi steam-
boat, cannot turn on a dime. How then — and
where — to make your next IT investment?
What will harness the power of the next
generation of IT, be flexible enough to meet
the changing needs of the business — and
align with business results — all while still
maintaining the need for access, security and
performance that constitute your day job?
The answer lies in activities that enter-
prise IT is currently not supporting well.
Namely, activities occurring at the edge of
the enterprise. These are the undefined and
emerging practices that require the input
of an array of individuals from both within
and outside the company.
One True Thing
Take exception handling. In the quest
for standardization, enterprise IT has cre-
ated a vast number of exceptions. These
represent situations where business needs
deviate from the prescribed policies and
processes supported by the IT platform.
Exception handling requires identifying the
right people; providing them with the nec-
essary data, context and analytic tools; and
letting them improvise within the boundary
conditions of the organization’s rules. It is a
large operational expense and a source of
great inefficiency.
New Directions
Paradoxically, exception handling is also a
place where unmet needs and new ideas
for meeting them can germinate, pushing
IT practices in new directions. Investments
that honor agility and that facilitate rapid
human interaction and judgment around
the contexts of exceptions can deliver near-
term cost-savings. They can also provide a
platform for identifying and targeting new
growth and innovation opportunities.
Social software has already begun to
evolve robust capabilities to connect the
right people, provide collaboration tools
and create records of interactions that
yield insight. It could transform exception
handling at two levels. First, by accelerating
and reducing the cost of exception handling.
People can discuss why a work process
broke and help resolve it quickly. Second,
by helping to document the exceptions, the
people involved and the resolutions. Such
a repository would be a valuable resource.
After all, let us not forget that the engine
of business innovation is not in data or flow
charts, but in people, in the knowledge and
practices and insights and improvisations
that only people can provide. In the effort to
amplify, rather than impede, their impact,
IT has a central role to play. ■
JOHN SEELY BROWN (pictured above)
AND JOHN HAGEL are Co-chairmen of the
Deloitte Center for the Edge, a Silicon Valley-
based research center. They are also co-authors,
with Lang Davison, of The Power of Pull
(Basic Books, 2010).
For additional insights from John
Seely Brown, read an article he
co-authored, “Unlocking Enterprise
Agility,” on Smart Enterprise Exchange
(join-see.com/seelybrown).
)'('›SMART ENTERPRISE 7
8 SMARTENTERPRISEMAG.COM

The CIO Rainmaker
Leveraging new tools can help wring (even more)
opportunity out of the cloud.
C loud computing is changing IT in
profound ways. One of the most
visible changes: business manag-
ers, who previously relied on their
CIOs to recommend, purchase and install
software and services, are taking matters
into their own hands. Today, anyone can
order cloud-based applications and services
with a click of the mouse.
At least on the surface, this change means
the IT requisition process becomes more
efficient for the business manager. But it
also means the CIO has to deal with a serious
challenge. Namely, how to help the business
harness the flexibility and agility of the cloud
while still retaining control, ensuring secu-
rity and meeting regulatory requirements.
Without control, it can be difficult to ensure
the performance and security of corporate
networks, data and applications.
Unfortunately, these are not problems
that will go away on their own. Market
watcher IDC expects cloud computing sales
to grow at an average compounded annual
growth rate of 27 percent through 2014,
when worldwide revenue from public IT
cloud-based services will reach $55.5 billion.
Another market watcher, Gartner, predicts
that by 2012, 20 percent of all businesses
won’t have any IT assets of their own.
As the cloud permeates corporations, IT
PHOTOGRAPH: COLIN ANDERSON/GETTY
will need to embrace a supply-chain model,
in which IT manages a web of internal and
external resources, mixing and matching
them to deliver the services that support
the business requirements. “The role of
IT management will change significantly
from being a keeper of the data center to
being more of a supply-chain manager,” says
Gregor Petri, Cloud Computing Advisor at CA
Tech Chatter
| By Tam Harbert
Technologies. “IT will sit between the busi-
ness units and the suppliers of IT solutions.”
This shift will require new tools to man-
age and automate the process. “You need
the technical underpinnings to support
this,” says Bernard Golden, CEO of Hyper-
Stratus, a cloud computing consultancy.
model. CA Technologies, for example,
is developing what it calls its Cloud-
Connected Management Suite. The suite
is designed to meet the needs that arise at
each step along the path as CIOs incorpo-
rate cloud computing into their companies.
The suite provides:
“If you don’t have the infrastructure and ■ A way for IT to stay informed about
the automation tools to implement this, if what cloud services are available
you’re still carrying on manual processes ■ A method for using a standard rat-
in an environment where your customers ing system, enabling IT to compare
expect immediate service, then you have no products and services, which leads to
hope of getting to this new world.” smarter sourcing decisions
Tools and services are being developed ■ Opportunities to dynamically switch
to help CIOs transform their organizations out components of the supply chain
into ones that embrace the supply-chain to achieve optimal performance
RATING CLOUD SERVICES
How do you choose from an ever-growing number of cloud service providers? It’s not
enough to look at uptime, security or reliability statistics, since there’s no standard for
measuring these metrics. But that may change — and soon.
Carnegie Mellon Silicon Valley, an extension of Carnegie Mellon University, recently
launched a consortium charged with developing what it calls the Service Measurement Index
(SMI) — a standard way to calculate the benefits and risks of cloud computing services.
“There are nebulous risks about the cloud that sometimes scare management
away,” says Jeff Perdue, a Senior Scientist at Carnegie Mellon and one of the lead-
ers of the consortium. “But you don’t know what the risks are in what you are doing
now, internally. It does carry some risks. It does carry certain costs. But none of this is
quantifiable. What you need is an objective way to compare external services as well as
your own internal stuff.”
The SMI will comprise several key performance indicators, such as quality, agility,
risk, capability, cost and security. CIOs can weigh the various indicators depending on
how important each attribute may be to their particular environment. Initially, SMI will
use data from its own research and surveys from market research firms to provide SMI
scores on e-mail services, compute-on-demand services such as virtualization, and
e-commerce services. But the ultimate goal is for data to be provided by IT professionals,
service organizations and benchmark studies. – T.H.
)'('›SMART ENTERPRISE 9
 ■ IT with the tools to manage the entire
supply-chain process
The foundation of a strong supply chain
is up-to-date, accurate information. But
lack of information is one of IT’s biggest
problems when it comes to the cloud. With
more services becoming available all the
time, “How do you know what you don’t
know?” asks Vincent Re, Senior VP and
Distinguished Engineer at CA Technolo-
gies. “What you need is a systematic way
of seeing what’s out there.”
Through a combination of crowd-
sourcing and standard metrics, CA Cloud
Insight will provide a way to survey and
assess both external cloud offerings and
internal IT services. The tool will lever-
age two recent industry initiatives. The
first, Cloud Commons (cloudcommons.
com), is an online community where cloud
users, cloud providers and industry experts
can share information, best practices
and, most importantly, feedback on vari-
ous services. The second initiative, from
Carnegie Mellon University, is the Cloud
The Duties of the IT Supply Chain
Organization
Service Measurement Index Consortium.
The members of the SMI Consortium (CA
Technologies is a founding member) have
come together to help IT executives develop
a standard framework for rating IT services.
(See sidebar, “Rating Cloud Services,” p.
9.) Once established, that framework and
subsequent ratings of cloud services will be
available on the Cloud Commons website.
CA Cloud Insight will not only draw on
information about external offerings from
Cloud Commons but will also provide vis-
ibility into internal IT environments. This
will enable IT departments not only to
compare various cloud providers but also
to compare external services to internal
capabilities using the SMI framework.
Having accurate information is one
thing; being able to take advantage of it is
another. CIOs need to become more agile
and flexible enough to source technology
opportunistically. In the current IT procure-
ment process, which can take months, CIOs
can become hamstrung. No sooner do they
identify a useful and reliable cloud service
Top Reasons CIOs
Move into the Cloud
To reduce costs
78%
To reduce deployment time
56%
To increase efficiency
50%
To increase flexibility and choice
45%
0% 20 40 60 80
DATA: “Security of Cloud Computing Users,”
Ponemon Institute survey of 642 U.S. and 283
European IT practitioners, May 2010
NOTE: Multiple replies were permitted.
than the technology changes or new, per-
haps better, vendors enter the market. In
the new supply-chain model, IT must be
able to quickly change applications and
services within the supply chain.
This is where the second planned compo-
nent of the Cloud-Connected Management
Suite, CA Cloud Compose, becomes cru-
cial. Cloud Compose will allow the user to
abstract applications from their underlying
physical architectures so that IT can rapidly
deploy these applications to either internal
or external clouds.

The shift from a manufacturing model to a supply chain model will bring a change Multiple Sources
to the responsibilities of a corporate IT department. As IT builds and manages fewer Cloud capabilities will come in different
internal resources and takes advantage of cloud-based services and products, the CIO forms from multiple sources. As the market for
and his or her staff will assume four primary duties, according to Gregor Petri, Cloud cloud computing develops, CA Technologies
Computing Advisor at CA Technologies: envisions the emergence of “application
stores” stocked with solutions designed for
Assessing vendors: Business users focus mainly on functionality and ease of use, various markets. In fact, the U.S. govern-
and are not going to spend a lot of time evaluating and qualifying vendors. IT will ment already has one. On Apps.gov, the
likely collaborate with business units and present them with a selection of pre- U.S. General Services Administration offers
screened options such as what’s offered at apps.gov. a variety of cloud applications and services,
all qualified for government use.
Serving as a single point of contact for support: As cloud applications from Ultimately, applications and services will
multiple sources and providers are mixed and matched, there will be more potential be decoupled from a particular provider’s
for finger-pointing among vendors when something goes wrong. IT will be the only infrastructure. IT will be able to select not
organization that understands the big picture well enough to help diagnose problems only which cloud applications to run, but
and hold the appropriate vendor responsible. where to run them — whether internally,
in a private cloud or in a public cloud —
Integrating applications when necessary: A company may use one cloud appli- and when to add or subtract computing
cation for CRM and another for shipping. IT can facilitate integration so that, for resources or when to move those applica-
example, CRM data such as names and addresses automatically populates shipping tions. “You’ll have the flexibility to deploy
labels, saving salespeople the task of re-entering the information. where it makes sense,” Petri says. “And where
it makes sense may change over time.”
Monitoring cost and other important metrics and making changes as needed: In fact, Petri thinks these apps stores will
Prices and features of applications and services will change, as will the number serve as brokers, offering different choices
that a company requires at any given time. IT will keep tabs on all variables, of prequalified applications, platforms and
recommending adjustments to maintain the best, most appropriate services at infrastructure that can be mixed and matched
the lowest cost. – T.H. as the customer wishes. “Today, we talk about
software as a service, platform as a service and

10 SMARTENTERPRISEMAG.COM
infrastructure as a service, and we see them
as vertically integrated without changing the
underlying infrastructure platform,” Petri says.
“But eventually, users will want the ability
to choose which infrastructure service they
want to run their software as a service from.”
Cloud Compose will let IT choose from
among those options. In fact, an application
store that offers up such choices is already
available. TheGISmarketplace.com, which
debuted this summer, offers several geo-
graphic information system (GIS) software
packages from different vendors across
a choice of infrastructure platforms and
vendors. That makes it simple for corporate
IT departments to procure a GIS solution
without locking themselves into a specific
software vendor or infrastructure platform.
Losing Their Grip on the Cloud
In a recent survey of IT managers:
55 percent of U.S. respondents and 44 percent of European respondents
were not confident they have complete knowledge of who uses the cloud in
their corporations.
Only 36 percent of U.S. respondents and 57 percent of European respondents
agreed that their organizations are vigilant in auditing/assessing cloud offerings
before they are deployed.
Only 27 percent of U.S. respondents and 38 percent of European respondents
believe their organization’s security leaders are the people most responsible for
ensuring safety in cloud computing environments.
DATA: “Security of Cloud Computing Users,” Ponemon Institute survey of 642 U.S. and 283 European
IT practitioners, May 2010

Better All the Time

Once CIOs have accurate information, an
objective rating system and the capability
to easily change components in the supply
chain, new ways of optimizing resources will
emerge. IT departments can continuously
monitor and analyze the supply chain,
constantly tweaking and improving it. To
help them, CA Technologies is developing
Cloud Optimize, which will use the SMI and
other information from the Cloud Commons
community to analyze alternatives across
business measurement characteristics
and present options for improving service
delivery and sourcing choices.
The solution will help CIOs, “decide
where to put which resources for the best
effect,” says Re. If Amazon drops its prices,
for example, IT might move more applica-
tions onto Amazon’s infrastructure. Or
perhaps a vendor reports a horrible quarter
and huge layoffs, both of which increase
risk in the supply chain. CA Cloud Optimize
could be set to automatically detect such
events and recommend alternatives.
But such agility and flexibility must be
accompanied by the proper management.
The final component of the Cloud-Connected
Management Suite, CA Cloud Orchestrate,
is intended to provide the technology to
manage the deployment of the options
suggested by CA Cloud Optimize. Based on
information from the first three components
as well as content from Cloud Commons, CA
Cloud Orchestrate is being touted as a way
to automatically control workflow and apply
policies to changes in service infrastruc-
tures. This should enable CIOs to quickly
adapt their cloud-connected environments
without increasing the cost of IT operations
or disrupting the business.
The solutions in the Cloud-Connected
Management Suite are scheduled to roll out
gradually, with select components available
now and a first release of the suite expected
before the end of 2011. It’s a plan that will serve
to guide CIOs through this transition, says
Charles King, President and Principal Analyst
at Pund-IT Inc. “With the Cloud-Connected
Management Suite, CA Technologies has
established specific, easily understandable
steps that should help customers effectively
embark on a journey to the cloud and arrive
at their destination in one piece,” he says.
That could have CIOs walking on a cloud. ■
TAM HARBERT is a writer and editor who
covers technology and business.

THE CLOUD SECURITY FORECAST: SUNNIER SKIES AHEAD

Although many of the changes cloud computing brings are good
for the business, CIOs are worried — for good reason — that some
cloud applications may endanger security. Fortunately, solutions
such as CA’s Cloud-Connected Management Suite will allow IT
departments to better evaluate and manage the security of cloud
services as one of six key characteristics.
A recent study conducted by the Ponemon Institute for
CA Technologies reveals a large void in IT’s ability to evaluate cloud
security — at least today. More than half of the U.S. IT managers
(55%) reported that they were not confident that they knew about
all the cloud resources their company was using; 44 percent
of European respondents answered in kind. (See box above,
“Losing Their Grip on the Cloud.”)
Similarly, only 36 percent of U.S. respondents thought their
company was vigilant in auditing and assessing services before
deployment. European respondents fared better, with 57 percent
saying the same. “I was surprised that there was such a discon-
nect between the security and IT folks and the end users who
are making the decisions to procure and use cloud computing
resources,” says Larry Ponemon, Chairman of the institute.
Another part of the study, which surveyed cloud service pro-
viders, confirmed Ponemon’s worst fears about lax security. “In
general, we found that, except for the largest companies, cloud
providers were questionable at best in terms of what they were
doing for security,” he says.
Fortunately, some IT departments are increasing security in the
cloud with existing technologies, such as identity and access manage-
ment tools. In addition, initiatives such as the Cloud Commons and
the SMI Consortium will make available information that should
have more cloud-bound CIOs feeling safe and secure. –T.H.

)'('›SMART ENTERPRISE 11
 Special Report

Greater
EXPECTATIONS
Business today demands more than ever from IT.
To deliver, smart CIOs are following a new path —
treating IT like a supply chain.
| By Larry Lange

R espond faster. Guarantee 24x7 service. Help the enterprise

generate revenue and control costs. These are just some of
the greater expectations the business has for IT today.
Smart CIOs already know that cloud computing, virtual-
ization and other technology innovations can deliver cost savings,
greater efficiencies and even competitive advantage. But in today’s
era of greater expectations from the business, smart CIOs also know
they need more. And more is coming from a new way of looking at
IT — namely, as a supply chain.
PHOTO ILLUSTRATION: FREDRIK BRODEN

Manufacturing companies use their supply chains to source parts

from both internal and external suppliers. Similarly, CIOs can now pick
and choose the best IT services from both their own internal resources
and service providers in the cloud. “We’re at the dawn of a new era,”
says Ajei Gopal, Executive VP of Technology and Development at
CA Technologies. “A set of business needs — including increased agility
and cost-effectiveness — is coming together with a set of innovations

12 SMARTENTERPRISEMAG.COM
in technology and delivery models to enable
another true watershed moment in IT.
Organizations that embrace this paradigm
shift will prosper.”
In this new model, IT won’t build service
components anymore; instead, through
automation, they’ll be designing the actual
assembly line. “IT people will be seen as
the innovative Henry Fords of the future,”
says Dominic Schiavello, Senior Advisor for
Product Marketing with CA Technologies.
More than a century ago, Henry Ford
and other early manufacturers invented not
only the assembly line, but also the supply
chain model. Today, manufacturing pro-
duction managers use their supply chains
to balance internal resources — including
budget, systems and staff — with external
resources, mainly subcontractors and sup-
pliers. In his 1922 book, My Life and Work,
Ford described the way he treated his branch
factories as if they were external providers:
“Wherever it is possible for a branch to make
a part more cheaply than we can make it in
Detroit and ship it to them, then the branch
makes the part.”
In the manufacturing lifecycle, a busi-
ness idea moves quickly through the design,
building, production, distribution and
consumption of that idea. Similarly, the
IT supply chain model helps solve one of
the biggest issues of IT: getting services for
customers faster to market.
Now that it’s possible to move many IT
resources to the cloud, CIOs can begin think-
ing of their IT operations in a similar way.
They too have internal resources, including
budgets, staff and internal IT systems. But
they also have a new and growing roster of
external resources — suppliers of a wide and
growing range of IT services in the cloud. To
proactively meet the needs of the business,
CIOs will need to balance these internal and
external resources, just as manufacturing
managers have been doing for more than
a century.
“I believe the IT supply chain has started
to closely resemble the traditional manufac-
turing model,” says Mandar Sukhatankar,
CIO of Alibre Inc., a Richardson, Texas, sup-
plier of CAD software. “The real value comes
when IT, as a business partner, delivers those
offerings that align most closely [with] the
business’ strategy, budget and vision — and
brings them together into one seamless
solution that is transparent to the consumer.”
This idea of a dynamic IT supply chain
also resonates with Leroy Williams, VP of
IT and Services at Ball Corp., a Broomfield,
Colo., manufacturer of consumer packaged
14 SMARTENTERPRISEMAG.COM
“ The cloud’s promise
is to enable an
enterprise to tap into
global on-demand
resources with better
economics and highly
specialized skill sets.”
—Leroy Williams
VP of IT and Services | Ball Corp.
goods and aerospace technologies. Williams
has learned well from the success of the
manufacturing side of his company, which
employs more than 14,000 people world-
wide and had sales last year of more than
$7.3 billion.
Warming to the analogy, Williams likens
the utility aspects of IT to basic electricity.
“While you don’t need to be the provider
of electricity, electricity is a must-have,
and you need to manage it as core to your
infrastructure,” he says. Similarly, by relying
on external IT service providers, Williams
can allow his IT organization to be more
efficient — and to focus more on innova-
tion. “All that speaks directly to the IT supply
chain,” he adds.
In managing the internal side of his IT
supply chain in North America, Williams
engages a global contractor for a variable
cost model. For example, when he needs
to deploy new PCs and laptops, he relies
on a national IT contractor to understand
Ball’s standards and expectations, and then
deliver quickly. “They’re in, they’re out,
boom!” Williams says.
This model also enables Williams’ IT
department to support Ball’s plant infrastruc-
ture, giving the plant the ability to serve its
customers on a one-to-many basis over the
Web rather than dealing with individuals on
the phone, via fax or with e-mail limitations.
Further, Williams won’t need to invest in dedi-
cated IT resources such as new servers, and
will no longer have the costs associated with
maintaining such an infrastructure — heat-
ing, cooling, power, and staffing costs. “The
cloud’s promise is to enable an enterprise to
tap into global on-demand resources with
better economics and highly specialized skill
sets,” Williams adds.
While the notion of an IT supply chain
is not entirely new, the dynamic nature of
today’s IT is. Schiavello of CA Technologies
says that despite outsourcing, internal IT has
traditionally been stuck in a static supply
chain model for more than 40 years. “IT
has been constrained by tight budgets, the
[number] of people they’ve got on staff, and
what the infrastructure looks like,” he says.
All that is changing now — and quickly.
New technologies form the core of the
dynamic IT supply chain. Virtualization
technology adds flexibility and shared com-
puting resources. The cloud brings IT service
suppliers as close as a click on a website,
and makes it easier than ever to add and
remove IT services.
This provides CIOs nearly unlimited
choices for obtaining the components they
need to meet business requirements. With
physical IT constraints unlocked, thanks
to the cloud, CIOs also gain the ability to
scale their IT infrastructures as needed. In
addition, they gain new flexibility and cost
savings, courtesy of the cloud’s pay-as-you-
go model for IT services.
Bridge Gapper
Also, because IT is increasingly viewed as a
provider of business services, the dynamic
IT supply chain helps CIOs bridge the gap
between business demand and supply
by freeing up time traditionally spent on
mundane tasks and enabling IT to be more
innovative. With many IT budgets declining,
that’s important. “Many CIOs are still facing PHOTOGRAPHY: COURTESY OF BALL CORPORATION
2 to 5 percent budget decreases, with some
lucky ones having a flat budget with the
expectation that they deliver more services
for the same money,” says Mark Lukianchuk,
VP and Executive Advisor for the IT Transfor-
mation Group at CA Technologies.
Greater agility is another benefit of the
dynamic IT supply chain. “In the past,
when the business wanted to move to
a new market or develop a product, the
cycle would take 18 to 24 months, which
means they often missed the market or
product opportunity,” says Mike Pearl,
Cloud Computing Leader at consultants
PricewaterhouseCoopers. “But with the
cloud, the technology is there and they’re
able to get that idea to market more quickly,
get feedback more readily, and capitalize
on the opportunity — all without putting
this very long investment and develop-
ment cycle between the organization and
its customers.”
Now, with IT able to expand easily out
to the cloud for benefits such as additional
capacity as needed, CIOs no longer need to
purchase new servers or redo their networks.
Besides the cost savings, it also means that
IT can move away from doing low-value
tasks such as patching systems and moni-
toring events — and focus on innovative
work such as creating new services and
designing efficient processes and quality
assurance around those services.
To make this new IT model work as effec-
tively and efficiently as possible, CIOs will
be required to think innovatively, experts
say. CIOs will need to continually evaluate
their IT services, not only thinking about
internal versus external suppliers, but also
evaluating relative costs, quality and risk.
Supply chain experts recommend that
CIOs adopt a strategic lifecycle plan. Such a
plan should include these IT components:
■ Planning: CIOs evaluate and priori-
tize their entire portfolios of on-hand IT
resources and services. Then, based on
business demand, they can take the first
steps to the cloud by virtualizing servers
and building a secure internal private cloud.
CIOs who have already taken these steps
may be ready for a hybrid cloud, which
can make the most of internal systems and
architecture while also taking advantage of
external providers.
■ Evaluate Constraints: While all CIOs
if necessary, fixed. To do so, CIOs should
implement solutions that manage and
measure these attributes from end to end.
■ Deploy: CIOs can provide their busi-
ness units with a cherry-picked catalog of
approved IT services, effectively enabling
the business units to become self-service
consumers of IT. CIOs should also consider
deploying experienced cloud management
service providers to help enable a fully
functional, dynamic IT supply chain.
■ Quality Assurance: Standards for
quality must be set, measured and ensured
with all third-party providers in the cloud,
just as with internal IT resources. When
working with third parties in the cloud,
CIOs must also apply and enforce their own
internal standards, as well as appropriate
industry and government regulations.
■ Deprovisioning: No system is forever.
So when CIOs want to ramp down a service
provided by an internal or external provider,
they’ll need a plan for the data they’ve put
there. Also, after a project winds down, CIOs
The Transformation of the IT Supply Chain
From STATIC, where each IT service has its own infrastructure:
Service
Provider
To ABSTRACTION, where IT retools for the future ... operating systems are decoupled from physical
hardware ... and architectures, vendors, processes and more are rationalized:
Service
Provider
need ways to quickly ramp down any utilized
internal applications, staff or hardware.
While all the components are impor-
tant, CIOs needn’t work them in sequence.
Instead, they can pick and choose where
to start.
The new IT supply chain may also change
the role of both the CIO and IT itself. In fact,
the flexibility and efficiency of the cloud
could dramatically change the way the IT
function works. The CIO would no longer be
the IT equivalent of a factory-floor worker
who assembles pieces. Instead, the CIO
would become, in essence, a designer of the
factory, manufacturing process and supply
chain process. This would be a much more
strategic role, one that dramatically strength-
ens IT’s partnership with the business.
A report published earlier this year by
IT analyst firm Gartner supports this view:
“CIOs see 2010 as an opportunity to acceler-
ate IT’s transition from a support function to
strategic contributor focused on innovation
and competitive advantage.” In the report,
Service
Consumer
Service
Consumer

face resource constraints on budgets, staff

and infrastructure, with the new IT supply To AGILE DELIVERY, where composite services are built from cloud sub-components from multiple
chain model, they’re no longer constrained suppliers ... and where highly automated systems assemble the services for individual customers —
and distribute them through the cloud.
by in-house resources. A balance of internal
automation and virtualization — and the use Service
Provider
Service
Provider
Service
Provider
of external service providers — can make
former constraints virtually moot.
■ Compose Services: The paradigm shift
in IT is reshaping CIOs into brokers of IT
services to the business. In this component,
CIOs ensure that the composition of ser- Service Service
vices — whether from internal or external Provider Consumers
resources — can be directly tailored to meet
the specific requirements of the business. Service Service Service
Provider Provider Provider
■ Security: Availability and performance
of IT service providers, whether internal or DATA: CA Technologies, 2010
external, must be measured, evaluated and,

)'('›SMART ENTERPRISE 15
entitled “Leading in Times of Transition: The
2010 CIO Agenda,” the author observes,
“They have aspired to this shift for years,
but economic, strategic and technological
changes have only recently made it feasible.”
The CIO’s role is changing, too. For
one, CIOs need to manage this new cloud-
enabled IT supply chain. That could require
some new ways of thinking and working,
as IT’s role shifts away from pure design,
building, and implementing and begins to
incorporate elements of brokering, selecting
and monitoring. “Cloud then becomes part
of a CIO’s portfolio,” says Pearl of Price-
waterhouseCoopers.
To accommodate this change, CIOs will
need efficient and effective processes for
assessing, selecting and monitoring service
providers. “Aside from gathering all the per-
tinent data about the service their suppliers
deliver,” says Gregor Petri, Cloud Computing
Advisor at CA Technologies, “CIOs will need
tools that interpret and integrate and show
what it all means for the business.”
So what happens to all those legacy IT
systems? In the short term, at least, IT depart-
ments will continue to manage what can now
be called the internal side of the IT supply
chain. In fact, most estimates say that 60 to
80 percent of all enterprise IT resources are
now spent on simply “keeping the lights on.”
But by deploying virtualization, automation
and internal cloud technology, IT will be able
to move to new and heightened levels of agil-
ity and efficiency in delivering this business
value. They will be able to do it more cheaply
and quickly than ever before. By fighting on
two fronts simultaneously — making internal
systems more efficient by implementing an
internal cloud, and sourcing new solutions
as a service from cloud providers — IT has
a good shot at achieving one of its longest-
standing goals: to become a true driver of
competitive advantage, rather than simply
a cost center.
Sourcing solutions as services from the
cloud adds several new tasks to a CIO’s
duties. Take security and support. Ensuring
the security of customer data, for example,
takes on a new complexity when that data
is with a third-party supplier somewhere
on the cloud. Ditto for support, says Petri
of CA Technologies: “If a company sources
three services from the cloud and, some-
where between these, one does not work,
then who is going to fix it? You will need
someone to coordinate that support, since
you don’t want your user to have to call all
three suppliers only to hear that they feel
it is not their fault or problem.”
IT will be tasked with integration, too,
experts say. For instance, if multiple IT solu-
tions are needed to provide a single business
service, it will make sense for IT to be the
one that coordinates integration of those
components into a reliable service. Costing,
too, is likely to become an IT responsibility,
including charging, checking invoices and
matching service providers’ results against
what was purchased or leased from them
— even counting the transactions.
At Alibre, CIO Sukhatankar says that
before any cloud-based offering is brought
into the IT supply chain, the IT group must
vet the offering for availability, reliability
and security. “All those factors are obviously
very important to us, just as they would be
for any business,” he says.
Similarly, Williams of Ball Corp. says he’s
already gearing up his IT staff for these new
roles. He wants his staff to move from being
technology generalists to becoming cloud-
savvy specialists across the IT supply chain.
In part, this will mean gaining competency in

SUPPLY CHAIN ACTION PLAN

To help CIOs move to the dynamic IT supply chain, Jay Fry, VP
of Marketing, Cloud Customer Solutions Unit at CA Technologies,
offers these five recommendations. Following these guidelines can
help CIOs make the transition to the cloud-enabled supply chain as
seamless as possible:
external services available in the cloud against what IT is already
doing in-house. Fry says you will also need to strategize about
which cloud models offer the most benefit to the business and
how to implement them as well. That’s true whether you go with a
private, hybrid or public cloud — or a software as a service (SaaS)
model, platform as a service (PaaS) model, or infrastructure as a

1
Gain insight to compare: Start by gaining insight into your service (IaaS) model.
current IT services — both internal and external. “The cloud

computing space has evolved so quickly that you have this
‘Wild Wild West’ effect, where it’s anybody’s game,” Fry warns. For
this reason, most CIOs will need a standard way to describe what
IT is doing now with the cloud, not just in terms of cost, but also in
quality and other intangible characteristics. If that’s the case for you,
compare that with what other sources might be able to provide.
4
Challenge your choices: After selecting and implementing
your cloud technologies and models, continually optimize
along your IT supply chain, both on the internal side —
budget, staff, systems and infrastructure — as well as the external.
Do this as you assemble service providers from the cloud to serve
business requirements. Then, to stay aligned with changing busi-
ness demands, constantly challenge and reassess all your choices.

2
Connect to expert knowledge: Gain access to relevant

data about cloud services, feedback about those services,
and best practices from your community of both peers and
experts. This will help you decide whether, when and how you
should use the cloud for a specific application or capability.
5
Deploy, manage and secure: Cloud services must be
secure, manageable and controllable. They must also meet
all your relevant compliance rules and regulations — all
while providing the necessary business value.

3
Cloud-enable resources: In formulating any cloud
decision, it’s important to align the set of available IT capa-
bilities (budget, staff, systems and infrastructure on hand)
with the technology available to them. That can mean virtualizing
servers for building a private cloud, for example — or comparing
Even after you have moved to the new IT supply chain,
these suggestions should still be useful. That way, you will ensure
that you’re constantly improving the IT supply chain over time.
“The right answer now,” Fry says, “is going to change
tomorrow.” – L.L.

16 SMARTENTERPRISEMAG.COM
 CRM, mainly to serve Ball’s internal business
customers at new, heightened levels. Also,
the cloud will help Williams run IT more
efficiently, thanks to selective sourcing with
partners that meet the company’s quality,
time-to-market and cost-savings standards.
“I’m also looking at innovative ways to help
Ball reach emerging markets by leveraging a
global technology platform for scale,” he says.
New solutions are especially important in
online retailing, where variable system capac-
ity is essential. While most retailers have a set
amount of capacity on their e-commerce sites,
typically those levels are topped during holiday
shopping periods. The traditional, pre-cloud
solution was to overprovision servers to meet
that potential demand, then let those servers
sit idle the rest of the year. However, with the
cloud, as demand increases, CIOs can either
provision processing capacity in the public
cloud or deploy an internal private cloud
using virtualized servers. “An organization’s
ability to gain competitive advantages from
technology will be contingent upon its ability
to continuously optimize its IT supply chains,”
says Chris O’Malley, General Manager at
CA Technologies.
At CAD supplier Alibre, both virtualization
and cloud technology are key components of
the IT supply chain. “Virtualization affords
us the ability to replicate environments in
almost real time, providing us the ability to
scale our operations up or down without
incurring huge sunk costs,” says CIO Sukhat-
ankar. For example, if the Alibre IT staff
expects to encounter an inordinate amount
of Web traffic for a short period of time, they
can add virtual servers to load-balance the
transient demand.
On the external side of Alibre’s IT supply
chain, the cloud has helped the company
migrate its CRM operations from an in-
house designed solution to Salesforce.com.
“I’ve been a big proponent of the cloud for
several years,” Sukhatankar says.
Several Solutions
Fortunately, CIOs don’t have to brave the
dynamic IT supply chain alone. They can
turn to solutions like the recently introduced
CA Cloud-Connected Management Suite,
which is designed to deliver the IT ser-
PHOTOGRAPH: YINYANG/ISTOCK
vices a business needs. The solution helps
ensure and secure cloud services in line
with regulatory and security requirements,
such as identity and access management,
and data loss protection. The solution is
also designed to help select and provision
external services in an automated and
The transition to the
dynamic IT supply
chain could take CIOs
on several paths,
depending on the their
IT portfolio, industry,
even country.
orchestrated manner. (For more on the CA
Cloud-Connected Management Suite, see
“The CIO Rainmaker,” p. 8.)
One of the four products included in the
CA Cloud-Connected Management Suite,
called CA Cloud Insight, will leverage the Ser-
vice Measurement Index (SMI) Framework.
The framework is now being developed by a
consortium of Carnegie Mellon University,
CA Technologies, Stony Brook University and
other business, academic and government
organizations. The goal: help CIOs quantify
and evaluate cloud-based services, then
compare these services against their own
internal IT resources. More specifically, the
SMI Framework will focus on six measures
to help CIOs compare and contrast cloud
services with other available services: qual-
ity, agility, risk, cost, capability and security.
“This framework will be a standard way to
talk about IT services at the business level,”
says Jay Fry, VP of Marketing, Cloud Customer
Solutions, at CA Technologies.
One place to learn more about the SMI
index is Cloud Commons (cloudcommons.
com), a new community and website
focused on helping IT practitioners get
useful, real-world information about cloud
computing. The site can help CIOs and
others looking to deploy cloud computing
and improve the way IT supports business
objectives. Founding supporters of this
community include CA Technologies, the
TM Forum, Red Hat and Insight Invest-
ments. “This isn’t just a CA site — it’s meant
for anyone needing practical information
about cloud,” says Fry. “It’s a great place to
go when you need to know what’s going
on with different types of cloud services.”
Part of the Portfolio
The transition to the dynamic IT supply chain
could take CIOs on several paths, depending
on their IT portfolio, industry, even country.
As Petri of CA Technologies points out, cloud
technology is likely to catch on fastest in
emerging countries, given their smaller
installed base of legacy systems. In these
countries, companies could well “leapfrog”
older technologies, much as consumers have
done with mobile phones in countries that
lack robust telecom landlines. “They were
able to go straight to wireless,” Petri adds.
Another option is a revisiting of IT’s cen-
tralization vs. decentralization debate. Petri
is seeing a growing number of companies
moving IT staff directly into marketing,
development, production and other busi-
ness units. “When you move IT into the
departments and couple that with more
frequently sourcing solutions as a service
from the cloud, IT will spend less time wor-
rying about rudimentary IT issues. Plus, they
can be much closer to the user,” Petri says,
“helping those users pick the right service
solutions to accomplish what they need.”
At Ball Corp., Williams has embedded
continuous improvement within the orga-
nizational DNA. “If you’re not proactively
managing the economics and increasing
demand for seamless services, you’re a
sitting duck, and somebody’s going to take
you out,” he says.
No matter which path CIOs take, this
change will take time. Only now are the
big enterprises considering cloud deploy-
ment, and many are still experimenting
with virtualization technology. “The cloud
is hearkening a profound change, but even
a revolution can take a long time with a big
company,” Fry says. “This transformation
will be a multiyear process.”
As the cloud rolls in, CIOs may want to
bear in mind what Henry Ford, the world’s
best-known manufacturing icon, once said:
“Before everything else, getting ready is the
secret of success.” ■
LARRY LANGE is a technology writer and
former Senior Editor at TechWeb, PlanetIT.com,
EE Times and IEEE Spectrum.
)'('›SMART ENTERPRISE 17
 Smart Management

The New World of

IT
To balance
efficiency with
business value,
CIOs turn
to dynamic
funding.
| By Tom Farre

Budgeting
I
t’s the season of IT budgeting, and CIOs are facing a number of pressures — not
the least of which is the perennial need for greater efficiency in IT. An improving
economy, however, is also spurring enterprises to begin embracing a growth
agenda, funding strategic IT initiatives that can drive business innovation and
support expansion.
“Companies have a brighter outlook for what’s coming up,” says Randy Roth,
a Partner at Corporate Contracts, an IT sourcing consultancy. “It seems they’re
starting to loosen up, planning to spend a little more money for next year, rather
than being flat or decreasing the budgets as they’ve done over the last few years.”
That sounds right to Jose Mora, Senior Director of Product Marketing at CA
Technologies. He says that as organizations position themselves for growth, they’re
being cautiously optimistic about their IT spending. “They’re working to balance
fiscal discipline with the need to be more agile and innovative in how they operate
and deliver value to the business,” Mora adds.
Given these pressures, how can CIOs best devise a budget that minimizes the
expense of operations — keeping the lights on — while providing adequate fund-
ing for new initiatives that can enhance the business and improve the bottom
line? The most successful CIOs work to garner business sponsorship for proposed
expenditures, and then clearly communicate business value at the executive table.

18 SMARTENTERPRISEMAG.COM
 Rama Dhuwaraha, CIO of Lexington Fayette Urban
County Government in Kentucky employs this strategy.
“We don’t recommend any project unless there is a busi-
ness component and sponsorship,” says Dhuwaraha.
“I’ve made it clear that there are no IT projects, only
business projects in which IT is a component.”
Such alignment between IT and business value can
relieve the pressure to reduce costs that troubles so
many CIOs. “You can’t win a cost discussion with the
business, because the discussion is always going to be,
‘Can’t you do it for less?’ ” says Peter Hinssen, Managing
Partner at Across Technology, a CIO consulting firm.
“CIOs need to transform that discussion into a value
dialogue and start talking about IT as a portfolio of
business investments. That’s a whole new mentality.”
Plan B Budgeting
As CIOs work to align their IT budgets with business
value, one concern relates to the concept of the annual
budget itself: Is a single budget for the coming year the
way to go? Or should the budget be more dynamic to
account for possible changes in the business and for
unforeseen technology advances? With recent economic
reports hinting at continued financial uncertainty in
2011, does that imply that the budget should be dynamic
and adaptable to different scenarios? Probably.
“In today’s economy, I can’t just have plan A; I have to
have plan A, B and C,” says Dhuwaraha , who works with
an annual IT budget of about $7 million. Dhuwaraha
expects his local economy to begin recovering in early
2011, but even if it doesn’t, he’s prepared. “We start with
a baseline budget tied to expected city revenues,” he
explains. “If revenues are down, we have plan B and
C ready to execute. We know which projects will take
priority and which will be cut.”
A flexible IT budget also helps CIOs capitalize on
unexpected technology advances. “The rate of change
we have in technology today, and the agility required of
IT doesn’t allow the CIO to think in terms of annual bud-
gets anymore,” says Hinssen. “If a technology advance
arises — and it’s a good opportunity for the business
— you should be able to invest in it. Hiding behind an
annual budget just doesn’t work.”
Cloud computing, for example, can
help build some flexibility into the IT
budget. “If your top line is down
by x percent, then IT is going to
have to share the pain,” says Bart
Perkins, Managing Partner
at Leverage Partners, a CIO
consultancy. “This argues
for a variable-cost IT

BUDGET BLUES? IT CAN HELP

There are two critical challenges in the IT
budgeting process: driving efficiencies in
the “keeping the lights on” budget and
evaluating the return on investment (ROI)
of discretionary IT projects. Judicious use
of information technology addresses both.
“You can’t manage what you don’t
measure,” says Denise Kalm, Product
Marketing Manager at CA Technologies,
who is also an ITIL® Capacity Manage-
ment Practitioner. “If you don’t have
PHOTOGRAPHS (LEFT TO RIGHT): IAN MCKINNELL/GETTY; THINKSTOCK
This helps CIOS devise a budget that will
meet future requirements for capacity
and performance.
“When you review a business process
such as online ordering, you need to
account for the resources that contribute
to the transaction, how busy they are and
how effectively they are working,” says
Kalm. “Resource management software
helps you define key processes and locate
the resources that contribute in terms
of Lexington Fayette Urban County
Government in Kentucky.
That is a core capability of a project
and portfolio management (PPM) solu-
tion. “PPM functions as the CIO’s system
of record,” says Jose Mora, Senior Director
of Product Marketing for CA Technologies’
Clarity PPM. “It offers visibility into the
projects where the budget is being spent,
how it’s being spent, and which course
corrections are needed as the market and

information about the systems and soft-
ware performing key business processes,
you don’t know enough to manage the
finances and the budget.”
Resource management software such
as MICS® Resource Management from
CA Technologies can help. It automates
analysis of the raw data coming in from
all the systems and software performing
various business processes, enabling CIOs
to measure and report on metrics that
indicate usage and efficiency. By adding
financial figures, such as cost per CPU
core or cost per megabyte of storage, CIOs
can better understand the costs.
of performance, capacity, utilization and
cost. It stores the data intelligently and
facilitates reporting so you can mine the
data to make budgetary decisions.”
LEADING ROLE
Software can also assist CIOs in evaluating
the finances of projects in the IT invest-
ment portfolio — essential when justifying
ROI to ward off attacks on the budget. “I
see a big role for technology in improv-
ing the IT budgeting process, in terms of
planning, generating proper reports and
being able to create realistic scenarios,”
says Rama Dhuwaraha, CIO
business changes.”
PPM Solutions help CIOs do realistic
scenario planning for proposed IT invest-
ments, after assigning metrics related to
costs, risks and expected ROI. Workflow
features can help in gathering and docu-
menting input from stakeholders across
the enterprise.
Peter Hinssen, Managing Partner at
consultancy Across Technology, sees such
tools as a boon to the budget process.
“Realistic scenario planning applied to
an IT investment portfolio,” he says, “is
light-years ahead of the old concept of IT
budgeting.” – T.F.

)'('›SMART ENTERPRISE 19
budget that leverages scalable cloud services,
in which you pay only for what you use.”
Perkins offers another take on the “one
budget or many” question. He argues that
every enterprise should have two IT bud-
gets — or, at least, separate its budget into
two spending components: discretionary
and nondiscretionary.
Nondiscretionary spending, he
explains, involves both capital and
operating expenses devoted to keep-
ing the lights on. That includes
the operation and maintenance
of existing applications and
infrastructure, as well as production
services such as e-mail and desktop sup-
port for office workers. CIOs have ultimate
responsibility for this budget and need to
both explain and minimize it. Minimizing
nondiscretionary unit costs will drive IT
efficiency, an imperative that CIOs accept
as the new normal of IT budgeting.
Creative Budgeting
At Thermo Fisher Scientific, a $10 billion
(revenue) maker of laboratory software
and equipment, VP and CIO Ina Kamenz
manages a worldwide staff of more than
800 people. She also runs the Waltham,
Mass.-based company’s shared services
infrastructure, which includes global appli-
cations, global infrastructure and IT services
such as Web services, asset management and
database support. Kamenz’s mission for her
nondiscretionary budget: Keep costs con-
stant, even as the company grows. “In any
year we could add hundreds to thousands
Segmenting the IT Budget
CIO consultant Bart Perkins suggests dividing the IT budget into two buckets:
nondiscretionary and discretionary spending. The key to budgetary approval
lies in showing efficiency gains from nondiscretionary spending and return on
investment (ROI) from discretionary projects.
THE TWO IT BUDGETS BUDGETARY ELEMENTS
“The trick is finding a happy medium,
where you as the customer gain the
ability to benefit from the suppliers’
products, but you haven’t cut them
so close that you get bad service.”
—Randy Roth | Partner |
Corporate Contracts
of employees through acquisitions, but I don’t believe you can negotiate, and thus
still hold my shared services budget pretty pay rack rates for everything, while others
flat,” Kamenz says. “Every year I expect to want everything for free,” he says. “The trick
improve our efficiency to offset growth.” is finding a happy medium, where you as
For CIOs in all industries, initiatives to the customer gain the ability to benefit from
drive efficiency gains can include infra- the suppliers’ products, but you haven’t cut
structure consolidation through server them so close that you get bad service.”
and desktop virtualization, streamlining To track the gains of these and other effi-
data archiving and backup, optimizing the ciency measures, it pays to benchmark the
global service desk, and standardizing and cost of IT operations and compare them to
simplifying networks, operating systems and industry norms. “We benchmark everything
databases. Enterprises are also outsourc- we can,” says Kamenz of Thermo Fisher
ing IT commodity services, due, in part, Scientific. “This includes our cost per service
to having fewer staffers after head-count desk call, number of support staff per user
cuts during the recession. “I don’t expect license, the productivity of our combined
enterprises to build staff back up again,” says onshore/offshore application development
sourcing consultant Roth. “That’s probably model, the utilization of our VoIP system, our
going to drive outsourcing purchases and call center productivity and more.”
investments in cloud services and hosting.” These granular benchmarks, which can
Enterprises can boost efficiency by nego- be used to justify budget requests, can be
tiating smarter for needed products and preferable to big-picture benchmarks such as
services, Roth notes. “Some enterprises IT budget as a percentage of annual revenue.
“You can’t just look at one number,” Kamenz
says. “You may be able to improve it, but it
would be at the expense of everything else.”
Such single-focus benchmarks can also
miss the mark in assessing the value that
IT delivers. If you’re asking for x percent of
sales revenue, you may be able to show that
figure is lower or higher than the competi-
tion’s, but you won’t gain any insight into
BUDGETARY GOAL
the value the business receives from that

1 Nondiscretionary budget
(keeping the lights on)
Funds to operate and maintain existing
apps and infrastructure, and for core IT
services such as Web, e-mail, desktop
support and help desk
Improve efficiency by
reducing unit costs or by
supporting more users
investment, according to consultant Perkins.
Once a CIO knows how much capital he
or she will need to keep the lights on and the
within same budget servers functioning, it’s time to turn to the
discretionary budget. This budget is used to
fund development of new functionalities,
PHOTOGRAPH: THINKSTOCK

2 Discretionary budget
(new projects)
Funds to develop new IT functionality,
replace existing systems and make
major infrastructure upgrades
Provide business value in
the form of positive ROI,
usually presented in a
replace existing systems, and make major
upgrades to the infrastructure. Discretion-
business case study
ary projects generally provide financial
benefits, too, such as increased sales or
DATA: Leverage Partners, 2010 reduced costs, or intangible benefits such
as delivering a higher-quality product or

20 SMARTENTERPRISEMAG.COM
service. Justifying that budget involves one
crucial element: projecting value through
return on investment (ROI), says Perkins. In
today’s environment, most enterprises will
fund only projects that provide substantial
ROI. This is why CIOs need to create a case
study or other detailed report to justify every
discretionary request.
To receive funding from the business,
say experts, it’s important to speak in the
language of the business. Since such projects
often percolate up through the enterprise
from line-of-business executives requesting
new IT functionality, use those requestors to
help make the business case for the invest-
ment. It will take more than just a solid case
study to gain approval. In many instances,
getting such requests approved requires
the CIO to have a solid relationship with
the enterprise’s executive decision makers,
which often translates into a seat at the
business table. Without this personal con-
nection, discretionary IT spending is likely
to come under closer scrutiny than other
aspects of the enterprise budget.
“The toughest thing in the private sector
is often that the CIO and the IT organization
are not viewed as business partners,” says
Steve Cooper, CIO of the Federal Aviation
Administration’s Air Traffic Organization
(ATO). “If you’re not part of the committee
that makes budgetary decisions, it’s difficult
because you’re not part of the discussion.
You’ve got to rely on someone else, who
may or not be speaking on your behalf.”
In Position
To enhance IT’s position at the table, Cooper
advises CIOs to focus on proper governance
and management of the IT investment.
Instead of setting priorities and making deci-
sions alone, CIOs should set up a governance
committee with other senior executives to
facilitate discussions about the company’s
top business priorities, and where IT should
invest to support those priorities. “CIOs
who facilitate that type of conversation
can enhance their stature and credibility
as a valued business partner,” says Cooper,
“as opposed to someone who just keeps
the lights on.”
That’s the process at Thermo Fisher
Scientific, where CIO Kamenz chairs an
executive-level committee that reviews a
bottom-up build of discretionary IT projects
requested by the company’s business units.
“If a request doesn’t relate to a strategic
business initiative, it’s off the list,” says
Kamenz. “Based on projected ROI of the
Run, Win, Change
CIO coach Peter Hinssen advises CIOs to think of the IT budget as an
investment portfolio, analyzing cost, risk and business value of each element
and initiating a value dialogue with the business.
IT PORTFOLIO ELEMENTS PORTFOLIO CHARACTERISTICS BUDGETARY GOAL
“RUN” THE RACE Low-risk “keeping the lights on” Minimize via efficiency
portfolio elements deliver the least measures to free funds for
business value “Win” and “Change”
projects
“WIN” THE RACE Elements with midlevel risk that help Analyze cost and risk
an organization compete better, or Win against business value
the Race, in the market to justify investment
“CHANGE” THE RACE High-risk projects with the potential to Identify “Change” projects
change the rules of the game in the and drive a discussion of
marketplace their business value with
executive management
DATA: Across Technology, 2010
business value, it stays on the list and gets products company might be as simple as
prioritized. Then it goes through a slice and designing and maintaining a basic website.
dice [often more than once], until the key Creating an interactive portal, however, could
initiatives are determined.” fall under the Win umbrella. It’s riskier, to be
This ideal relationship between IT and sure, but such a project could provide custom-
business is often referred to as “alignment,” ers with more value. A Change project might
but CIO coach Hinssen takes it further, be an interactive, downloadable Java-based
calling for “fusion,” where IT becomes a full game to help engage customers. “Projects
partner with the business. He advises CIOs that change the rules could have great value,
to abandon the old concept of IT budgeting but it’s unclear,” Hinssen says. “If you don’t
and look at the budget more as a venture take the risk, however, you could lose a lot.”
capitalist (VC) would, managing a portfo- Making the case for such elements in the
lio of investments based on cost, risk and portfolio requires a business-savvy CIO with
value delivered to the business. “A VC would a strong boardroom presence — and fewer
say, ‘We’re going to have a certain number than 10 percent of CIOs fall in that category,
of investments,’” says Hinssen. “Some of Hinssen says. “The most successful CIOs
them will fail, but we have to seed, select have the ability to transform IT and drive the
and amplify, develop what works for the business value discussion,” he says. “If you
business and kill the rest. “ just say ‘This is our capacity, and we’ll let the
CIOs can approach this budget practice, business decide the priority,’ you could be
Hinssen suggests, by segmenting the IT shying away from your responsibility.” The
portfolio into three categories: Run the Race, CIO should be in the driver’s seat, turning
Win the Race and Change the Race. The Run the discussion into a value dialogue.
category — which comprises approximately “That,” concludes Hinssen, “is the only
70 percent of the IT budget — is akin to way to survive.”
keeping the lights on. While low in risk, it
also provides the least business value. Win TOM FARRE, formerly Editor of VARBusiness,
projects relate to those IT expenditures that is a freelance journalist. He’s been covering the
help the enterprise compete better, winning computer industry for more than 20 years.
the race in the market. Change projects, the
riskiest of all, provide the most business ITIL® is a Registered Trade Mark, and a Reg-
value by changing the rules of the game. istered Community Trade Mark of the Office
To show the distinction, Hinssen offers of Government Commerce, and is registered
an example: A Run project for a consumer in the U.S. Patent and Trademark Office.
)'('›SMART ENTERPRISE 21
 Case Study Baker Hughes

THE
CORPORATE
En t re p reneur
At oilfield services company Baker Hughes, CIO Clif Triplett is running
IT like a business. The upshot? More business.
| By Alan S. Horowitz

M
any companies struggle to align
IT and the business. Not Baker
Hughes Inc. At the company,
a new and entrepreneurial IT
leader has all but closed the gap
between the two.
Baker Hughes, the world’s third-largest oilfield
services company, offers a service called BEACON,
short for Baker Expert Advisory Center Operations
Network. The service was developed by the Houston,
Texas-based company’s IT team, which since last year
has been led by VP and CIO Clif Triplett. While BEA-
BEACON offers a service platform that lets Baker
Hughes leverage its oilfield expertise across drilling
sites worldwide. The company’s global customers
can procure the service for remote monitoring, data
storage, data transmission and call center support.
Guillermo Arango, Director of BEACON Enterprise
Services at Baker Hughes, likens the role of IT on a
BEACON project to that of a shopping mall owner. A
mall brings together shoppers and merchants, Arango
explains, but while the merchants do the actual sell-
ing, the mall owner provides security, parking and
attractive facilities to stimulate business. Like the mall
PHOTOGRAPH: KIM KULISH

CON is still managed by IT, in a unique business-IT
partnership, the service is offered to external custom-
ers by the Baker Hughes operating units. “BEACON
is an IT-enabled technology and a core part of our
company’s business,” Triplett says. “It’s about drilling
and monitoring.”
owner, IT at Baker Hughes provides the company’s
operating units with a platform that includes telecom
and data management infrastructure, knowledge
management facilities and service centers. Continuing
the analogy, Arango says the Baker Hughes business
units — including reservoir evaluation, drilling,

22 SMARTENTERPRISEMAG.COM
Clif Triplett, VP and
CIO, Baker Hughes.

)'('›SMART ENTERPRISE 23
wireline logging, well completion and field
management — provide the actual services,
similar to the way retail merchants offer
products in a shopping mall.
What’s more, with its IT group and
operating units working in tandem, Baker
Hughes can provide customers with a desir-
able package of IT-powered services. “The
primary mission of BEACON is to enable
Baker Hughes to provide remote well and
reservoir services to our customers, and
BEACON does just that,” Arango says.
Drilling for oil is expensive — and get-
ting more expensive all the time. Finding
IT ASSET MANAGEMENT FOR COMPETITIVE ADVANTAGE
For oilfield services supplier Baker
Hughes Inc., managing IT assets is more
than just a good idea — it’s also
a competitive advantage.
The Houston, Texas-based company
is transforming its organization, some
of its markets and other factors. In part,
the company needed IT to become a core
business partner, one that was able to
support the business as well as boost
its competitive standing. “We believe
asset management will be a differentiator
between us and some of the other com-
panies in our peer group,” says Graham
Crisp, the company’s Global IT Assets
Director.
The IT asset-management program
at Baker Hughes has several internal
objectives as well. The company needed
to reconcile known IT assets with owned
IT assets; increase IT availability and
asset usage; increase the reprovisioning
of existing assets to reduce the need for
new purchases; improve IT asset manage-
ment; and dispose of selected IT assets in
environmentally responsible ways.
Ultimately, Baker Hughes decided to
rely primarily on CA Technologies asset-
management solutions for the project.
With these solutions, Baker Hughes was
able to integrate IT functions. For example,
when Baker Hughes needed to replace
an aging help desk/call center applica-
tion, it used CA Service Desk to integrate
asset management and then to change its
configuration and release into a help desk
application. “We wanted one product that
gave us flexibility across the organization,”
Crisp says. “We didn’t want to bolt prod-
ucts together to give us that functionality.”
24 SMARTENTERPRISEMAG.COM
and retaining skilled workers is challenging
and costly, especially in remote locations or
politically unstable countries.
To control these and other costs, the
oil industry is moving toward the remote
control and monitoring of drilling and well
operations. Using video and other telecom-
munications links, the oil industry’s drills in
far-off places can be directed up and down,
left and right, slower and faster — all by
operators sitting in the relative comfort of
control rooms hundreds, even thousands
of miles from the drill. Once an oil well has
been drilled and is operational, its pumps can
“ We believe asset
management will
be a differentiator.”
—Graham Crisp | Global IT Assets
Director | Baker Hughes
For a company the size of Baker
Hughes, that’s no small effort. The
company has some 35,000 laptops and
desktops scattered around the world. It
has equipment being used in the deep sea
and other remote sites, often for extended
periods of time. What’s more, the company’s
workforce is highly mobile. To make it
even more challenging, the IT department,
under the leadership of its new CIO, Clif
Triplett, was for the first time centralizing
all Baker Hughes IT assets under a single
departmental umbrella.
Software inventories posed a challenge.
Like many companies, Baker Hughes erred
on the side of caution with its software
licenses, thinking it was better to have
too many software licenses than too few.
also be monitored and optimized remotely,
further reducing operating expenses.
The BEACON service at Baker Hughes
provides remote monitoring, remote opera-
tions, secure file exchange, file storage,
remote access and remote collaboration,
all from centralized locations. At any one
time, BEACON oversees some 200 well sites.
Triplett, the IT executive behind BEA-
CON’s success, joined Baker Hughes in
early 2009 as the company’s first-ever CIO.
Previously, the company had been organized
into eight independent operating units,
each with its own IT department. Now,
“But we found we were overlicensed and
oversubscribed,” Crisp says.
The result: In the first six months
of the IT asset-management program,
Baker Hughes identified more than 600
systems as underutilized; many of these
systems could be redeployed. Internal
buyers could reassign the systems to
users who needed them.
This has yielded additional results. For
example, in IT procurement, if an internal
user in Nigeria wants the IT department to
purchase a server, buyers can now evalu-
ate the warranty status, usage and refresh
schedule of internally owned machines.
They can then determine whether Baker
Hughes already owns equipment worth
shipping to Nigeria; if so, they avoid pur-
chasing new assets.
In addition, with the new asset-
management system, Baker Hughes
can forecast its replacement needs on
a quarterly basis, and then make a bulk
order. Rather than purchasing systems on
a one-off basis, now the purchasing and
shipping is done in bulk, which is a money
saver. “From a deployment perspective, we
can be cost-effective in how we deploy the
machines,” Crisp says.
Another benefit: IT now has greater
confidence that it has the hardware and
software it needs. This also improves IT’s
ability to negotiate with suppliers. “It put
our licenses in perspective,” Crisp explains.
“Do we need 10 licenses or five? Do we
PHOTOGRAPH: KIM KULISH
have 10 licenses, but only five deployed?”
Baker Hughes’ IT asset-management
program is lowering expenses, improving
utilization and enhancing the company’s
competitive position. – A.S.H.
under Triplett, Baker Hughes has a single,
centralized IT department that owns all of
the company’s IT assets. Its goal: to pres-
ent customers with a unified image, rather
than separate product entities. “I joined a
company that is willing to try new things,”
Triplett says. “Baker Hughes is looking to IT
to be a core member of the team.”
IT at Baker Hughes under Triplett’s
leadership has developed a strong entrepre-
neurial spirit. Like most IT groups, Triplett’s
is expected to suggest cost-reducing proj-
ects. But they are also expected to provide
new ways of generating revenue. “Some-
times the responsibility lies with IT, and
sometimes with the company. But it’s clearly
within our bounds and expectations to bring
forth revenue generation.”
Those expectations also extend to
Triplett’s compensation and performance
reviews, he explains. The CIO’s job perfor-
mance is measured, in part, by how many
new services he delivers — and the amount
of new revenue his department enables
or generates. New services, new revenues
— these benchmarks are very much the
way any entrepreneur would expect to be
measured. For these reasons, calling Triplett
an entrepreneurial risk-taker is no stretch.
Industry watchers say this new approach
fits well with the company’s reputation for
being analytical. “Baker Hughes takes a very
thoughtful, very mathematical approach
to business,” says Stephen Ellis, an Equity
Analyst at Morningstar. “It’s a fierce numbers
approach. The company looks for value [in
its business operations] and approaches IT
in a similar way.”
Sharper Focus
That’s important as Baker Hughes refo-
cuses its business, industry analysts say.
“Baker Hughes is moving from having a
product- and service-line focus, to more
of a geographically focused approach,”
says Stephen Gengaro, Managing Direc-
tor at investment firm Jefferies & Co. With
the acquisition of BJ services, another oil-
field services provider, Baker Hughes now
employs about 45,000 people in 90 coun-
tries, and has facilities in more than 70 of
those countries.
BEACON’s current service offerings are
merely the first in a series of entrepreneurial
offerings from Triplett’s IT department at
Baker Hughes. Triplett says his group is
currently evaluating other concepts that
will advance the service possibilities from
Baker Hughes.
Baker Hughes
at a Glance
■ BUSINESS: Oilfield services
■ HEADQUARTERS: Houston, Texas
■ CIO: Clif Triplett
■ NUMBER OF IT EMPLOYEES:
500 (out of a total of 36,000
employees)
■ NUMBER OF PCs AND
LAPTOPS: 28,000
■ REVENUE (2009): $9.7 billion
■ OPERATING INCOME AFTER
TAXES (2009): $421 million
■ OPERATIONS: 90 countries
■ HISTORY: Result of 1987 merger of
Baker International, founded in 1907,
and Hughes Tool, formed in 1909.
DATA: Baker Hughes, 2010
To further encourage entrepreneurship,
and to foster a variety of viewpoints and
expertise, Triplett has hired several of his
staff from outside the oil industry. One
of his IT executives previously worked in
food services. Another worked for a copier
manufacturer. Still others came from the
automobile and telecom industries.
Triplett himself has a diverse back-
ground. Prior to joining Baker Hughes, he
worked in several other industries, including
autos, tractors, electric utilities, telecom and
aerospace. Triplett was also deeply involved
with the move of a regulated utility into the
market for the public sale of telecommu-
nications services. In another position, he
ran a global services business for a telecom
company; there, he was responsible for both
establishing a market identity and growing
revenue. Triplett has also been co-chairman
of the board for a startup in India.
Of course, as anyone with experience
starting or running a business knows, entre-
preneurship involves risk. And Triplett says
he’s “big on being willing to take risks.”
Major projects at Baker Hughes can cost as
much as $50 million to $100 million; such
offerings would require the sign-on from
not only IT, but also Baker Hughes business
departments. Although smaller risks, such
as an investment of $20,000 to $50,000,
Triplett can likely do on his own. “It’s very
important to encourage employees and to
reward them for exploring new options.”
To keep “exploring new options,” Triplett
has ensured that innovation is pursued
aggressively and systematically. He looks
for innovation in three ways.
The first he calls “managed innovation.”
When someone has an idea, it is registered
with the chief architect’s office, which then
publishes a notice to everyone in the IT
department. Anyone interested in pursuing
the idea is welcome to join the project’s team.
The department, in turn, works to support
and exploit innovative ideas that come from
such managed innovation. “We often get a
spark of an idea that turns into a much big-
ger idea through this process,” Triplett says.
The second innovation strategy is called
“planned innovation.” For example, when
someone says, “I need to solve this prob-
lem,” Triplett will convene a diverse group
of people to brainstorm solutions. The team
members will ideally represent IT, business
groups and geographic divisions. “That
usually develops into three or four fantastic
ideas that we can build on,” Triplett says.
Triplett’s third approach to innovation
is called an “innovation workout.” Here, a
chief technology officer or other executive
from an outside company is invited to Baker
Hughes to discuss a topic of mutual interest.
“We’ll talk about what we’re doing in that
area, and they’ll talk about what they’re
doing,” Triplett says. “We typically come
up with six to 10 great ideas.”
Such a systematic approach to innova-
tion is essential to the entrepreneurial IT at
Baker Hughes, says Triplett. He warns, “If a
deliberate approach to innovation isn’t part
of your culture, you will be challenged to
become entrepreneurial.”
Also, Triplett says, the culture created by
an entrepreneurial approach provides IT
with substantive benefits. “We in IT used to
be order takers, where we would sit and wait
for someone to ask us to build something,”
he says. “Now, we are bringing the ideas to
the table, and we are taking far more of a
leadership role. Our aim is to work ‘faster
than the speed of business,’ because we do
not want the business to be waiting for IT.”
He continues: “All of which is quite dif-
ferent than [it was] before. It’s building a
much stronger relationship with our busi-
ness partners.” ■
ALAN S. HOROWITZ is a San Mateo, Calif.-
based freelance business and technology writer.
)'('›SMART ENTERPRISE 25
 A
ommon
Cink
L DHL Supply Chain, with help from virtualization
and strong ties to the business, is changing the way IT works.
| By Karen J. Bannan

E
xcellence, simply delivered. Those are the
words Deutsche Post DHL lives by. The
company, which manages and transports
letters, goods and information, is always
looking for an edge. To get that edge, DHL
is breaking down the walls — almost literally —
between IT and the business units.
In fact, several DHL departments count IT staff-
ers as their direct colleagues and work with them
on a day-to-day basis to help set business policy
and strategy. Thanks to this close alignment, DHL’s
business executives don’t necessarily view IT staff as
part of IT. Instead, they see these staffers as part of
business operations. This has resulted in innovation
as well as a shift in thinking: Business people see
IT people not as a department that installs servers
and software, but as colleagues who just happen to
have IT as a background.
Nowhere is this more apparent than in DHL’s Sup-
ply Chain Division, which offers “contract logistics”
— services and supporting systems that other com-
panies use to source materials, build products and

26 SMARTENTERPRISEMAG.COM PHOTOGRAPH: COURTESY OF DHL

Case Study DHL
deliver those products to customers. The
Supply Chain Division is one of four internal
divisions at DHL. The other three are Mail,
which handles mail and parcels in Germany;
Express, which transports time-sensitive
documents and packages worldwide; and
Global Forwarding and Freight, which
handles large freight and cargo deliveries
via air or ocean.
“Divisional IT will attend the customer
meetings and the solutions design sessions,
and form part of the value proposition to the
customers,” says Martin Cox, regional CIO
of the Supply Chain Division, who oversees
IT for DHL Supply Chain in the U.K., Ireland,
France, Eastern Europe, the Middle East
and Africa. “They are an integrated part of
that business team.”
For example, IT at DHL recently col-
laborated with business-unit colleagues
and customers to uncover cost savings
in the supply chain process and identify
opportunities to improve profitability. By
focusing on technology and business at
the same time, IT has also changed how it
is perceived.
That’s something any CIO can implement
in his or her own company, according to CIO
Cox. “Ninety percent of our IT is focused on
supporting our customers’ supply chain,” he
says. “DHL Supply Chain’s value proposition
is to not only operate a customer supply
chain, but also implement and execute the
IT systems needed to make that happen
effectively, efficiently and consistently.”
At least one industry expert thinks DHL’s
approach could be a model for all IT shops.
LEARNING ON THE JOB
A well-rounded IT person needs to know
servers and software, but these days
there’s more to the job. IT professionals
must also speak the language of business.
“It’s why some financial institutions
are getting business and IT analysts to
work together,” says Dennis Drogseth,
VP of research firm Enterprise Manage-
ment Associates. “When everyone can
connect and understand each other, real
work can get done.”
To help IT people at DHL Supply Chain
speak business-ese, Martin Cox, regional
CIO in the company’s Supply Chain
Division, plans to launch an educational
program called IT Business School late
this year. The 18-month course of study,
28 SMARTENTERPRISEMAG.COM
“Divisional IT will
attend the customer
meetings and
solutions design
sessions, and form
part of the value
proposition to the
customers.”
—Martin Cox
Regional CIO | DHL Supply Chain
“They are using a creative approach to break
down the business-to-IT barrier, and that is
right in the vanguard of where IT needs to
go,” says Dennis Drogseth, VP of technol-
ogy research firm Enterprise Management
Associates (EMA). “It’s a brilliant approach.
They are part of the evolution of IT from
being a service provider to being a true
service broker.”
Measuring Success
While most of the IT staff under Cox’s leader-
ship have been formally trained in IT, many
have also come from business or operational
backgrounds, and acquired their IT com-
petency later. What’s more, a significant
number of IT staff are trained in project
management, and many have been certi-
fied by the Project Management Institute,
conducted in classrooms and online and
practiced on the job, will cover business
issues such as how IT can help the
business sell its offerings. “How do you
articulate the value that our IT products
can bring to our customer as part of our
broader supply chain service offering? The
course will include, among other things,
innovation, IT commercialization and value
proposition as well as business and IT risk
management,” Cox says. “By educat-
ing my IT force to help the business use
IT more effectively, I’m seeking to drive
increased efficiency for the business.”
Cox’s IT management team at DHL
Supply Chain will be the program’s first
students. In fact, many of them are
an international professional association.
When they talk to the business, they are
essentially creating a common thread. “The
language they use is business language,”
Cox says. “They won’t be talking technology.
They will be talking instead about process,
leveraging IT, and the implications of using
technology and information to optimize
those processes to reduce the metrics of
the business.”
This helps enormously, says Cox, when
it comes to one of the biggest problems IT
departments typically face: funding. The
business side doesn’t always see the ben-
efit in spending money on a project that
doesn’t directly affect company revenue.
DHL Supply Chain’s IT team doesn’t see this
as a major issue because they are able to
communicate the soft benefits. In addition,
actually helping to create the program’s
curriculum and modules.
Researcher Drogseth says the DHL
program makes sense. “It makes the
role of IT more important; it does so by
humanizing IT,” he says. “By giving
IT more business knowledge, they’re
handing [it] the tools to produce real
cultural change.”
Perhaps best of all, the IT Business
PHOTOGRAPH: COURTESY OF DHL
School shouldn’t cost DHL a single dime.
“I’ve promised the board that I will show
them how we’ve increased revenue from
external customers and recouped our
investment within 12 months,” Cox says.
That’s an investment the business can
understand. – K.J.B.
the department has put policies into place
that make it easier to get approvals.
Any costs associated with services — the
staff hours and software that might go into
building a new application, for example —
are billed directly back to the business units.
This applies to customer-facing applications
and services as well as services that support
DHL’s internal processes. IT bills the busi-
ness departments directly; the business
units, in turn, commercialize that as part of
their broader Supply Chain service offering.
“Costs, ROI and broader IT service per-
formance therefore need to be tracked
tightly,’” says Coran Thompson, DHL’s VP
of IT Service Management (U.K., Ireland,
France, Eastern Europe, the Middle East
and Africa). “We do this in a variety of ways,
and balanced scorecards are one important
tool. The company has created a set of IT
best practices, and it measures everything
it does against these. DHL Supply Chain
also calculates how much IT elements truly
cost, based on a total cost of ownership
model and compares this to the benefits it
will deliver, either through cost savings or
revenue generation.
In addition, because Cox and his team,
like the rest of DHL Supply Chain IT staff-
ers, focus only on projects with a clear and
approved business case, IT ends up creating
value, delivering cost savings and revenue
for the company, he says.
This, says EMA’s Drogseth, is exactly
what IT will have to deliver to avoid becom-
ing completely commoditized. “It seems
way out there compared to where most
[IT shops] are, but on the other hand you
could stand back and say, ‘Why didn’t that
happen 10 years ago?’” he says. “If you look
at the future of IT, it makes IT more of a
services provider, generating support for
the business processes.”
Case in point: A recent project that
deploys telematic tracking on DHL Supply
Chain’s U.K. fleet of delivery trucks has
helped the company achieve improved
driver performance.
Going into the project, Cox had a good
idea of how much the hardware, software
and manpower would cost, and what the
benefit would be to the Supply Chain Divi-
sion — he knew they would be able to save
money on equipment as well as help the
company meet environmental targets that
were set at the group level. The program
itself would require a lot of staff. At the
end of shifts, managers would need to sit
down with their drivers to discuss driving
performance — everything from how hard
the drivers braked, how long they waited
in traffic with the engine running and how
hard they accelerated.
If a driver had been idling too long, he or
she, after the review, could be reminded to
turn the engine off when waiting in heavy
traffic. “We can show them how their driving
performance was across the route that they
took,” Cox explains. “We then benchmark this
against best in class performance for that
route. DHL Supply Chain is now assessing
the value of adding gyroscopic equipment
in order to measure how fast vehicles are
turning, to further optimize performance.”
Data from the telematics and subsequent
driver training have reduced wear and tear on
company vehicles, reduced fuel consump-
tion and carbon emissions, and increased
safety. “We’ve optimized driving performance
and delivery routes, resulting in a 4 percent
reduction in carbon dioxide across a fleet
of around 800 vehicles,” adds Cox. This has
also supported DHL’s Go Green agenda, a
program to improve the company’s 2007
carbon-efficiency levels by 10 percent two
years from now and 30 percent by 2020.
Back to Basics
For its part, the run side of DHL’s IT Services
has created an IT infrastructure that’s lean
while still directly affecting the bottom line.
Virtualization is an important component,
Thompson says, as is standardization wher-
ever and whenever possible. That’s because
most of DHL’s IT systems are transactional,
meaning they depend on real-time pro-
cessing, where minutes and seconds are
important to its customers’ productivity
and revenue generation.
Recently, DHL used virtualization in
a warehouse management solution that
serves some of DHL Supply Chain’s key
customers in the U.K. and Eastern Europe.
The project ultimately reduced the number
of physical servers from 44 to 12, accord-
ing to Thompson, and it is expected to
deliver savings in DHL’s annual costs and to
improve the quality of service. It was created
and executed using ITIL®, which helped the
process go more smoothly.
The company tapped ITIL as its frame-
work for service management processes to
ensure that it is deploying “practical and
repeatable common standards,” according
to Thompson. It is especially important to
DHL, she says, because of its size: With so
many different regions and maturity levels,
it would be nearly impossible for DHL to
Deutsche Post
DHL at a Glance
■ HEADQUARTERS: Bonn, Germany
■ FOUNDED: 1969
■ REVENUE (FISCAL 2009): 46
billion euros
■ NO. OF EMPLOYEES: 500,000
in more than 220 countries and
territories worldwide
■ NO. OF IT EMPLOYEES: 5,000+
■ BUSINESSES: Express (parcels);
Global Forwarding and Freight
(air, ocean and road); Global Mail
(customized mail and parcels); and
Supply Chain (contract logistics)
■ NO. OF COUNTRIES AND
TERRITORIES IN ITS NETWORK:
220+
DATA: DHL
bring new services to its users and custom-
ers without some level of standardization.
“The ITIL processes help us in ensuring
a level of consistency of service provision
and provide us with a common language
with which our customers and business are
also becoming increasingly familiar,” she
says. “The new [warehouse] environment
will provide a scalable environment that
will allow us to manage the business peaks
and troughs across the customers.” It also
supports the Go Green agenda by reducing
the power consumption, she says.
With fewer barriers to entry, the com-
pany can continue to grow with IT’s help.
That’s exactly what any CIO could wish for,
says Cox. “During the economic downturn
in 2009, DHL Supply Chain, like many
organizations, paid particular attention
to optimizing its efficiency,” he says. “This
has paid dividends, meaning now we’re
far leaner and better equipped to tackle
growth opportunities.” ■
KAREN J. BANNAN is the Executive Editor of
Smart Enterprise magazine.
ITIL® is a Registered Trade Mark, and a Reg-
istered Community Trade Mark of the Office
of Government Commerce, and is registered
in the U.S. Patent and Trademark Office.
)'('›SMART ENTERPRISE 29
Market Stats
Compiled by John Zipperer The latest facts, developments and stats for today’s CIOs.

IT companies 4.5 hours a year of

scheduled downtime:
are adding jobs That’s what cloud vendors
faster than they are cutting mean when they promise
them, reports outplacement 99.95 percent uptime,
firm Challenger, Gray & points out cloud services
Christmas. IT jobs were provider Cumulux. The
4 million strong in the second takeaway for CIOs:
quarter, a 5 percent increase Know your service
over the same quarter last level agreement's
year, according to the U.S. real-time
Bureau of Labor Statistics. By 2020, most people equivalent.
Employment at IT companies will work with cloud-
is back to pre-recession based applications, say
(pre-2008) levels. technology experts surveyed by Pew
Research and Elon University. While

57
this won’t be the end of the desktop
PC, the respondents predict that
desktop computers will lead a hybrid

240
life, serving up both local and cloud-
based applications and services.

million enterprise business The State of California’s

customers will leverage cloud data center just got a percent of those using
computing services via mobile little roomier. Its CIO is using SaaS-based security
devices by 2015, says ABI only one-third of the 436,000 technology expect to use
Research — the same year square feet of available data center even more of it next year,
the enterprise mobile cloud space, according to O’Reilly Radar. according to Enterprise
computing market will hit The reason for the extra space: Management Associates
$5.2 billion due to continuing aggressive use of server and storage (EMA). IT execs are looking
expansion of cloud-based virtualization due to the state’s to offload some of their
IT services, and more mandate to reduce data center space growing security concerns
business customers by 50 percent by July 2011 and and costs by adopting
using cellular connected reduce energy use from IT by 30 a security-as-a-service
devices, says ABI. percent by July 2012. approach, EMA says.

SOURCES: Clockwise from top: [1] “IT companies...”: ibtimes.com [2] “By 2020...”: pewinternet.org [3] “4.5 hours...”: cumulux.com [4] “57 percent...”:
enterprisemanagement.com [5] “The State...”: radar.oreilly.com [6] “240 million...”: abiresearch.com

30 SMARTENTERPRISEMAG.COM IMAGES (LEFT TO RIGHT): THINKSTOCK; MICHAEL AUSTIN/THEISPOT.COM; THINKSTOCK

ENERGISE YOUR ENTERPRISE
At Easynet, before any mention of a network or hosting solution, we take
care to understand your business

This approach has seen Easynet bring new energy to blue chip Wherever your business wants to expand, you can rely on Easynet
enterprises in more than 50 countries since 1994. to provide global managed networks, hosting and value added
integration services, leaving you free to focus on core business.
Our global experience, local expertise and strong vertical sector
insight stems from working with a wide range of industries
including media and telecom, manufacturing, retail, professional
services, energy and the public sector.

GLOBAL MANAGED NETWORKS, HOSTING AND VALUE ADDED SERVICES

www.easynet.com | +44 (0)845 333 3500
 Smart Trends

The
Strategic
CIO
Simply staying the course is so 2010.
Looking ahead, smart IT leaders plan to invest
in innovative technologies and approaches.
| By Bob Violino

ILLUSTRATION: BRIAN STAUFFER/THEISPOT.COM

32 SMARTENTERPRISEMAG.COM
Y es, it’s official, according to recent research: Many IT executives
have seen their jobs transformed from reactive to proactive. As
a result, CIOs are starting to look at increasing investments in
areas such as virtualization, software as a service (SaaS), unified
communications and mobile applications to support their new
focus, according to the findings of a May 2010 research report led by
InformationWeek Analytics, in which more than 300 IT executives
were surveyed. Indeed, the study, “Return to Growth: 2010 Global
CIO Report,” makes it very clear that IT executives are taking on
more of a business focus.
Case in point: The most common response to a question about
how IT executives spend their time was “driving global technology
and process standards,” which was cited by 42 percent of the execu-
tives. (See “Going Global,” p. 34.) That’s up from just 27 percent
in a similar 2009 survey of CIOs conducted by InformationWeek
Analytics. Other common responses also reflect a more strategic
outlook. IT executives are spending time with the CEO or other
senior executives discussing a strategic agenda (37%), driving
initiatives to reduce spending on operations and maintenance in
favor of spending for new initiatives (34%), and getting educated
about emerging technologies, such as social media, programmable
Web apps and wireless broadband (28%).
“I spend most of my time in two areas: partnering with my
colleagues on the business side to develop a strategic IT agenda
that will help to drive [the] top and bottom line, [and] developing
and coaching my team to develop their strategic skills,” agrees
Greg Meyers, VP of IT at Biogen Idec, a biotechnology firm based
in Cambridge, Mass. “It’s the IT executive’s responsibility to help
shape an agenda that has IT showing up as a value-added partner
that is as interested in accomplishing the business objectives as
the business is,” Meyers says. “It’s his or her team’s responsibility
to execute on these initiatives and be the most well-informed
[people] on how to best to design these initiatives.”
Mitchel Davis, CIO at Bowdoin College in Brunswick, Maine, says
he’s thinking ahead by spending more time forging strong business
partnerships that support the college’s tactical efforts. “Most of my
initiatives are related to defining unique ways to enhance existing
services or create new ones by leveraging business partnerships
and finding common ground for success,” he says.
This business tenet requires Davis to come up with systems
or services ideas that business partners within the college will
see as unexploited opportunities. “Then [they] work with me to
build out a solution that the college can use,” he says.
Leveraging Data
Davis isn’t the only changemaker out there. In fact, nearly a third of
CIOs (29%) say that their main opportunity today is using customer
and business data to influence new products and services and
drive growth. That statistic was only 18 percent in the 2009 survey.
“IT has spent months or years building elaborate structures
to capture and aggregate data, and now CIOs are feeling pressure
to do something with this data,” says Patrick Gray, Founder and
President of the Prevoyance Group, a Charlotte, N.C., IT consulting
firm. “This is going to require a sophisticated analysis of a com-
pany’s products, markets and competitors, as well as analytical
capabilities, to produce something useful.”
Biogen Idec is taking advantage of its data resources, says its
CIO, to help the business and its customers. “[As a company] we
are inundated with data coming from clinical trials, and physi-
cians and [consumers using] our products,” Meyers says. “It’s our
goal to improve the treatment outcomes of our patients, and we
really try to harness all of the data we get to better understand
treatment algorithms, unmet needs of patients and to continue
to drive better clinical outcomes for [everyone we work with]. The
data gathered and analyzed ultimately could lead to innovative
new products that improve the lives of [our customers],” he says.
Pacific Gas & Electric (PG&E), a San Francisco-based utility,
is collecting much of the customer data it gathers, such as how
much energy they’re consuming and precisely when they’re con-
suming it, via new electronic “smart meters” in a bid to provide
better customer service, says Patricia Lawicki, Senior VP and CIO.
“We’re bringing back a lot of information we never had before,”
she explains. And much more of it since smart readers provide
constant updates on energy usage. Under the old data-collection
Better Business Processes
What are the primary ways your organization plans to
innovate in 2010?
Make business processes more efficient
48%
Introduce new IT-led products/services for our customers
36%
Lower IT costs/business costs
32%
Create a new business model/revenue stream for the company
28%
Get better business intelligence to more employees more quickly
20%
Improve customer service
18%
Enable deeper information sharing with customers, partners and suppliers
17%
Improve Web operations/customer experience
17%
Get better return on IT investments
15%
Engage customers in new ways
14%
Reduce carbon footprint and energy costs of IT environment
13%
Pursue new global opportunities
12%
Improve interaction with partners and suppliers
8%
Transform skill set of IT organization to emphasize collaboration
4%
0% 10 20 30 40 50
DATA: InformationWeek Analytics, “Return to Growth: 2010 Global CIO Report,”
survey of 333 U.S. IT executives, May 2010
Note: Multiple responses were allowed
)'('›SMART ENTERPRISE 33
methodology, meters were read only once a month by meter processes more efficient, cited by nearly half the respondents.
readers. By having more accurate and real-time information on The next most-common response was to introduce new IT-led
usage patterns, PG&E can better handle energy load balancing products and services for customers, which was cited by 36 percent
and provide energy more efficiently, Lawicki says. The company of respondents, up from just 18 percent in 2009.
can also more quickly diagnose problems and speed up repairs, Innovation will also come in the forms of creating new busi-
since more automated elements of the smart grid are incorporated. ness models and revenue streams (28%), getting better business
And the smart grid will make it easier for the utility to incorporate intelligence to more employees more quickly (20%), improving
intermittent renewable energy sources such as solar and wind. customer service (18%), sharing information more deeply with
Organizations have a variety of plans to innovate this year, customers, partners and suppliers (17%), and improving Web
according to the survey. At the top of the list: Make business operations/customer experience (17%).
“Two points leap out from these stats,” says Chris Murphy, an
editor at InformationWeek, who is also the author of the report.
Going Global “One, the share of IT teams focused on growth has shot up. More
than double the number are dialed into innovating with new IT-led
What are the primary areas on which you spend your time? products. That speaks to rising optimism.”
■ 2010 ■ 2009 The second point, Murphy says, is that most IT teams still aren’t
Driving global technology and process standards
focused on driving revenue. “IT teams are most comfortable driving
42% efficiency and cutting costs,” he says. “More IT leaders need to dig
27% deep to find ways that their teams can help directly drive revenue.”
Spending time with my CEO/senior executives, Overall, research shows that company culture is important to
focusing on a strategic agenda in these meetings innovation. Most IT executives surveyed say the culture of their IT
37% organization is consistent with that of the company overall. About
31% one-third say both IT and the company culture are generally aggres-
Measuring IT processes, output, performance sive in strategy and execution, and roughly the same percentage
35% say both are generally conservative in strategy and execution. And
41% some forward-thinking IT departments are even ahead of the busi-
Driving initiative to reduce spending on operations and maintenance ness: 21 percent of organizations say their IT department is more
in favor of spending for new initiatives
aggressive than the rest of the company, while only 12 percent say
34%
35% non-IT departments are more aggressive than IT.
Biogen Idec is innovating by tapping outside resources. For
Educating myself about the next wave of technologies
(e.g., social media, programmable Web, wireless broadband) instance, one of the IT department’s near-term focuses is to better
28% integrate third-party logistics providers and contract manufacturers
34% into the IT infrastructure, according to Biogen Idec’s Meyers. “In
Managing and planning global IT budget and procurement the healthcare space, there is tremendous fragmentation of data
20% exchange standards, which makes sharing forecasts, inventory
28% positions and sales data difficult. We believe there is an opportunity
Negotiating with vendors and service providers to develop a catalog of IT services which can be built into contracts
19% with third parties that make integration easier and collaborative
25% operations much more efficient.” By having better integration,
Driving global business or sourcing opportunities, global supply chains Biogen Idec hopes to affect revenue, too.
or trading networks
Pacific Coast Building Products, a Rancho Cordova, Calif.,
14%
11%
provider of manufacturing and contracting products, is enabling
innovation by working to get business intelligence (BI) data to
Meeting with external customers
employees more quickly.
14%
21% The main goal is to enable people to do their jobs more effec-
tively. “What we’re doing is making the people we have more
Developing key potential successors and team members
13% effective and business processes smarter so when the economy
14% comes back, we’re ready to go,” says Mike O’Dell, CIO.
Spending time with my CFO discussing long- and short-term financial issues
Other IT efforts at Pacific Coast involve using BI, data warehous-
8% ing and analytical systems to improve inventory management
9% and customer service, which can, in turn, affect revenue and cash
Recruiting IT talent flow. The tools, which examine historical sales data and apply
8% algorithms, allow the company’s distribution arm to calculate
6% demand and set inventory levels to meet customer needs based
on real data.
0% 10 20 30 40 50
Innovations require a strong IT support web, a factor some
DATA: InformationWeek Analytics, “Return to Growth: 2010 Global CIO Report,” CIOs say is sometimes lacking, according to the survey. Executives
survey of U.S. IT executives, May 2010
SURVEY BASE: 333 in May 2010; 600 in April 2009 report not having enough IT people or having a staff without the
Note: Multiple responses were allowed right IT skills.

34 SMARTENTERPRISEMAG.COM
 “In spite of the unemployment numbers, finding the right people
to fit our needs has been a big problem,” concurs O’Dell of Pacific
Every Customer a King
Coast Building Products. “Part of it is that we’re picky; we want In your opinion, what is the main opportunity for CIOs today?
someone who fits the culture and will be here for a while. But
as new technology becomes available, finding someone who ■ 2010 ■ 2009

knows it is tough, too.” Use customer/business data to influence new products and
services and drive growth
Hiring, in fact, is still somewhat sluggish. Only about one in
29%
10 organizations is actively looking to staff up across many areas
18%
of IT, while about one-third are actively looking to hire for very
Drive companywide process innovation
specialized technology or business skills. At another third of the
24%
organizations, hiring of permanent IT staff is frozen. The good
25%
news for IT professionals is that very few organizations say they’re
Cut business and IT costs
more likely to lay off than hire, which means a talented IT person 12%
is likely to have some level of job security. 19%
Gray of Prevoyance Group isn’t surprised by the survey find- Drive global standards and global business opportunities
ings related to staffing. “There is not a business unit out there 11%
that couldn’t use more money and talented people, and prefer [to 6%
have] less work on its shoulders,” he says. “To meet this challenge, Increase employee productivity via new collaboration tools
IT could do a better job of ‘recycling’ current infrastructure and 10%
systems, effectively extending them or their data to other areas of 12%
the organization to meet other internal needs.” Lead company’s sales and growth efforts on the Web specifically
IT should refocus its efforts on benefiting the company’s cus- 6%
tomers and seeking to make noninfrastructure decisions from that 6%
perspective, too, Gray says. “This allows IT to provide some push- Move the company closer to its customers via Web 2.0 and other technologies
back on requests that don’t serve the paying customer,” he says. 4%
Lawicki says it’s important for IT to understand the priorities 6%
of the organization and to plan and implement projects based Free up cash for ongoing operations
on that. PG&E has a governance council that regularly looks at 3%
IT initiatives within a portfolio and determines how to prioritize 7%
them based on budgets and the needs of the company, she says. Other
One of Biogen Idec’s biggest challenges is getting its staff to 1%
think of IT as a solution provider and not a technology provider. “A 1%
solution requires a clearly defined problem statement, a rational 0% 10 20 30 40 50
analysis of root causes and a clear set of process changes that may DATA: InformationWeek Analytics, “Return to Growth: 2010 Global CIO Report,”
or may not require software,” Meyers says. survey of U.S. IT executives, May 2010
SURVEY BASE: 333 in May 2010; 600 in April 2009
No matter what companies like Biogen Idec decide to take on, it
will most likely involve server virtualization, according to the report.
Nearly nine out of 10 (87%) companies have already increased server growth potential. For example, only 23 percent of companies have
virtualization or plan to do so over the next year to 24 months. a major implementation of unified communications (UC) in place,
Other common technology implementations involve improving but another 28 percent plan to implement UC within the next 24
information security (deployed or planned by 84%), improving col- months. Likewise, only 17 percent are using SaaS, but 25 percent
laboration among employees (83%), upgrading desktop hardware plan a major deployment with the next 24 months, and only 15
or software (82%) and expanding business intelligence (81%). percent have put applications on mobile devices, but 26 percent
And it’s not just existing technologies that are driving innovation. plan to do this within 24 months.
Other newer technologies and emerging IT delivery models show “Look out for the growth of mobile apps,” Murphy says. We’re
not just talking customer-facing iPhone apps. CIOs are feeling the
pressure to give employees a lot more mobile applications. One
Up, Up and Away big pressure CIOs are feeling is to allow employees to access their
21% work e-mail from their personal devices. It’s particularly true from
How will your organization’s 2010 14% young people in the workforce, people who might not qualify for
IT spending compare with your IT a company phone but sure as heck own their own smartphone.”
6%
spending in 2009? 15% Biogen Idec is in various stages of implementing all these newer
8% technologies. “UC offers a really great usability benefit, but it makes
■ Up more than 10% ■ Down less than 5% the most sense to pursue this when you are end-of-life [with] an
■ Up 5% to 10% ■ Down 5% to 10% 9%
27% old set of hardware,” Meyers says. “SaaS has a lot of potential, but
■ Up less than 5% ■ Down more than 10% there are still only a handful of vendors who truly do this well. As
■ Flat for mobile, we have gotten a tremendous amount of interest
DATA: InformationWeek Analytics, “Return to Growth: 2010 Global CIO Report,” regarding iPad use for executives, and we continue to figure out
survey of 333 U.S. IT executives, May 2010 how mobile plays a role in managing a field force.”

)'('›SMART ENTERPRISE 35
Recipe for Growth
How would you characterize your organization’s IT plans
this year, in terms of projects intended to drive or support
revenue growth?
4%
■ INVESTING; rising number
of growth-oriented projects
8% compared with a year ago
■ STEADY STATE; the same number
of growth-oriented projects
compared with a year ago
50%
38% ■ CONTRACTING; declining number
of growth-oriented projects
compared with a year ago
■ FROZEN; virtually no growth-
oriented projects in the works
DATA: InformationWeek Analytics, “Return to Growth: 2010 Global CIO Report,”
survey of U.S. IT executives, May 2010
SURVEY BASE: 228 respondents who predict their organizations’ revenue will
increase in 2010
Pacific Coast has UC in place for 70 percent of its operations,
O’Dell says. The exception: a few small lumberyards where it
doesn’t make sense to use the technology. Among the benefits it
affords is the ability to easily locate co-workers, cost reductions
and less network downtime.
At PG&E, the deployment of mobile technology into the field is
a big priority. For example, the company is equipping all service
vehicles with new laptops so technicians can better serve custom-
ers by having easier access to account information. The utility
also is planning to leverage mobile devices used by customers,
for instance by texting or e-mailing updates about outages or
power restoration.
For a moderate number of organizations, it appears there will be
increased budget for these and other initiatives. Only about one-
quarter (27%) of the executives surveyed say IT spending will be flat
this year compared with 2009. But half of all the executives say they
expect increases in spending, while only 23 percent expect decreases.
Fourteen percent say IT spending will go up by more than 10
percent this year, compared with 2009, while another 21 percent
say budgets will be up between 5 and 10 percent. Overall, half (50%)
say their budgets are on the upswing. That doesn’t mean the effects
of the tail end of the recession aren’t still being felt by IT executives.
While 25 percent of executives say concerns about the economy
have not affected their IT budget or spending plans, the rest (75%)
— including those who are seeing budget increases — say there
has been some impact, such as having to cut specific projects or
not increase spending on IT as much as they had planned. Many
companies have had to be more discerning about how they allocate
their technology budgets and add staff, for example.
“Our industry is not heavily correlated to the economy, so we
have not seen major changes in budgets,” Meyers says. “That said,
we are definitely [making more careful choices] about what new
head count to create, and [we] continue to strive to bring down
the costs of operations so we can reinvest in projects.”
Gray says IT has been somewhat lucky in that a great deal of
fat was cut in the wake of a crisis in the early 2000s, and IT leaders
36 SMARTENTERPRISEMAG.COM
became quite effective at cutting costs through the use of tech-
nology. “Usually CIOs who are not being asked to cut budgets are
the ones that effectively demonstrate IT’s value, and can reliably
predict a return on a corporate investment in IT. [Therefore], fund-
ing questions become more about which investment to choose
than, ‘How can we cut another three percent from the IT budget?’”
During challenging times, the best way to save money is by
streamlining operations and redeploying existing staff to meet
additional business requirements, Davis says. “This will keep
your business process lean and provide growth without additional
staffing.” It also prepares the IT department for major software
upgrades when the funding for those projects is released, he says.
As for Bowdoin’s IT spending outlook, Davis says, “I think if all goes
reasonably well over this next year, larger projects will be approved.”
For many companies, growth plans for 2010 call for increased
investment in new application development and infrastructure
upgrades (servers, PCs, etc.). Only 12 percent say they plan to scale
back application development spending, and just nine percent
will invest less money in IT infrastructure this year.
Half of the executives expecting an increase in company revenue
for 2010 say their organizations are increasing the number of IT
projects intended to drive or support revenue growth, compared with
a year ago. A mere 12 percent say their organizations are decreas-
ing the number of growth-oriented IT projects or have virtually no
growth-oriented projects in the works.
The way IT goes about contributing to business and revenue
growth is shifting somewhat from past growth periods, according to
the survey. For example, many organizations (38%) plan to use more
contract IT talent, rather than hire full-time employees. A number of
companies also plan to centralize their IT resources as they expand
(35%), use more SaaS (31%), and use more on-demand infrastructure
offerings such as cloud-based CPUs and storage (29%).
“SaaS is a clear growth trend,” Murphy says. “But beyond that, a
lot of the cloud work is pilot testing; there’s lots of tire-kicking.” Even
those cloud services that CIOs say they will be utilizing more frequently,
such as cloud-based CPU and storage, won’t see full capitalization
for another year or so, he says.
Clearly there’s lots of change in store, as economic conditions
continue to improve, and IT executives help lead their organizations
into new opportunities for growth. ■
BOB VIOLINO is a freelance writer in Massapequa Park, N.Y. He covers
a variety of business and technology topics.
About the Survey
For its study, the “Return to Growth: 2010 Global CIO Report,”
InformationWeek Analytics surveyed 333 U.S.-based senior IT
executives. The study was conducted online, and respondents
were recruited through an e-mail invitation with an embedded
link to the survey. All of the survey respondents work at orga-
nizations with customers, suppliers and/or business operations
in more than one country. Job titles of the survey respondents
include CIO, CTO, Executive VP and Senior VP of IT. Companies
represented by the respondents include both large enterprises
and SMBs in industries that include banking, manufacturing,
consulting and business services, and healthcare.
quit stalling
Virtual stall.

It happens when virtualization deployments grow fast across an

enterprise or across silos. Eventually, you run into scalability issues.
It gets harder and harder to map the application to the infrastructure.
Visibility diminishes. Process issues multiply.

CA Technologies can help you break through virtual stall and realize
the value of your virtualization investment. We offer virtualization
management solutions that can help you prioritize applications and
measure both physical and virtual performance.

To overcome virtual stall and accelerate real results, visit ca.com.

you can

Copyright ©2010 CA. All rights reserved.

 Smart Practices
The Greater Data Center
Cloud computing,
virtualization and a renewed
interest in the mainframe
are changing the way
data centers are run. The
changes couldn’t come at
a better time.
| By John W. Verity
38 SMARTENTERPRISEMAG.COM
A sk CIOs for a data center wish list,
and many will answer, “greater
speed and agility in both provision-
ing and managing the IT infrastructure.”
To achieve those goals, CIOs have looked
to standardization and automation as ways
to lower costs, improve predictability and
ease the delivery of business services. But
today, after years of reaping the benefits of
open systems, commodity hardware and
the Web, enterprises face an even greater
variety of IT infrastructures to choose from
and administer. These include physical and
virtualized servers, computing services
hosted in private and public computing
clouds, virtual machines running inside
mainframes, and everything from complete
IT stacks to application software to full-
blown business processes delivered in the
form of services.
“We’re in the middle of a major transi-
tion,” says Albert Lee, Lead Analyst in the
System Management Practice at Enterprise
Management Associates, an IT research
firm in Boulder, Colo. “Infrastructure is
becoming much more dynamic, and there
is so much more complexity being added
to what already existed in the physical data
center. CIOs are wondering, ‘How do we
make all this work?’”
Fortunately, the robust IT management
tool kit that enterprises have relied on is
now rapidly being adapted to meet the
demands of virtualized and cloud-based
infrastructures. For example, there are tools
available today that ensure service levels
across practically any combination of physi-
cal, virtual and cloud-based environments.
PHOTOGRAPH: THINKSTOCK
Yet there’s no denying that with so many
options becoming available, IT’s corporate
function is being forced to change, with
consequences for everyone. In the past, the
IT department’s main job was to acquire,
install, program and operate computers for
the sake of the enterprise’s lines of business.
Today, with IT resources, infrastructure,
applications and even business processes
available as services, IT is being asked to
act as a broker of IT services, regardless
of whether those services were sourced
internally or externally.
“The role of IT is shifting from the [depart-
ment] that has to make sure the equipment
and systems are running well and if not,
getting them fixed, to mainly one of figuring
out where to get the best IT services for a
given business requirement,” says Jay Fry,
VP of Marketing, Cloud Customer Solutions
Unit, at CA Technologies. “It’s more a mat-
ter of managing this new supply chain that
cloud computing is making possible than
of day-to-day technology management.”
Just in Time
Already, processes originally developed for
making real world, physical supply chains
operate more efficiently are finding uses in
the increasingly services-oriented data cen-
ter. Just as factories strive to rationalize the
raw materials flowing into their assembly
lines, data centers are gaining efficiencies
by standardizing their server assets. For
example, an IT shop that lists just a few
preselected server configurations in its
IT service catalog can essentially shrink
its bill of materials, prepare for expanded
automation of provisioning and other
management processes, and even hand
off provisioning to business managers,
who can do it themselves.
Similarly, just-in-time delivery of IT
services is proving to be a big cost saver.
When, for example, a movie production
company is editing large chunks of video,
it can now rent the necessary power in a
public cloud in a matter of minutes from
providers that include Amazon, Microsoft
and Rackspace. “Similar to manufacturing
supply chains, we’re seeing a move from
push to pull,” says Roger Pilc, General
Manager, Virtualization and Automation,
Customer Solution Unit at CA Technolo-
gies. “The economies of standardization
and just-in-time delivery techniques are
driving a lot of costs out of the IT system.”
Pilc notes that the IT department can
maintain oversight of cloudbursting activity
with tools, which can now provision public
cloud capacity seamlessly alongside on-
premises resources — a so-called hybrid
infrastructure model.
It’s still early days in the public cloud,
and Pilc advises IT executives to spend time
evaluating the widening variety of cloud Worldwide Server Revenue
offerings hitting the market. “There will
2009
be different provisioning characteristics
$46.2 billion
for each kind of service,” Pilc notes. Some
providers are specializing in raw computing 2010
power at cut-rate prices, for instance, while $49.3 billion
others emphasize security and compliance 2011
or high levels of manageability. $50.5 billion
Troubadour Ltd. is one of several pro- 2012
viders offering infrastructure as a service. $51.3 billion
Its customers supply their own operating DATA: IDC, “Worldwide and Regional Server
system and applications, and then run Forecast,” April 2010
them in a cloud of virtualized servers that Note: 2010, 2011 and 2012 figures are forecasts
Troubadour oversees on their behalf. Some
customers use this “virtual data center” applications. They also provide small and
service simply to develop and test soft- midsize businesses with many of the advan-
ware and websites. But Troubadour sees tages of enterprise-class monitoring tools.
great potential among local and state In fact, Nimsoft is proving itself useful
governments, school districts, and small in even the most demanding cloud-based
and midsize organizations that are under environments. One Troubadour customer,
great pressure to cut costs and limit hiring. a media company, uses the Nimsoft tool to
“We’re offering a high-touch service,” says monitor its servers as the system streams
Jay Kirby, Co-Founder and Executive VP of movies over the Internet to thousands of
Sales and Marketing at Troubadour. customers. Whenever the solution detects
In Troubadour’s case, that means that the servers are under stress, say, on a
enabling customers to not only provision particularly busy Saturday evening, the
complete technology stacks by themselves, software triggers a request for a burst of
but also monitor their applications’ perfor- added streaming capacity from banks of
mance as easily and thoroughly as if their servers elsewhere in the cloud. “If it lives in
software were running in-house. To do so, IT,” says Chris O’Connell, Director of Prod-
Troubadour relies on Nimsoft solutions uct Management at the Nimsoft subsidiary
from CA Technologies, which provide a of CA Technologies, “we can monitor it.”
Web-based, customizable, graphical and That capability is making the solution
real-time dashboard view into the work- indispensable among managed ser-
ings of key infrastructure elements and vice providers. Many local and regional
Options Galore
Where will you put your company’s resources? For a growing number of CIOs,
the answer is “all of the above.” Here are some top infrastructure options and
the benefits of each.
OPTIONS BENEFITS
VIRTUALIZED Increased server utilization; greater agility; lower capital expenses; business
SERVERS continuity
PRIVATE CLOUD Fast provisioning; self-service options; resource pooling; tight control
PUBLIC CLOUD Fast, easy provisioning for one-off projects; lower capital and operating
OFFERINGS expenses; pretested stack; practically unlimited capacity; zero maintenance;
global access
MAINFRAME High reliability, availability and serviceability (RAS); proven virtualization
technology; energy efficiency; Linux-compatible; compact
INFRASTRUCTURE Lower capital expenditures, no data center required; pretested technology
stack; familiar technology
AS A SERVICE
SOFTWARE Zero maintenance costs; low capital expenditures; pay-as-you-go billing; no
AS A SERVICE client software required; universal Web access
SOURCE: Smart Enterprise, 2010
)'('›SMART ENTERPRISE 39
 CLOUD value-added resellers are also scrambling
to host their small and mid-tier clients’
COMPUTING BY applications. “They’ve got the customers
and the relationships,” O’Connell says. “By
THE NUMBERS using computers in the cloud, they can
run clients’ apps better than the clients
Server hardware spending for can themselves.”
public cloud computing:
Buddy, Can You Paradigm?
2014 2009
$582 million While cloudbursting and one-off proj-
ects make the public cloud appealing,
for many companies, concerns about
$718 million security and regulatory compliance can
be deal breakers. But as IT companies
solve those problems, and as the cloud’s
economics prove irresistible, more core
business applications will appear in the
Server hardware spending for public cloud, predicts Joseph Reger, CTO
private cloud computing: at Fujitsu Technology Solutions in Munich.
Like it or not, he says, the IT industry and
2014 2009
$2.6 million its customers are in for a paradigm change.
“And everybody needs to be thinking about
it,” Reger says.
$5.7 million After security, another CIO concern
is potential lock-in: Will public cloud
providers leverage their control of cer-
tain interfaces so it becomes difficult for
customers to migrate to another cloud
Percentage of IT public cloud
offering? To answer, a group of companies
services revenues represented by
— including Intel, AMD, Citrix, Rackspace
software as a service (SaaS):
and a variety of smaller firms and startups
2009
73% — recently launched an open source effort
to develop cloud-based computing and
storage services. Called OpenStack, the
project is building on a cloud-provisioning
code called Nebula, developed and donated
SaaS market revenues: by NASA. OpenStack’s members intend
2009
to build software for public cloud service
$13.1 billion providers and enterprises.
Private cloud technology is evolving rap-
SaaS market forecast: idly, too. Cisco Systems recently launched
2014
$40.5 billion a data center platform, Unified Computing
System (UCS), that streamlines the provi-
sioning and scaling of cloud infrastructures.
By integrating x86-architecture server
blades with 10-gigabit Ethernet intercon-
Cloud server hardware market nect switches in a common set of hardware,
opportunity: UCS reduces provisioning time and cost.
For example, when a new server chassis
2010
$3.8 billion is added to a UCS cloud, all the necessary
updates to Fibre Channel networking
or 600,000 units
zones and security settings are handled
automatically. It’s true plug and play.
2014
$6.4 billion This unified approach raises IT pro-
ductivity while lowering the total cost of
or 1.3 million units
ownership. “You can add and move chassis
DATA: IDC reports, 2010 without changing the switching and net-
Note: 2010 and 2014 figures are forecasts
work topology,” says Mark Balch, Product
Manager, Engineering, with Cisco’s UCS
40 SMARTENTERPRISEMAG.COM
team. “With fewer individual pieces to
manage, there’s less impact on the overall
IT environment. All policies are compat-
ible and scalable as you add new servers.”
With so many new options available, CIOs
might be forgiven for overlooking that tire-
less data-center workhorse, the mainframe.
But in some IT departments, at least, the
mainframe is enjoying a quiet renaissance.
Consider that in 2000, the world’s IBM
mainframes had an aggregate computing
power of around 3.8 million MIPS (millions
of instructions per second, a measure of
mainframe processing capacity). By 2009,
that worldwide figure had more than tripled
to 14 million MIPS. “Not bad for a ‘dead’
platform!” says Scott Fagen, a Distinguished
Engineer and Chief Architect for Mainframe
at CA Technologies.
Much of this increase is attributable
to Web-based e-commerce and banking,
Fagen notes. While Web merchants such
as Amazon.com and eBay rely on masses of
distributed commodity servers to dish out
Web content and process customer orders,
the resulting payment transactions still pass
through legions of mainframes operated by
credit card companies and banks.
Tried and True
Why? It all comes down to reliability, avail-
ability and serviceability (RAS), an IBM
formulation. Because a mainframe’s hard-
ware and software are so tightly integrated,
its RAS attributes remain unmatched by
other hardware platforms. Also, RAS today
extends to not only legacy mainframe oper-
ating systems, but also hundreds if not
thousands of virtualized Linux instances
per mainframe complex. “Resilience turns
out to be the mainframe’s best-kept secret,”
Fagen says.
Other factors are at work, too. Because
mainframes generally consume less
energy per unit of computing work, they’re
“greener” than commodity hardware. Main-
frames also pack more punch into a given
area of data-center floor space, and they
win hands-down in total cost of owner-
ship — especially when measured over
periods of three years or more, during
which commodity servers typically need
to be replaced.
Also, the CPU utilization rates of main-
frames are typically two to three times
higher than those of commodity servers,
even when the latter are heavily virtualized.
“On a mainframe, utilization easily gets
up to nearly 100 percent, while a standard
 “ This is the future. The
computer is ubiquitous but
invisible, delivering something
that’s vital but not considered
merely an IT service.”
—Joseph Reger | CTO | Fujitsu Technology Solutions
server is doing well if it hits 45 percent,” and decrypt requests and data moving from
Fagen explains. Because the utilization server to server. “There’s zero networking
rates are higher, fewer physical footprints overhead in mainframes,” says Fagen,
are needed which, in turn, require fewer “and no bandwidth issues, as there are in
system administrators for a given workload, distributed setups.”
another significant savings. Numbers like these, plus the mainframe’s
Finally, the virtualization technology 30-year head start in harnessing virtualiza-
available on IBM System z mainframes tion, are helping the hardware platform
allows many application server instances prevail even in the face of what Fagen calls a
to be tightly ganged together within a “scarcity of knowledge and expertise — and
single hardware footprint. This enables a tremendous cultural bias against these
application, transaction and database pro- machines.” In fact, many of the world’s
cessing to occur in the same box or another largest financial institutions and other
mainframe via a mainframe coupling link, corporations are now expanding their use
removing the need to repeatedly encrypt of mainframes significantly.
They may see even greater incentives
soon, thanks to IBM’s latest line of zEnter-
prise System mainframes. These systems
increase the maximum number of processor
cores, can slash price-per-MIPS by as much
as 20 percent, and can integrate processor
blades using Intel x86 and IBM’s own Power
architecture directly into a chassis tightly
coupled with a mainframe. According to
an IBM press release, this latter move is
designed to manage applications that run
across disparate server types. “This is a
big turn of the crank,” says Becky Alexan-
der, Mainframe Product Manager, Service
Strategy and Design at ACS, a Xerox com-
pany that provides hosted IT services. “The
zEnterprise should add to the momentum
in mainframe usage we’ve been seeing.”
It’s all part of a larger move in the data
center, one that helps CIOs gain maximum
visibility into their systems, no matter where
those systems may live. In today’s cloud-
connected environment, that gain should
be high on every CIO’s wish list. ■
JOHN W. VERITY writes about technology
from Santa Rosa, Calif.

THE SHRINKING DATA CENTER

This January, Facebook disclosed plans to build its own massive
data center in Oregon. In August, Twitter followed suit, aim-
ing for Salt Lake City. Look ahead 10 years, though, and such
announcements may be a distant memory. By then, all of the
world’s server power may be housed in as few as 200 data
centers, according to Joseph Reger, CTO at Fujitsu Technology
Solutions in Munich.
There are nearly 47 million servers in use today, each with
average utilization rate of less than 15 percent, and it’s not
uncommon for that number to fall well below 10 percent. This
underutilization makes for what Reger calls a dramatic overpro-
visioning in server power. “The current exponential growth rate
cannot continue,” he says.
And it won’t, says Reger, thanks to virtualization and the
accelerating industrialization of IT. Virtualization of servers has the
potential to bring utilization rates up to typical mainframe levels
— around 80 percent — which will greatly reduce the number of
physical boxes. Couple that statistic with the fact that the largest
data centers will each soon be able to run on the order of
PHOTOGRAPH: COURTESY OF FUJITSU
100 times more servers, for example, will lead to 10,000 times
greater complexity. The key, therefore, will be more intensive,
software-based automation to manage every aspect of what will
essentially be huge IT factories. “Once you control complexity
with software,” Reger says, “the rest plays to your advantage.”
What this means to today’s CIO — and what’s clearly evident
even this early in the rise of cloud computing — is that IT will
be available in myriad forms, “a multitude of delivery models,”
as Reger puts it, ranging from raw CPU to complete business
processes. “If a company thinks it gains value in running its own
servers, it can do that. Or, it may take services from a ‘factory’
running 500,000 shared servers. Many companies will say, ‘We
don’t want to touch it.’”
Fujitsu’s own cloud strategy ranges from offering infrastruc-
ture as a service to what the company calls content as a service,
a paradigm that delivers a mix of content and business processes
which sometimes originates within Fujitsu — but not always. In
Japan, for example, the company offers a service that provides
guidance for even the smallest rice farms, giving them insight into

magnitude, one million physical servers, with each one hosting
some 100 virtual machines, and it becomes clear: 200 data centers
could actually provide capacity equivalent to much more than the
existing 47 million underutilized servers out there today.
These surviving megadata centers will be of an enormous
complexity, of course, which presents its own technical chal-
lenges. Complexity roughly rises with the square of the number of
elements that potentially connect to and interact with each other;
the precise hour to begin harvesting crops. The service collects
data from meteorological satellites as well as from sensors on the
ground, and stores the aggregate data centrally, running analytic
algorithms against it. “This is more than a business process,”
Reger says. “This is problem-solving content.”
“This is the future,” he adds. “The computer is ubiquitous
but invisible, delivering something that’s vital but not considered
merely an IT service.” – J.W.V.

)'('›SMART ENTERPRISE 41
 Smart Business
Measuring
CLOUD
the
To measure the performance levels of IT service providers in the cloud, smart CIOs
are giving a traditional metric — key performance indicators — a fresh update.
| By Leon Erlanger
T he world of IT is evolving once again. CIOs, who were
the builders, managers and providers of in-house
technology, are today becoming managers of a new
IT supply chain. Included in these supply chains are
both internal IT resources and external cloud services that
can be sliced, diced and combined dynamically into efficient,
cost-effective business services.
But as CIOs increasingly rely on third-party IT providers in
the cloud, they’re also encountering new levels of complexity.
Because providers in the cloud in turn rely on their own supply
chain of cloud and communications partners, monitoring per-
formance and fixing problems can involve new levels of detail.
Consider, for example, a provider of software as a service
(SaaS) that counts global enterprises as its customers. When
complaints about lackluster performance levels arrived from
a small group of its European IT clients, the company found
the problem was due to one of its infrastructure providers,
which had an issue when one of its network providers ran into
problems updating a switch in Germany. The SaaS customers
with performance problems had been routed through that
switch by their communications providers. So who was at
fault? And how was the SaaS provider to resolve the issue?
Cases like this illustrate the hidden challenges of today’s
dynamic global supply chain. To be sure, virtualization
42 SMARTENTERPRISEMAG.COM
technology and cloud services provide IT with access to huge
pools of resources, lower up-front costs, and less effort and
delay than ever before. But when an IT service has an issue,
the cause may reside deep within a multilayered maze of
providers’ — and their providers’ — IT infrastructures. How
do CIOs monitor cloud providers to ensure that they are
fulfilling their contracts and meeting business goals?
One solution to this new challenge lies in IT’s past. When
all IT systems were still built and run on premises, CIOs
ensured top performance by using management solutions
that monitor application, network and other services. These
tools, in turn, employed business measurements — selected
by the user — known as key performance indicators (KPIs).
In IT, KPIs today include the average completion time for a
Web transaction, the percentage of support calls solved by
the first-line support staff, and the average response time
from a Web-based CRM service.
KPIs measure the specific performance aspects that indicate
most clearly whether an IT service is meeting the needs of the
PHOTOGRAPH: ISTOCK
business. In today’s new IT supply chain, a KPI that exceeds
or falls below a certain threshold may indicate that a service
is not performing as specified in the supplier’s contract.
But setting the right KPIs for monitoring a cloud environ-
ment is particularly challenging. Why? Three main reasons:
 First, a single business service provided by IT may combine
several IT services, both internal and external. To troubleshoot
Eyes on the Cloud
an issue, IT must first identify all the services in its supply chain, Monitoring tools and real-time alerts used for problem-
then determine which services might be causing the issue, and detection by cloud-based-services users
finally work with the service provider to identify the cause of the
Own management systems
problem and then fix it. Similarly, for each IT service in the supply
chain, IT will need to determine which KPIs most accurately mea- 57%
sure whether the service is meeting its contractual requirements.
Second, IT needs more than just performance from cloud service Proactive, real-time alerts from cloud providers

providers. Often, agility, flexibility, scalability, security and other 55%

factors matter, too. But how can CIOs craft indicators that reflect
these relatively intangible requirements? How, for example, do Internal user reports, service desk calls
CIOs measure business flexibility? 42%
Third, while IT has ready access to its own internal infrastructure
for monitoring tools and KPIs, when it comes to cloud services, IT External sources, including customers
may not enjoy this level of access. For example, most SaaS systems 35%
offer only limited access to the actual infrastructure running the
software. Also, to limit their liability, cloud service providers may Scheduled reports from cloud providers
chafe at being held accountable for some measures. Service uptime, 22%
sure. But response times? Maybe not, since those levels depend in
part on a third-party communications provider. 0% 10 20 30 40 50 60
Fortunately, service assurance technologies can help CIOs moni- DATA: Enterprise Management Associates, survey of 150 large (500+ employees)
tor their IT services, whether internal or in the cloud. These include companies worldwide, 2010
CA Application Performance Management, which keeps tabs on Note: Multiple replies were permitted

)'('›SMART ENTERPRISE 43

THREE STEPS TO CREATING
CLOUD-WORTHY KPIs
1
Start with a deep and detailed understanding of which
provider is responsible for which aspects of a specific IT
service. Understand responsibilities, roles and process
requirements. The goal: service providers who can work
as true partners.
2
To help your cloud providers understand what matters
to your business partners, arrange meetings of all
interested parties. For example, if you’re moving your
CRM to the cloud, then make sure your cloud provider
meets with your VP of sales.
Seek or create new measurements that accurately
3 reflect the needs of the business. This may require
metrics that are centered not on IT, but on the business.
For example: How long will it take to back up files? How
many steps are needed to add a new customer file? And
how much does it cost to fulfill an order? —L.E.
DATA: Smart Enterprise, 2010
individual transactions and users. The solution also provides insight
into any applications the customer may be running.
CA Infrastructure Management products provide deep network,
systems and database insight that domain experts require, and tie
into a real-time operations model to help illuminate the big picture
of business service analytics for service quality, health and risk.
“CA and others have put a tremendous amount of effort into
making sure enterprises have the tools to benefit fully from
the cloud,” says Adam Reeves, a Senior Product Manager at CA
Technologies. In addition, new frameworks are being developed
to help CIOs compare and contrast their internal IT resources
with those in the cloud. (See sidebar, “A Framework for Cloud
Comparisons,” p. 45.)
But even with solutions in hand, CIOs will need to do their
homework when setting cloud-worthy KPIs. One place to start,
industry experts say, is with a deep and detailed understanding
of who is responsible for which aspects of a specific IT service.
“You really need to understand responsibilities, roles and process
requirements,” says Dennis Drogseth, VP at Enterprise Manage-
ment Associates, an IT analyst and consulting firm. “You need
44 SMARTENTERPRISEMAG.COM
service providers who are willing to sit down with you as a partner,
and work with you and your users to understand the boundaries.”
When working with cloud providers in this way, CIOs should
explain what matters to them — and to their enterprise colleagues.
“If an enterprise is looking to move its CRM business capability to
the cloud, a representative of the cloud provider should meet with
the client’s VPs of sales, supply chain and IT,” says Claude Baudoin,
Principal Consultant at cébé IT and Knowledge Management, an
IT strategy and governance consulting firm. “IT will have input
on how the service will be integrated and how master data will be
handed off to the provider. The supply chain knows about contract
terms. But it is sales that knows the business requirements and
how quickly new customer records need to be available.”
CIOs also need to determine which cloud service is responsible
for what services, then seek measurements that accurately reflect
the needs of the business. For example, while IT might define a
metric for a backup service in terms of bandwidth, the user simply
wants to know how long his 20-megabyte backup will take. “IT
has its own set of metrics it feels comfortable with, but they may
have little to do with the end users of the service,” Baudoin says.
CIOs can get a better handle on business metrics by thinking
about application performance, specifically applications that
enable transactions. “IT’s products, for the most part, are appli-
cation services,” says analyst Drogseth. “Everything else is just a
means to that end.”
Another important KPI: cost per transaction. Is the business
getting its money’s worth? Is the business paying the same or
less than it would for those transactions if the system were run
in-house? Or, as Radu Sion, Assistant Professor of Computer Sci-
ence at Stony Brook University, says, “You may want to know that
a 10 microcent in-house transaction costs you only 1 microcent
with a cloud provider at the same [service level agreement] levels.”
The cost analysis must include not only the cloud provider
costs, but also the in-house costs of the infrastructure needed
to access that provider, adds Sion, who is also head of New York
State’s Cloud Computing Center.
Other KPIs may be specific to a business or IT function. An
organization monitoring a cloud provider’s technical support help
desk might want the provider to report its response times, number
of dropped calls, and first-line resolution times; or, the organiza-
PHOTOGRAPH: THINKSTOCK
tion might arrange to monitor it themselves. Security, meanwhile,
might want to monitor encryption performance, or even to arrange
a security audit or obtain backup log files to determine whether a
supplier is providing adequate disaster recovery.
By taking the business factors a step further, CIOs may even be able
to pack KPIs with real business impacts. “Once you start marrying
IT indicators with business indicators,” says The Management customers to monitor infrastructure details
Reeves of CA Technologies, “your KPIs can — they want to provide access only to their
start to identify things such as customer Disciplines that Matter software. But all that may soon change.
satisfaction or revenue cost incurred when Percentage of cloud adopters rating CA Technologies, for one, is working with
a component slows down a transaction.” as “important” or “very important” to enterprise cloud providers to develop ways
Another important aspect of KPIs is set- to either share that information or enable
ting thresholds. While IT sometimes thinks
managing cloud-based services: customers to monitor it.
these thresholds should be set at very high Performance and availability monitoring For now, when CIOs cannot gain access
performance levels or whatever the contract 88% to preferred component KPIs, they can
says, the key metric to consider — vague Incident and problem management often find an “efficient proxy KPI” that
as it may sound — is user satisfaction. 84% closely mimics that preferred component,
“The ultimate metrics are frustration and Change and configuration Kaminski adds. An example is the volume
achievement,” Drogseth says. Adds a capac- 83% of two-way network traffic between a CIO’s
ity planner for a large consumer products site and that of the service provider.
Capacity planning and optimization
company: “Given the choice between the 80%
Once a monitoring service is in place,
highest recorded value and a happy user, information should continue to flow both
SLA reporting
choose the happy user.” ways. Ideally, proactive monitoring at both
79%
When monitoring transactions, iden- ends, and the exchange of this data, can
tifying the highest-impact components Application dependency mapping catch performance drifts early and prevent
75%
may be difficult. When that’s the case, big problems before they happen, says Bau-
CIOs can graph IT indicators, such as CPU 0% 20 40 60 80 100 doin. He advocates the use of application
utilization and I/O, together with more program interfaces (APIs) and hooks into the
DATA: Enterprise Management Associates, survey of
business-oriented metrics such as trans- 150 large (500+ employees) companies worldwide, 2010 service provider’s management tools, where
action times. By charting these indicators Note: Multiple replies were permitted appropriate. This way, the client can query
over a period of weeks or months, CIOs the supplier’s quality reporting system.
can determine which IT indicators correlate most closely with CIOs need providers to supply quality statistics, and providers
the business metrics, then take appropriate actions. When one need CIOs to monitor performance and quality information from
of these indicators exceeds or falls below a threshold, it may be their end, and then share that information. “That’s the only way
time for more cloud resources. the two parties can agree on whether there is a real service-quality
To be sure, some components of transaction performance — issue — or whether a few less-trained users are causing most of
such as network latency, CPU utilization and disk I/O — may not the problems,” Baudoin says. ■
be readily accessible in the cloud. While traditional infrastructure
providers offer users full access to servers, storage and other sys- LEON ERLANGER is a freelance writer and consultant who specializes
tems they’ve paid for, SaaS providers will be less likely to allow in security, unified communications and storage.

COMING SOON: A FRAMEWORK FOR CLOUD COMPARISONS

If only there were standards, CIOs would
have an easier time evaluating and com-
paring IT services in the cloud with their
own on-premises services. That’s the goal
of the Cloud Service Measurement Index
Consortium (CSMIC).
Under the consortium’s auspices, repre-
sentatives from Carnegie Mellon University,
CA Technologies, Stony Brook University
and other business, academic and govern-
ment organizations are working to create
what they call the SMI Framework. When
done, this framework will provide CIOs with
a set of business-relevant key performance
indicators (KPIs). Armed with these stan-
dards, CIOs will have an easier time making
the cloud vs. do-it-yourself decision and
choosing a cloud provider.
CSMIC is an ambitious undertaking.
The consortium aims to develop standard
KPIs for everything from IT service quality
to agility, risk, security, capability and
cost. What’s more, it plans to conduct
ongoing benchmarking and then provide
a scoring system for services, based on
its own KPIs. The group also intends
to encourage CIOs to do the same and
publish their own results online, using a
CSMIC application programming interface
(API), on cloudcommons.com. Going fur-
ther, the consortium will also conduct user
satisfaction surveys and post the results.
When done, the framework will let
CIOs compare IT services using weightings
that tailor the scores to their own needs.
“If security is your main concern, you can
weight the results in its favor,” explains
Brian Hughes, VP of Strategy at
CA Technologies and a consortium member.
“The same goes for performance or cost.”
In addition, CSMIC will provide use-
ful, tested KPIs that companies can use
to monitor their own service levels. CIOs
will then be able to compare those levels
with other users of the same service, other
services or even their own in-house capabil-
ities. “This is a way to objectively measure
the relative goodness — what we define as
a set of more than 50 specific characteris-
tics — of cloud services,” Hughes adds.
“The goal is also for management
software vendors to incorporate CSMIC-
standard KPIs in their management tools,”
says Jeff Perdue, a Senior Scientist at
Carnegie Mellon and Co-Director of Cloud
Measurement for the CSMIC.
Draft Version 0.5 of the Service
Measurement Index can be found on
cloudcommons.com today. Version 1.0 is
slated for early 2011. –L.E.

)'('›SMART ENTERPRISE 45
 Looking
into the
Cloud
Service assurance
solutions provide greater
visibility into the new IT
supply chain.
C loud computing has
been a boon for many IT
organizations, lowering costs
and improving ease of use. Now
another attribute is joining the mix:
greater visibility.
Recognizing the need for real-
time analytics in the age of cloud
computing, CA Technologies in
late 2009 introduced a portfolio
of solutions designed to help IT
organizations discern how they’re
delivering business performance, not
only within physical environments,
but also across virtual systems
and the cloud. Called CA Service
Assurance, the portfolio provides
CIOs a foundation for both managing
current performance and making
informed decisions about new
technologies and services.
CA formulated Service Assurance
to help companies moving to the
cloud to continue monitoring results.
But with cloud computing, there’s an
unprecedented opportunity to gain
a comprehensive view of the health,
quality and risk of critical services
and transactions. That’s because the
advent of cloud computing shattered
the old model of internal silos,
where the network team, the server
team, the database team and the
application side of the house each
had their own metrics.
With cloud computing, such
divisions have become less
relevant. “The only constants are
46 SMARTENTERPRISEMAG.COM
the experiences of the customer or
co-worker, and an understanding
of what those end users are
trying to accomplish,” explains
Patrick Ancipink, VP of Product
Marketing at CA Technologies.
“Even if IT outsourced every piece
of infrastructure, it's still going to
be responsible for measuring and
assuring the quality of experience
and transaction success the business
or organization requires.”
LOW VISIBILITY
Rooms to Go, a Seffner, Fla.-based
furniture retailer, embraced cloud
computing three-and-a-half years
ago with a private cloud solution.
The Rooms to Go Point of Sale
system lets consumers have a
positive retail purchase experience.
But the company couldn’t track the
performance of its retail locations.
That meant Rooms to Go had
no way of knowing whether the
system was running slowly or had
even become unworkable for some
users. “We quickly realized we had
gotten in over our heads,” says
Jason Hall, the company’s Director
of IT. “We had no idea how the end
user experience was, or whether
we were having problems.”
That all changed recently,
when Hall began to use CA Virtual
Assurance for Infrastructure
Managers. This service assurance
solution features a Web-based
interface that connects the actual
service being delivered with both the
end-user experience and business
transactions for all application types.
Within 30 minutes of firing up the
solution, Rooms to Go received
alarms on CPU, memory and other
issues, Hall says.
Those factors, of course, can lead
to slow website performance and
abandoned transactions, which could
result in lost revenue and unhappy
customers, Ancipink says. “With good
service assurance capabilities our
customers can prioritize their efforts
on the most important business-
related issues and make confident
decisions that align with business and
organizational objectives.”
More than ever, it’s crucial for
CIOs to weigh trade-offs between
performance and cost, he says.
“Depending on the service, it
may be okay to trade a little
drop in performance for a big
cost advantage,” Ancipink says.
“The point is to know what each
service requires and to manage
expectations with your users. Ten
additional milliseconds of delay is
fine for e-mail, but it’s not okay for
electronic trading.”
In contrast, without the visibility
PHOTOGRAPH: THINKSTOCK
that service assurance provides,
Ancipink says IT departments are
“flying blind” — or, perhaps more
accurately, in a cloud.
— Todd Wasserman
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referenced herein belong to their respective companies.
 Smart Research

Uncovering Hidden Value

To deliver business benefits
from IT projects, leading
researchers say, smart CIOs
will keep their business
partners engaged
and involved.
| By Lamont Wood

W hen a 35 percent success rate

is considered good, some-
thing’s not right.
Unfortunately, that’s the case
with many IT projects. According to figures
gathered every other year by market research
firm Standish Group International, 35 per-
cent is the highest success rate IT projects
have achieved in the last decade.
In other words, of all IT projects, roughly
only one in three is delivered on time, within
budget and with all its promised features,
and even then it doesn’t mean the proj-
ects are delivering business value. And
the remaining 65 percent? They are either
“challenged,” in Standish Group parlance
(meaning they missed any or all of those
three criteria), or are outright failures —
they were canceled, never completed, or
delivered but not implemented.
Program. Peppard has also authored or
co-authored several books on the subject,
including one scheduled for publication
next year entitled, Business Innovation with
IT. To develop his theories, Peppard has
studied hundreds of large-scale IT projects
over the past 15 years.
In his review, Peppard finds that IT
investments at many organizations are
simply not aligned with business goals. And
why is that? Peppard’s answer may surprise
you: He believes that business leaders have
incorrectly shifted responsibility for the
business value of IT projects away from
themselves and onto the CIO. That’s unfair
to CIOs, he says, and it shortchanges the
organizations, too. “A lot of C-level execu-
tives don’t understand the role of IT, and
we find the CIO having to second-guess
the business strategy,” Peppard says. “Even
Network, a Victoria, B.C.-based consulting
firm, and co-author of The Information
Paradox: Realizing the Business Benefits
of Information Technology (McGraw-Hill,
2003.) Thorp’s take on the issue, similar to
Peppard’s, is that business leaders must
keep their hands firmly on IT. “How many
times have I heard a CEO say, ‘I want to focus
on the core business and have someone
else deal with IT’?” Thorp asks. But how
you manage IT, and how you manage the
changes that IT shapes and enables, is
too important to leave entirely to the IT
function.” Delegation is fine, he says, but
business all too often relinquishes anything
with the IT label to the IT function. “Even
if the IT function were able to manage
change,” he says, “it wouldn’t have the span
of control and authority to do so.”
It is up to the CIO, Peppard says, to gar-
PHOTOGRAPH: THINKSTOCK

Why this happens, and what CIOs should
do about it has attracted the attention of
several leading researchers. Among them is
Joe Peppard, a Professor at Cranfield School
of Management in Bedfordshire, U.K.,
and Director of the school’s IT Leadership
determining the IT investment portfolio is
a business decision, but in most organiza-
tions it is abdicated to the CIO.”
Another researcher exploring the ques-
tion of why more IT projects don’t succeed
is John Thorp. He is head of the Thorp
ner the needed support, involvement and
engagement from business-side colleagues
before proceeding with any project — or
abandon that project if the backing is not
there. “Failing this, the CIO should probably
look for a new job, as he or she unlikely to

48 SMARTENTERPRISEMAG.COM
have any significant impact beyond keeping
the lights on,” Peppard adds.
Among CIOs, even those who are willing
to discuss this topic prefer to do so in the
context of other companies. “The reason
[behind] projects sometimes disappears,
and I’ve heard of other organizations con-
tinuing to work on a project they no longer
need,” says Chuck Pagano, Executive VP for
Technology at ESPN Inc., who is credited
with bringing high-definition and 3D tech-
nology to its TV network. “But we don’t do it
in that fashion. As in sailing, you sometimes
need to jibe and tack, or make a 180-degree
turn. You need to learn from everything
around you, and that includes failure.”
If so, there is plenty of learning to go
around. According to the Standish Group,
IT failure rates rise with project scale, mean-
ing the largest, most-expensive IT projects
are also the most likely to fail. In fact, when
looking at large IT projects (those with price
tags of more than $10 million), the Standish
Group found that nearly 50 percent fail and
almost the same percentage are challenged.
A mere 2 percent are outright successes.
Only when budgets fall below $750,000 do
successful IT projects outnumber failures
and challenged projects, the Standish Group
reports. (See chart, p. 51.)
Waste Not…
Another issue is IT waste. In 2008, the last full
year measured by the Standish Group, only
57 percent of total worldwide IT spending
delivered full value. Of the rest, 18 per-
cent was lost to what Standish Group calls
“project waste” (the amount over budget).
The final 25 percent was lost to user waste
— features paid for and implemented, but
never actually used. (See chart, p. 50.) With
global IT spending in 2008 hitting the $291
billion mark, these percentages translate
into real money. “Developers have been
paying closer attention to feedback from
the users,” says Jim Johnson, Chairman
of the Standish Group. “Those who pay
closer attention do better, but it’s amazing
how many people have not learned this
lesson,” he says.
Another lesson, say both Peppard and
Thorp, is that business managers should be
staying involved in IT projects from start to
finish. What’s more, that start begins long
before the hardware is ordered, and the fin-
ish comes long after the system is installed.
An IT project truly begins with making of
the business case, Peppard argues. But
too often, he adds, this process involves process. Over that entire time, no more than
flimsy data and reasoning. He cites his own 20 or 30 hands in all have gone up.”
research showing that, with less successful Also, how decisions about IT systems
organizations, more than half the people are made is at least as important as which
involved gain funding by overstating the decisions are made. Specifically, decisions
expected benefits. “Some business cases about IT must be made in consultation with
are fiction,” Peppard says. “And even when everyone involved, while always keeping
they aren’t, they often lack rigor.” in mind the project’s ultimate business
Adds Thorp: “I have spent the last 15 goals. “The quality of the process is criti-
years talking to large and small audiences, cal,” Peppard says. “It must include the key
and I always ask how many in the room stakeholders, who understand both what
believe they have an effective business case is required of them and their people if the
FIVE STEPS TO BUSINESS BENEFITS
There is a formula for successful IT projects, says Joe Peppard, a Professor at Cranfield
School of Management in Bedfordshire, U.K., and Director of the school’s IT Leader-
ship Program. CIOs and business executives, working together, must first decide on the
desired benefits. Then they can work backward to determine which intermediate steps
will deliver those benefits. Only then can they decide which IT investments will be needed
to support those steps.
To help, Peppard has created what he calls the Benefits Dependency Network
(BDN). It provides an organized framework for getting the maximum benefits from an
IT project.
BDN is organized into five main sections:
■ Investment objectives: the bottom-line results being sought; for example, “increase
sales value and volume from new customers.”
■ Benefits: the business gains that will underlie the bottom-line results; for
example, “increase rate of follow-up on leads” and “increase conversion rate of leads
to orders.”
■ Business changes: permanent changes to the enterprise’s practices, processes or
relationships that are needed to achieve the stated ends; for example, “increase
sales time with customers” and “allocate sales time to potential high-value leads.”
■ Enabling changes: one-off organizational changes needed to connect the IT invest-
ments with the desired business changes; for example, “release sales time from
post-sales activity to pre-sales.”
■ IT enablers: hardware and software necessary to support the rest of the process; for
example, wireless computers and mobile devices for the sales staff.
SEVEN QUESTIONS
FOR YOUR NEXT PROJECT
Getting ready to launch a new IT project? Peppard says answering these seven
questions first can help ensure that your project delivers its promised business value:
■ Why must we improve?
■ What improvements are necessary/possible? (These become the objectives.)
■ If the objectives are achieved, what benefits will be realized by each stakeholder?
■ Who will be accountable for the delivery of each benefit?
■ What changes are needed to achieve each benefit?
■ Who will be responsible for ensuring that these changes are successfully made?
■ How and when can these changes be made? —L.W.
)'('›SMART ENTERPRISE 49
benefits are to be achieved, and what is
required of the organization if the project
is going to be successful.” Adds Thorp: “The
right people must sit down together and
have the right conversation.”
Thorp also recommends that a business
case contain not only the expected benefits
of an IT investment, but also how those
benefits will actually be achieved. That is:
To achieve the planned benefits, which
process, organizational and infrastructure
changes are required? More traditionally,
success has been defined as satisfying a
project’s budget, schedule and features
THE 5 PRINCIPLES
OF REALIZING
BUSINESS
BENEFITS
To deliver value from IT projects, CIOs
must ensure that project stakehold-
ers understand some basic principles,
says Joe Peppard, Director of the IT
Leadership Program at the Cranfield
University School of Management in
Bedfordshire, U.K. To help, Peppard
has defined five basic principles:
1 IT has no inherent value.
Simply possessing it is of
no benefit.
2
Benefits arise when IT lets
people do things differently,
presumably by being more
efficient and effective in the use
of information.
3
Only business managers
and users can trigger benefits.
The IT staff cannot be held
responsible for realizing
business benefits.
4 The goal of any IT project
should be a positive outcome
that delivers explicit benefits
to the business.
5
To be achieved, IT benefits must
be actively and continuously
managed — until they are either
achieved or abandoned. —L.W.
50 SMARTENTERPRISEMAG.COM
requirements. But Peppard cites a study
from McKinsey Quarterly showing that such
“success” actually provides only 20 percent
of an IT project’s potential business value.
To achieve the remaining 80 percent of
value, Peppard adds, management must
be involved.
Percent of total IT spending
Peppard believes that many business
executives incorrectly view their CIO as
a chief infrastructure officer — someone
who merely keeps the lights on. “Even in
organizations where there is alignment,
the CIO is often seen as an order-taker,”
Peppard says. “Whereas IT should shape
as well as enable strategy.”
Corporate executives need to understand
that IT decisions are also business decisions,
he says. Those who don’t may simply dictate
business strategy to the CIO, and then leave
the IT executive to his or her own devices to
define and even implement a technology
portfolio to support that strategy. “In a lot of
organizations, even if business colleagues
have been involved in building the case,
they will abandon their responsibility to
the CIO to actually deliver the project,”
Peppard says.
As for how it’s done in the trenches, the
history of ESPN has included one successful
IT project after another since its founding.
EVP Pagano says he has a practice, both
formal and informal, of making sure that
business-side people are “embedded” in
every technology project from its definition
through its execution. “The customer has to
be there during the project’s development
and its changes, to guide it and mold it,”
Pagano says. “[He or she] can’t just turn it
over to the techies to figure out [what to do]
miraculously or through osmosis.”
Business on Board
Once a CIO gets his or her business man-
agers involved, there’s hope, Thorp and
Peppard agree. But that’s just the start.
“The tipping point comes when senior
management says, ‘We own this, and we
need to get serious,’” Thorp says. “At that
point, there is some basic governance that
must be put in place.”
First, CIOs and their business leaders
need to connect the dots between IT and
business value. The result is what Peppard
calls a Business Dependency Network. (See
sidebar, “Five Steps to Business Benefits,” p.
49.) “It helps you get clarity on the outcomes
you are trying to achieve,” he says. “It also
shows the intermediate outcomes you need
to get to those final outcomes.”
Business Value: Closer,
But Still Not There
User Waste Project Waste Value
60
50
40
30
20
10
2000 2002 2004 2006 2008
DATA: The Standish Group, 2010, custom data provided
for Smart Enterprise, using worldwide project statistics
Note: User waste = features paid for and implemented,
but never actually used. Project waste = the amount
over budget
Offering an example, Thorp asks: “Why
[implement] CRM? A common answer is, ‘So
we have more information about the custom-
ers.’ But that is an intermediate outcome,
not a business outcome. The business out-
come is higher profitability through higher
customer retention — or higher revenue
per customer.” The reference to CRM is not
accidental. Peppard’s research shows that
between 2000 and 2005, the most recent years
for which data is available, some $220 billion
was spent worldwide on CRM projects. But
during these years, as many as 75 percent
of all CRM projects failed to achieve their
expected ROI.
Next, the experts advise, CIOs and their
business counterparts need to understand
which IT initiatives are needed for the
desired business outcomes. “You must get all
that on the table,” Thorp says. “Those doing
well put a lot of effort into the front end.”
What’s more, say both experts, just
because an IT project is delivered doesn’t
mean it’s finished. In fact, that’s when the true
value of most IT projects is actually delivered.
“You have to manage the journey,” Thorp
says. “Rarely is the end what you thought it
would be at the start, and how you get there
also changes. There is nothing wrong with
that as long as you are not surprised and you
take appropriate action as things change.”
Adds Peppard: “Technology itself has no
inherent value — to unlock technology’s
value, it has to be used. Most organizations
use elaborate methods to get the technology
 deployed, but assume the benefits will
result if it is on time, within budget and
meets specifications. But if no one uses it,
it generates no value.”
That can require patience on the part of
CIOs and business executives alike. Thorp
says it typically takes a company seven years
to implement what he calls “the whole cul-
ture” of ongoing executive involvement with
IT. “The tenure of the average executive is
less than that,” Thorp adds. “So we are tell-
ing them that the process is hard, and if it is
successful, someone else will get the kudos.”
Companies that demonstrate patience
can reap rewards. For example, Peppard
cites a U.K.-based bank that, thanks to a new
CRM system, saw its marketing response
rates rise from just 2 percent to 40 percent
after only three years. Another U.K.-based
financial organization won an award for
its CRM implementation — this time, after
seven years. “The benefits do not happen
automatically,” Peppard says. “If you go live
on Monday morning, you won’t have all the
benefits by Monday afternoon.”
Another key to getting value from IT is
change management. Many IT projects fail
not because the technology did not work,
but because the organization failed to man-
age the resulting change effectively. “Jobs
may have to be redesigned, people may have
to be redeployed — these are part and parcel
of IT-enabled change projects,” Peppard
says. What’s more, managing this change
isn’t something the CIO can do alone. “It
has to come from within the business itself,”
Peppard adds.
ESPN’s Pagano adds that having the right
culture is more important than having a
defined process. “We have a culture rather
than a template, and that is the way it has
been since we launched in 1979,” he says.
“To be honest, there is no standard project
template for anything here.”
In the final analysis, “IT is fundamen-
tally different from other resources and
needs to be managed in a fundamentally
different way than, say, manufacturing,”
Peppard noted. “You can’t manage IT from
within a box on the organization chart,
assign a budget and say to the CIO, ‘Get
on with it.’ Executives need to recognize
that IT is different, and that IT decisions
are essentially business decisions. And
CIOs need to educate their business col-
leagues about how value is generated from
IT investments — and what their role is in
IT investments.”
Yes, the task is complex. But once CIOs
understand the complexity, they can orga-
nize it into simpler tasks, Thorp says. “If you
deny the complexity of the task,” he adds,
“you only make it more complex.” ■
LAMONT WOOD is a freelance writer based in
San Antonio, Texas.

Too Big to Succeed? The Continuing Search for IT Value

Smaller IT projects are more likely to deliver their How well U.S. IT projects delivered their promised
promised business value business value
Succeeded Challenged Failed Succeeded Challenged Failed
80 80

70 70
71%

60 60
54%

53%

50 50
Percent of Projects

51%

51%
50%
49%

49%
48%

46%

44%
40 40
38%
38%

35%
34%

30 30
32%

32%
29%
28%
24%

24%
23%

20 20
19%
18%
15%
14%
13%

10 10
5%

11%

2%

0 0
PROJECT SIZE
Less than $750K to $3 Million to $6 Million to More than
2000 2002 2004 2006 2008
$750K $3 Million $6 Million $10 Million $10 Million
DATA: The Standish Group, “CHAOS Summary for 2010,” using statistics
DATA: The Standish Group, 2010, custom data provided for Smart Enterprise, gathered worldwide
using worldwide project statistics Note: Succeeded = delivered on time, within budget, and with all promised
Note: Succeeded = delivered on time, within budget, and with all promised features. Challenged = missing any or all of those three criteria. Failed =
features. Challenged = missing any or all of those three criteria. Failed = canceled, never completed, or delivered but not implemented
canceled, never completed, or delivered but not implemented

)'('›SMART ENTERPRISE 51
Career Smarts
From CIO to
Corporate Advisor
Hervé Gouëzel finds a second career at BNP Paribas.
| By Jean-Christophe Latournerie
G lobal banking and financial services
company BNP Paribas is among
the world’s top 20 companies, and
Hervé Gouëzel has played an active role in
the group’s growth for the last 20 years. CIO
of the financial services company from 1995
to 2007, Gouëzel today is an advisor to the
BNP Paribas management team. He is also
chiefly responsible for steering a merger,
now ongoing, between Paris-based BNP
Paribas and Belgian bank Fortis.
For someone who worked more than a
decade in technology, Gouëzel never intended
to make a career in IT. After graduating from
France’s prestigious École Polytechnique
and gaining an MBA from the HEC business
52 SMARTENTERPRISEMAG.COM
Hervé
Gouëzel
school in Paris, a career in industry, with a
focus on management control, seemed like
the natural choice. “I don’t like the technical
side,” Gouëzel says. “But deep down, I’ve been
involved in IT practically all my life.”
In 1988, the then-32-year-old Gouëzel
joined BNP Group as IT Manager. He quickly
moved up the ladder to Deputy Manager of
the banking network for the Paris suburbs.
“Being number two in the suburban network
was an essential experience for me,” Gouëzel
recounts. “IT costs money, and before you
learn how to spend money, you need to
learn how to earn it.”
Seven years later, in 1995, Gouëzel was
appointed Chief Information Systems
and Organizational Officer. And just three
months later, he was appointed to the
executive committee. For the next 12 years,
Gouëzel oversaw some 15,000 IT technicians
— including 10,000 in-house staff — and a
global IT budget of more than 3 billion euros.
He also earned a successful track record
meeting several IT challenges, including a
move to the euro, maneuvering through Y2K,
completing the merger of BNP and Paribas,
and integrating Italian bank BNL. During
those years, BNP Paribas enjoyed a 50-fold
growth in revenue and increased its overall
staff to 200,000 employees from 40,000.
But in 2007, Gouëzel, then 55, opted to
resign from the position of CIO and leave the
bank’s executive committee. Today, when
asked about his departure, he replies, “I’d
been a dedicated worker all my life, every day
and every evening. You need to leave some
work behind for the younger generation.”
Next, Gouëzel became a consultant.
Drawing on his years of experience, he began
to provide valuable insights to BNP Group’s
general management and, somewhat later,
to BNP Paribas’ 40 business leaders.
Today Gouëzel leverages his CIO expe-
rience and draws on his knowledge of the
group’s organization, business lines and
human resources. “CIOs see everything
that happens in the company; they know
everything and everyone,” he says. “I’d been
supporting the group’s business lines for
20 years, and I understand their problems,
which is the least you can do before you can
claim to advise them.”
More recently, in 2008 Gouëzel was asked
by Baudouin Prot, Chairman of BNP Paribas,
to coordinate the merger of BNP Paribas
and Fortis. The deal is Europe’s largest
bank merger, involving 1.3 billion euros in
restructuring costs and an expected 900
million euros in annual synergies. The
merger also involves some 1,200 internal
projects, of which nearly half are IT-related,
Gouëzel says.
What is the key to a smooth merger?
Efficient project management, Gouëzel says.
PHOTOGRAPH: COURTESY OF BNP PARIBAS
“A non-groupwide approach is one of IT’s
main enemies,” he explains. “Organizations,
business processes and collective knowledge
must be standardized.”
Gouëzel plans to spend another 18 months
on the Fortis merger. And afterward?
“We’ll see!” ■
JEAN-CHRISTOPHE LATOURNERIE is an
editor at Mémo Technique in Paris.
the Cloud is the answer.
it’s also the question.
The Cloud has the potential to transform business by offering faster, cheaper, on-demand access to services and
resources. But it’s also one of the great business questions: How much Cloud? What kind? How to manage it?
How to secure it? How to make it work with what I already have?

CA Technologies can help you answer those questions. Here’s how: With ways to plan, implement, and monitor
Cloud services as part of your existing infrastructure; with ways to help you evaluate external Cloud sources,
and with security solutions to help manage identities, access and information.

In other words, with the solutions you’re likely to need to help manage the Cloud internally and externally.

Question answered.

To find out more about how our Cloud technologies can work across your IT environments, visit ca.com.

we can

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Leadership Perspective
The Best of Timing
Virtualization, the cloud and anywhere, anytime computing
are transforming the CIO’s role. These changes couldn’t
come at a better moment. | By Dave Hansen
T oday’s CIOs have access to massive
amounts of bandwidth and computing
power — anywhere, anytime. As a result,
the old imperative to create IT systems
on-premises is fading away. The incredible
flexibility of virtualization technology and
cloud computing is providing options that
didn’t exist a decade ago.
In many ways, these changes couldn’t
have arrived at a better time. Virtualization
technology, cloud computing and other
emerging technologies are effectively creat-
ing a new IT supply chain, one that enables
CIOs to meet the growing demand for quick,
efficient creation of business services.
To be sure, these changes also create man-
agement challenges. In the new IT supply
chain, security, governance and performance
monitoring all become more complicated, and
more urgent. Also, some (if not all) of the IT
department may need to acquire new skills.
CIOs may even need to hire from the outside
to fill new positions with the word “cloud” in
their titles, despite the fact that the very ease
of using the cloud — for some services, all
you need is a Web browser and a credit card
— means that business managers can now
obtain IT services without their CIO’s involve-
ment. In fact, a recent survey, conducted by
the Ponemon Institute and sponsored by
CA Technologies, found that as many as
half of all IT workers aren’t confident that
they know which cloud services their
companies use.
What’s a CIO to do? These recommenda-
tions can help you turn the challenges of
the cloud movement into benefits:
Get help creating and leveraging the
IT supply chain: Start with an assessment.
Examine the business services you now offer,
test them and determine whether there
are better or cheaper ways to deliver these
services to the business. Even if you end up
keeping most of your IT in-house, this is a
valuable exercise, and one that every CIO
should conduct twice a year.
54 SMARTENTERPRISEMAG.COM
Expand your options for legacy
applications: While they’re easy to forget,
legacy apps still need to work smoothly;
employees still want to receive their pay-
checks on time, and suppliers still want their
invoices paid properly. Consider seeking out
new suppliers of legacy services, such as
traditional outsourcers, cloud-based apps
or some other alternative.
Explore cloud-based options for testing,
research and other exploratory work: In the
past, when CIOs wanted to test a new system,
they needed to rent or buy servers. That
capacity can now be pulled from the cloud,
with the work being sent as virtual images.
Create frameworks to help ensure your
security in the cloud: With the right frame-
works in place, security can be an enabler for
cloud use, and one that positions the CIO as
a true business partner. Without them, you
could find that IT is moving too slowly for
the business, putting your business at risk.
Monitor IT performance carefully, but
in new, dynamic ways: In the past, CIOs
could obtain service level agreement reports
on a weekly or even a monthly basis. No
more. Today, if a cloud-based supplier is
falling below its SLAs, you need to know
about it immediately.
Ensure that your IT function continues
to evolve, moving higher up the value
chain: One way is to use virtualization
technology and cloud computing to free
up costs for both labor and infrastruc-
ture. Then increase your IT staff’s focus on
PHOTOGRAPH: COURTESY OF CA TECHNOLOGIES
the business.
By leveraging today’s new technologies in
these efficient, cost-effective ways, CIOs can
also become trusted technology advisors to
the business. The timing couldn’t be better. ■
To hear more from Dave Hansen
and other experts, visit Dave Hansen is the General Manager,
Smart Enterprise Exchange at Customer Solution Unit at CA
smartenterpriseexchange.com. Technologies, and the company’s
former CIO.
 an end to system performance
“blamestorming”?
Business-critical applications are the lifeblood of your organization. It becomes difficult to
trace problems to their source. The distributed team blames the mainframe and vice versa—
everyone loses.

Until now.

The CA Technologies Cross Enterprise APM solution allows you to see yourself as your
customers and end-users do—so you can control service levels to your customers while
fostering harmony in your data center.

To learn more, please visit ca.com/crossenterpriseapm

we can

Copyright ©2010 CA. All rights reserved.

can you build a
flexible IT
supply chain?
Services when you need them. Responding to business demands
automatically. Sourcing the right vendor for the right solution.
Making better decisions, faster. We can give you the management
solutions you need to secure and assure your IT resources – from
physical to virtual and to the Cloud.

To find out more about how CA Technologies’ robust management

solutions can help you work across your IT environments – from
physical to virtual and the Cloud, visit ca.com.

you can

Copyright © 2010 CA. All rights reserved.