To Dell and Back

To Dell and Back

How does a CIO at a high-tech company --who juggles as many balls as you do or more -- succeed in the pressure cooker of a booming industry? For Dell Computer's CIO Jerry Gregoire it means "laying down track in front of a locomotive going 100 miles per hour".

Hopeless is the way the CIO of Dell Computer in the US describes his job -- although it's quite apparent he doesn't mean that to be taken literally. What he does mean, Jerry Gregoire hastens to add with a twinkle in his eye, is a challenge not to be sneezed at: he's CIO of a computer manufacturing company so successful in pioneering a special, made-to-order process that it is now growing by $US1 billion every six to eight weeks. "We are processing 60 per cent more transactions than we were 12 months ago when we had $12 billion revenue," he says, almost surprised that his IT operation has been able to cope. "We're growing the equivalent of a new huge corporation every quarter," he says. "It's never happened before, and it's not likely to happen again soon.

The only way it could happen is through acquisition; and that brings a whole different set of IT problems, because when you buy a corporation you get the systems that come with it.

"My challenge is to make sure that every day the systems are up and working.

The number-one priority is to make sure IT does not negatively affect the growth of the company. It consumes a lot of my time making sure we can continue to grow at this pace," he says. "It's a real challenge: there's no manual I can turn to." Gregoire spoke to CIO while on a visit to Sydney late last year He is familiar with Australia, having visited here several times in his previous role as vice president of information systems for PepsiCo and later Pepsi-Cola, and seems at ease here. As he speaks about his job he also seems at ease, happy enough to be facing the challenges it presents. And those challenges are not limited to coping with growth. The company's build-to-order strategy, for example, poses other special problems, Gregoire says. "The mass customisation process that has us building computers in 30,000 to 40,000 lots of one every day generates so many system transactions that it puts us out of the reach of every software package on the market, if used in the conventional way.

Everything we do is new.

"For a CIO it's madness really," Gregoire laughingly acknowledges. At the same time, working in a computer technology company means almost all the staff understand intimately what a CIO is trying to do, which creates its own special challenges. "At a technology company you don't spend too much time explaining.

Everybody in the company thinks they are the CIO," Gregoire explains. "They think the difference between technology and IT is a rumour." Despite the scale of the challenges he confronts every day in his position, Gregoire admits the last years of the twentieth century are an exciting time to be a CIO in an innovative company. "It's the second-best time I can imagine, because with the Internet and intranet technologies and objects and fascinating things we're seeing companies do, it's getting to be more fun." The best time to have been a CIO, he later jokes, was in the 1950s, because in those days computer systems professionals got to wear lab coats. They no longer do at Dell where Gregoire has an IT staff of 1700, which he expects to increase by another 300 before the end of 1999. The size of that operation does not bother him in the context of Dell's overall business. "There was a time when IT departments were regarded as sink holes in terms of expense," he notes. "Now we align ourselves more closely to the business and, after many years of significant investment, corporations are beginning to see the productivity gains they had always expected. Those gains are a direct result of the investments made in previous years."But the realisation of productivity gains is not a signal that IT management can sit back smugly and reap the benefits of those past investments. There are new technologies to be exploited. And, of course, there is the Internet. "As I'm sure you've heard, the Internet is a very good thing for Dell and its customers," Gregoire notes in a dramatic understatement. When he visited Sydney, Dell was reaping more than $US10 million in revenue from the Internet each day, and online sales were expected to exceed $US12 million a day in the weeks leading up to Christmas. In addition to sales pages, the company's Web site -- which receives more than 1.6 million hits a week -- contains 45,000 pages of technical reference material. "Dell is so lucky with the Internet, which is almost an extension of our [direct sales] business model. If it hadn't come along, Michael Dell would have had to invent it," Gregoire claims. "He has now set a goal that in fairly short order 50 per cent of our orders will be taken over the Internet. It's a very achievable goal."Currently, most online buyers are consumers and small businesses. Large companies tend to use Dell's Internet pages for technical support rather than purchases. However, the company is attempting to woo them over to the online buying process by offering customised "premier Web pages", which offer efficiencies to its customers as well as to Dell. "The value of those premier Web pages for our customers' CIOs and purchasing departments can be immeasurable as a solution to the problem of communicating and enforcing purchasing standards," Gregoire says. He is keenly aware that the Internet is more than a simple sales and marketing tool; although, he says, many IT practitioners are only just beginning to appreciate the true worth of Internet/intranet technologies. "The most significant contribution by the Internet and its related technology to IT's effectiveness is just emerging as a host for core transaction applications," Gregoire explains. So strong is his belief in this proposition that all of Dell's new development is based on Internet/intranet technology, and all transaction systems are built on the same architecture.

"The Internet will provide a means for IT departments to change fundamentally the way systems are built, delivered, maintained and used. It has the potential to change the way businesses and users think about IT and its potential as a channel of competitive advantage. It has the potential to erase the line between electronic commerce and a company's core transaction systems," Gregoire says. "It has potential as the basis for a very long-term strategic systems architecture," he stresses, adding that he believes Internet technologies can even be used to enable IT to provide systems that are at last capable of satisfying end users. Gregoire says that in the 25 years he has spent working in information systems he has repeatedly been struck by the universal truth that the users of IT systems are inevitably dissatisfied with IT's performance and unsure about its ability to deliver. "The IT community has consistently ranked, in a wide range of surveys, as one of the least admired corporate functions," he says. "In all of the time I have spent in this profession, I have never come across an exception to this rule anywhere."Gregoire is, however, striving to create his own exception by searching for an architecture that is completely open and "fanatical" about fundamentals like scalability, electronic commerce, user interfaces and cost effectiveness, and capable of delivering usable systems. He has defined the basis of what he describes as a "sustainable architecture" in a number of clearly articulated requirements, including: - The delivery of processes, systems and data that are common enough throughout a company or group of organisations to allow for a global view of what is going on; - The delivery of functionality that is so intuitively easy to use that it requires no training, as long as the user understands the system's purpose; - Systems that can be individually tailored for each user, or even developed by users; - Systems that can connect directly to users accessing a company's services and blur the line between transaction systems and electronic commerce; - Systems that are infinitely scalable; - Systems that will be processed on the most cost-effective platform; and- Systems that allow for true evolutionary change to minimise the impact on ongoing operations. Gregoire says that an architectural strategy conforming to those fundamental requirements will be "the only thing one can develop or acquire today that will not be obsolete sooner than the Spice Girls". He acknowledges that until a couple of years ago the technology was not available to allow such an architecture to be implemented. "Then some new tools and techniques came along that a number of companies, including Dell, looked at and began experimenting with in different combinations, and the results to date have been spectacular," he says. Dell calls its version of the architecture, G2. Gregoire describes it as a multi-tier, super thin-client architecture that uses a Web browser for the presentation layer and is infinitely scalable, not only in the number of tiers, but in the horizontal extensions to each tier. At the heart of G2 is a Web browser front end to eliminate the need to manage applications at the desktop, reduce training and tailor functionality to the individual desktops by way of Java or ActiveX applets.

There is also a message broker layer to simplify the connections between applications, data engines and the other layers of the architecture.

Gregoire explained the importance of message brokers in connecting systems together to make them appear seamless. "Message brokers: an infinite string of servers running software specifically designed for this purpose, connecting disparate systems together on the same principle as the hub and spoke system the airlines use, with hub cities to maximise their efficiency and inconvenience their customers," he jokes. "A single connection to the hub is required to access or move information from application to application, database engine to database engine, or layer to layer without regard to hardware, operating system or application environment. There is no replication of databases, no panics when a database is restructured, as will happen when companies fix their millennium bug. "And all of this is built using object-based applications, which facilitate the reuse of program code and make programs easier to debug and modify. And if that weren't enough, the entire architecture plugs directly into the Internet for use by customers and vendors looking to access the services of your company using devices as simple as a processor hooked to a television set.

"It's magic, really," Gregoire concludes. "G2 and variations on it are changing everything at Dell. "If we are right about G2, the Internet, and the application of these technologies -- and our success leads me to believe we are right -- we will change everything: how users use our systems, how they feel about and interact with IT, the nature and limitless potential of our roles in our companies. "I think we can do this," he says. And he means it.

Hyping the Internet

While Tom Peters believes the Internet and enterprise resource planning (ERP) packages are two "under-hyped" technologies (see CIO, October 1998), Jerry Gregoire, CIO of Dell Computer in the US, believes the Internet has to come out ahead. "ERP and the Internet are at opposite ends of the spectrum, and in some weird ways they're in opposition," he says. "ERP gains high-level integration at the application layer. Internet integration is much lower at the message broker layer.

"Both are technological wonders, and both allow users to get to the same place.

In my opinion, though, because the Internet solves the problem ERP is trying to solve, it will probably be the one that lasts," he says. He explains that he believes ERP packages have severe limitations. "Enterprise-wide software solutions: tightly wound, highly integrated applications suites -- offerings that are integrated at the application layer -- while a technical marvel of sorts and spectacular in their engineering, do not by themselves lead to business solutions," Gregoire says. "Once turned on, this high degree of application integration comes at the price of flexibility and reaction time."Success in business demands the ability to react very quickly, but Gregoire says that systems which are tightly wound at the application layer don't lend themselves to rapid changes, especially if the user doesn't own the code. By contrast, Internet applications do lend themselves to rapid change, he says.

"When a company or organisation aligns itself to someone else's proprietary system they are saying: 'We commit to a systems revolution where we will convert our people and organisation to your standard. We will eliminate applications as a channel of differentiation or competitive advantage, unless we can convince our software provider that there is money in the wide marketplace for that improvement. And, because every application-based solution has a finite life, we commit at some future date to subject our organisation to yet another revolution.' "This is truly madness. It's all based on the notion that if you're willing to throw in everything -- including the kitchen sink -- perfection can be achieved when there is nothing more to add; in fact, perfection is truly achieved when there is nothing more to take away."Gregoire claims that Dell's G2 effort for a sustainable enterprise architecture, with its dependence on message brokers, eliminates the need for tightly integrated enterprise solutions, but at the same time facilitates their use. Within G2, ERP packages get additional value as "best-of-breed choices", he says.

Linux has Legs

Linux, the freeware version of the Unix operating system, cannot be written off, says the CIO of Dell (US). Not only have heavyweight software developers like IBM, Oracle and Informix recognised the operating system, but demand is picking up. "Linux has legs," Gregoire says. "It has 50 million geeks around the world all working to make it better. We at Dell are playing with it; my own computer geeks play with it." The most persuasive argument that Linux is indeed gaining legs, he says, is that Dell is receiving more and more orders for systems preconfigured with Linux. Gregoire acknowledges that to date the demand appears to be coming from small customers only, but says he believes the word about Linux, and therefore the demand, will spread as the cult-like operating system forces its way into the mainstream.

Wary of Y2K

Jerry Gregoire, CIO of Dell Computer (US), is keenly aware of the problems posed by the millennium bug. He spent some time while in Sydney trying to discover how seriously Australian organisations are tackling the Y2K problem and how well advanced they are in their preparations. He says Dell is very careful about how it is addressing the problem and is documenting everything it is doing. At the time of writing, all of the company's internal systems were scheduled to be compliant by the end of 1998. However, Gregoire stresses that Dell's internal compliance will not overcome problems caused by non-compliant business partners, no matter where these organisation operate. "I don't see countries around the world moving at the same pace," he says. "The slowdown in economies in Asia is affecting levels of compliance work there." Such chain-dragging could have very serious consequences, not only for Dell but for all other multinational companies. "We at Dell may announce that we will only do business with companies that will fix the Y2K problem; but if you follow the food chain, everyone is involved in business with a small company that may not have worked on compliance," he observes.

Wasted Human Capital

Jerry Gregoire, CIO of Dell Computer (US), was scathing in his criticisms of the cynical use of IT as a whipping boy in times of corporate strife. "It seems that whenever corporate management discovers it must enter into another round of modernisation, the first reaction is to replace their computer chiefs," he says. As Gregoire sees it, the new CIO then moves to avoid confrontations with agglomerations of old practices by launching a program of modernisation. New applications are implemented, rendering existing programs "useless junk" which is euphemistically branded legacy software. "The very term 'legacy systems' is a construct; one of those verbal sledgehammers that are invented to imply bad and in need of immediate replacement," he says. And so products that absorbed over their life cycles a considerable amount of corporate expertise are lost forever. "The act of writing off the accumulated knowledge of prior years, whether in people or software, opens the door to those marketing, consulting and integration services all packaged up as the next miracle solution.

Unencumbered by maintenance and operating problems, there's a hope that these experienced mercenaries are more likely to get the job accomplished, while the talent that previously guarded the information assets of the organisation get the unglamorous custodial task of keeping the daily operations going while waiting for the newcomers to collect the prizes," he says. Gregoire is also highly critical of the cavalier attitudes some companies take to their IT staff, who all too frequently are retrenched without a qualm. "Cutting IT staff and getting rid of hundreds of person-years of accumulated skill and business knowledge seems to be a prevailing compulsion among large [companies] seeking to improve profitability. Unfortunately, shareholders and investors don't have a clue about the losses to the [company] whenever knowledge workers leave.

"There is no balance sheet write-off for human capital," Gregoire says.

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