Author: Yogi Schulz
CIO’s, like other executives, are under continuing pressure to do more with less. Expectations of application availability and desktop support continue to rise. At the same time, operating budgets remain under pressure from the combination of demanding shareholder returns, mild recession and brutal price competition.
Mr. Neil Barton from Compass Ltd. in England addressed this pressure on IT recently at a CIPS-sponsored CIO breakfast in Calgary. The Canadian Information Processing Society (CIPS) represents Information Technology professionals. Compass Ltd. is an information technology (IT) consultancy.
Mr. Jess Harding, the CIO of Alliance Pipeline, said that his IS department is experiencing exactly this pressure on operating expenses despite a record year for revenue, profits and continuing growth in employee count.
Barton believes that IS departments have exhausted most opportunities to reduce costs through enhanced efficiencies during the past decade. He described demand management as a new strategy that CIO’s should pursue to maximize IT value to their organization. For many IS departments, the areas where demand management offers opportunity to contain costs, without sacrificing service, include help desk rationalization, server consolidation and application portfolio management.
Help Desk Growth
The cost of operating a Help Desk will continue to grow in many organizations as the number of applications and hours of service continue to grow. The number of applications is growing due to mergers and newer applications like CRM. Hours of service are growing because globalization and the Web are extending the hours during which customers expect to be able to conduct business. {Rogue users, who tamper with their PC configuration, are most prevalent in the marketing, engineering and IS departments. These users also contribute to cost increases.} CIO’s need to take steps to minimize growth in calls per user which currently average 1.5 per month.
Mr. Wayne Stengl, the CIO of the PowerPool of Alberta, the Calgary-based wholesale electricity trading organization, said his department is experiencing more than this average number of calls per user as a result of increasing staff and the roll-out of new applications.
Barton identified remote desktop controls, use of chat tools, self-service and formalizing user gurus as initiatives to control costs while maintaining service. He sees real opportunities to make the knowledge bases of key vendors more easily accessible to end-users and to post more self-service information on the Intranet. Since many end-users already rely on informal local gurus for some support, helping these gurus more proficient is another effective initiative.
Barton did not address how poorly planned deployments of major applications drive up the number of Help Desk calls as new users struggle with intimidating or buggy software. In my experience, major deployments are an annual event in larger organizations that create considerable grief.
Servers Consolidation
In Barton’s view, organizations have not yet exploited the benefits of server consolidation sufficiently. In many organizations, server utilization is less than 10%.
Mr. Clay Long, the CIO of Enmax Corporation, the Calgary electrical utility, said their growth is accompanied by a corresponding increase in the number of servers. Enmax is pursuing an ambitious business plan to provide more services for other utilities and acquire more customers outside its traditional trade area.
Barton described a series of steps from centralization through standardization and ultimately to consolidation. The resultant reduction in server count will reduce overall investment by increasing utilization, while reducing the cost of managing servers without reducing availability.
Among our clients, server consolidations are constrained by the expectations that major software packages impose for specific releases of the operating system and the database management system. Even if, at a point in time, the packages require only two versions of each, an IS department will be looking at several servers to support production, test and development.
Application Portfolio Management
Barton observed that most organizations experience continuing growth in the number of applications in the application portfolio. Mature organizations exhibit a surprisingly low average user count per application. New applications usually emerge during periods of growth or acquisition. However, few old applications are ever discarded.
Ms. Alex Federucci, the CIO of Talisman Energy Inc., the Calgary-based oil & gas producer, said her department is experiencing continuing increase in the number of applications as a result of acquiring applications as part of acquisitions.
Barton offered a model for managing the application portfolio. Each application is characterized as obsolete, steady earner, high growth or high risk. In pursuit of maximizing value, the role of the CIO is to ensure that obsolete applications are truly decommissioned, steady earners are maintained, high growth applications receive high levels of support and the expectations surrounding high risk applications are contained.
A CIO should aim to spend approximately $10,000 per user per year. The lowest cost IS departments spend less than $7,000. Some organizations with significant duplications in the application portfolio spend up to $20,000 per user per year.
I’ve observed a CIO, who promoted decommissioning redundant parts of the application portfolio, being fired over this issue. Various vocal groups, with political clout, defended their pet applications and ensured the CIO’s demise. A CIO helps himself and the organization better by ensuring that the redundant costs show up in the end-user cost center rather than the IS department cost center. Then they’ll be scrubbed without the fireworks.
Conclusions
Barton emphasized that CIO’s should position themselves and their department as value generators within the organization through demand management. If the CIO and the IS department are simply seen an internal IT supplier, the value perceived will be no more than that provided by an external outsourcer. Every CIO understands where that perception leads.
