The board has just given its blessing to the IT budget. You ease back into your chair and gradually expel the breath you've been holding. Then the chairman smiles, waves his spangled wand, and bestows an unexpected 15 per cent. Beverley Head asks a selection of leading CIOs how they'd blow the doughCounting sheep is one way. Reading engineering manuals another. But the best cure for insomnia is to spend a windfall. By the time you're on your second bottle of Krug, as you ease along the Nile, chances are you'll be asleep. In the pragmatic 90s, though, who really has the opportunity to think what they'd do with a small windfall in their corporate life?
CIO magazine, however, asked several CIOs in different industry sectors precisely that question. If the board agreed to the base budget to run the IT&T operations, and then in a moment of uncharacteristic largesse donated a further 15 per cent -- to be used at the discretion of the CIO -- how would it be spent? For some the proposition was just too preposterous. Peter Holland, CIO of Toyota, summed it up. "One of the keys here is to ensure we spend our budget effectively. I don't think our people would be too pleased at me whimsically thinking how I'd spend some extra money."
Indeed, some suggestions were whimsical, but many more were practical. All were interesting and gave an insight into some of the issues with which CIOs would like to grapple, but simply haven't yet the time or resources.
In 1998, according to industry analyst IDC Australia, the nation reached its highest level in a decade of IT spending as a percentage of turnover, at 2.51 per cent. Most was spent on hardware, staff and software. But an increasing percentage has been spent on network and line costs as the networked nation becomes a reality. As the Y2K clock continues to tick, few CIOs can afford the luxury of real, blue-sky dreaming; they are too busy making sure they have a business in the next millennium. But beyond 2000, what projects might be expected, if the budget reins are ever loosened?
To sleep, perchance to dream . . .
CIO, Asia PricewaterhouseCoopers
Large professional services company
Hypothetical windfall: $4.5 million
Graham Andrews immediately states that the windfall approach "is not the way I operate. I tend to do a bottom-up approach, look at what we need, then market it well," he says. "I've never been knocked back. I suppose I'm my own worst enemy, as the projects that I don't do are the projects I choose not to do." Nevertheless, he is prepared to consider what he'd do, given the "extra funds to play with, without requiring rigorous justification". He muses: "I do believe in playing and tampering around."
One area where he would like to play is in advanced video streaming for communications. Andrews is intrigued by the prospect of video on demand for the network. He sees it as potentially the next generation of communications, beyond e-mail, voice mail and telephony. He suspects it would have great value in training staff. "It is quite an exciting technology," Andrews says. "Technology is all about communications and a more personalised communication would improve and assist that. The trick is not to bring down the network because of capacity issues." But given the windfall, he would run a pilot. A video streaming pilot would cost about $500,000.
Though significant, $500,000 is only about a ninth of the $4.5 million windfall Andrews might expect if PwC gave him 15 per cent of his $30 million annual Asian IT&T budget. What would he do with the rest? One project that would soak up about $2 million would be some more sophisticated knowledge management projects. Andrews would be keen to explore artificial intelligence to see how it could be harnessed for more advanced information profiling. That is, technology that would allow a user to "see" across disparate systems, permitting not only a search of Web-based documents, or archived and indexed information, but also a search across Word documents or Powerpoint presentations. "Some of this technology is now in its third generation and it is really looking good," he says.
So far Andrews' spree comes to $2.5 million, still leaving him with $2 million. He quips about "a couple of long holidays" before admitting that "everything else I've got [left] I'd throw into e-business. I've already got a lot of e-business in my base business," he acknowledges, but would like more; for example, being able to fund the creation of new client services -- perhaps developing client-to-client, extranet-based chat rooms where knowledge could be shared. He's also interested in developing the e-business offering from initiation right through to payments. Spending money on e-business has "clear business benefits", he says, and, therefore, is more easily justified than his other two projects. He admits that his information profiling proposal would involve "going out on a limb, but hell, it's only play money".
And as for the video streaming . . . well, a trial would prove one way or another whether it is "a technology looking for a home, or something else. I'm sure it's a valid new media", he says, but it's not something which has yet wound onto his official IT budget sheets.
Regional IT director, Australasia, OracleInternational software companyHypothetical windfall: $1.5 millionMiriam Ryan takes the most pragmatic approach of all to spending the loot. "I think I'd start off by [asking myself] where I am feeling the pain. Working at Oracle I can always have access to the latest and greatest software and I don't have to pay for it," she says. But Ryan does have to pay for network capacity, and that is stretched. "Oracle is at the forefront of e-business, and I didn't anticipate the demand on the network would come quite so quickly," Ryan admits frankly. She says that it has put a strain on both the network routers and the network's capacity.
In April Oracle increased its network capacity, but it's still not enough, Ryan says. She has swiftly seen network capacity go from a situation where the network spent very little time running above 50 per cent load, to today where there are times when it hits 100 per cent for two hours at a time. What she is battling is that her IT budget cycles are annual, but the ramp up of network demand has not been anywhere near so stately an advance; rather, it has been a pell-mell rush online.
"Now we are doing all sorts of demonstrations across the network. We traditionally had a demonstration machine in a branch," Ryan says, which would be used to show clients new software. "Now we log onto centralised [demonstration] servers in Singapore or the US." The strain that this puts on the network is immense, but it does mean that Oracle salespeople can have access to demonstration software from any of its branches. "The applications are so complex now and so interrelated that it is more effective to run these centralised demonstrations. Then anyone, even in a relatively small office like Canberra or Adelaide, can see the demonstration," she says. "But it is a load on the network."
Ryan says that in the past it has been sufficient to prioritise traffic type over the network, breaking down FTP or HTTP traffic type. "But now I need to prioritise by applications. I don't want to give equal priority to people who are browsing as to people who are giving demonstrations," she says. "The latest generation of Cisco routers allows that." But at what cost? Ryan admits that it would cost her $700,000 just to equip the Melbourne office -- almost half of her 15 per cent windfall in one hit.
But this $700,000 needs to be spent, and soon. "We have a couple of people here who monitor the network and then knock people off when we need the capacity. It's a bit silly," she admits. And in October the demand on the network further exploded, as Oracle migrated all of its production systems to Singapore. The company will conduct all its order processing over the Internet.
Clearly, Ryan can't wait for the windfall fairy to meet her needs. She says she is currently preparing a business plan to take to the company to tease out more IT&T budget. "A couple of years ago I might have spent it [the windfall] on PCs -- but now the emphasis is on the network," she says. "Corporations have to recognise it. I was speaking to colleagues in the UK and they say that they have to double the network every six months. We've now stabilised on PCs, but we've got a couple of years of doubling the network," she warns.
Professor Jack Bassett
Pro vice chancellor, responsible for IT education and innovation, Macquarie UniversityHypothetical windfall: more than $1.5 millionWhen you call out to a window high up in an ivory tower the question: "How would you spend $1.5 million?" the last thing you expect is that the door next to you opens and a workmanlike answer is delivered. But education's ivory towers are now largely a mirage. Universities and colleges have a job to do, on a very limited budget. Professor Jack Basset is midway through overseeing the replacement of management information systems at the university. Much of any windfall he might accrue he would spend on extending that information system.
"I would spend it to get our IS system in place. We have a new finance and personnel system; I might consider using the money to develop our own management reports," he says. "The third element is the student-information system, which is expensive and complex to bring in. It's a problem which all universities are facing. This is the system to manage grades, to monitor progress, and to handle enrolments and fees." Such a system would quickly soak up a 15 per cent windfall. But, Bassett says, "if the government wanted to throw an extra $10 million to $15 million our way . . . "The university is already investing in a range of new technologies, but Bassett is keen "not to get caught up in the hype. Don't put technologies in if you don't need them. It's the same as upgrading. There is a feeling that any computer on your desk will last three to five years, but it lasts much longer. The hardware is driven by software, of course, but if you're not changing the software then the PC should last seven, eight or nine years."
Bassett says that the university's approach to IT&T is pragmatic. "You tend to be pragmatic if no one gives you any money," he says. "But everyone gets caught up in the hype; especially in universities where you have all this academic freedom, and people think they can spend their grant any way they damn well like. Some IT areas get caught up in the biggest and the best business."
Nevertheless, there are some areas of new technology he is keen to explore, particularly developing IT infrastructure which would allow developing more flexible learning systems. "I'm not too concerned with videoconferencing -- it's still a fairly ineffective way of communicating. It's okay with a small group, but it's not that good with large groups -- and we need reasonably sized groups to get a return.
"I think Web-based initiatives are interesting, and for the management systems we are looking at a Web front end. For example, having enrolling students finding information via the Web, and then even enrolling directly. There is also the opportunity to submit and pay for that electronically, because of the efficiencies that it brings to the system" Bassett estimates that the present weeks of waiting to learn if a university might make an offer could in theory be reduced to hours were such a Web-based application system available.
But he is also interested in developing Web-based teaching systems, using an intranet for students on campus to get lectures, graphics or course notes. "Students wouldn't need to worry about getting into a crowded lecture theatre or library, and [Web-based teaching] makes more effective and efficient use of [the] campus. Or off-campus, part-time students might have the opportunity to study from home. It also has obvious advantages for distance education," he says. "I'm not talking about the virtual university, that's a myth. People are happier about talking to a person. I'm just talking about offering a more flexible package.
"The university student of today is not someone who can wander along and take their time. Most of our students are employed," he says. A Web-based, flexible learning system, he believes, would help them manage their study, work and free time much more effectively.
Insurance and financial services
Hypothetical windfall: about $5 million
"If I got a one-time 15 per cent hit, I'd spend a substantial proportion on people," Cullity says. Not necessarily new people -- but the right people. He lists what he would need: training, retraining, assessment, competency assessment, and replacing some people who won't make the grade. In all he would spend about $3 million to completely overhaul his staff, he says, which would leave another couple of million in the windfall kitty. But it's the people where the attention is required. "You don't want to throw training at them, but need a systematic and controlled investment," Cullity says.
The initial step, he says, would be to call in independent consultants who would conduct a competency assessment, which would show which staff were capable of what, and how they might be reskilled or redeployed. In some cases they might be retrenched, and Cullity admits that some of the $3 million would go on retrenchment payouts. "We have a high level of contractors in insurance to meet a demand which otherwise couldn't be met -- a demand to do with Y2K, and the goods and services tax, and the Internet and e-commerce. I would want to reduce my dependency on contractors," he says. "To do that I would either need to pay more [to permanent staff] or make it more attractive to work here."
At present more than half of MMI's IT&T staff are contractors, and ideally Cullity would like to see that fall to 25 per cent. A higher ratio of permanent staff would, he believes, help those staff relate more closely to the fundamental business of MMI. He would be looking for people with an understanding of data warehousing and enterprise resource planning systems. "It's all about getting the right people into the right job. I don't have a problem getting new PCs or software, but I do need to look at the skills shortage."
At present MMI's headcount is skewed because of the Y2K issue, and there are 150 staff at the company; but post-Y2K, and post-GST, Cullity expects that to drop to around 100.
One thing he definitely would not do is spend any windfall on e-commerce. "It's like the saying about advertising: half of the money spent goes down the drain -- you're just not sure which half," he warns. E-commerce spending needs to be carefully thought through, rather than have windfalls thrown at it, and Cullity says: "I've probably already got the funding I need for e-commerce."
If he got his 15 per cent windfall he'd have the $3 million to overhaul the staff, and be left with "a couple of million in the kitty". How would he spend that? "Send them on a week's holiday to Hamilton Island," he jokes. "You don't blindly give everyone a 20 per cent pay rise or send everyone off on a training course," he says. "You need to assess staff and make sure you are spending the money on the right people."
Senior manager IT, Bendigo Bank
Banking and financial services
Hypothetical windfall: $820,000
David Cooper spends his windfall in seconds. In fact, he could easily spend four times his windfall, if he got what he really wanted: a best-of-breed enterprise management system. Over the last two and a half years, Bendigo Bank has been changing its network infrastructure. But lagging quite badly has been the network management system, Cooper admits. "The network management program has been left behind a little, and I found that the cost was well above my expectations."
Cooper accounted for the cost of a management system in his annual IT budget, but candidly admits that he severely underestimated the costs. "It is so expensive. You need a proper framework. It's cheap enough to get point-to-point solutions, but you don't get the whole network management coverage." His idea would be to get a best-of-breed enterprise management solution that would allow proactive management of the network. That, however, would cost $2 million to $3 million, well above even the 15 per cent hypothetical windfall that CIO magazine provided him.
Fantasy aside, though, network management is a real issue for the bank -- especially as it rolls out its program of alliances, such as those with IOOF and Elders; extends its community banking program; and from October, begins its rollout across Western Australia. (See "Banking on the Community", March, 1999 CIO, page 8.) "At the moment we are very reactive to the network," Cooper admits. It's only when the help desk alerts IT, or a user calls, that it becomes clear that the network isn't working well. "There is a delay in our service, in our response to problems," he says.
Like Oracle's Miriam Ryan, David Cooper is finding the network his biggest area of growth and his biggest concern. "We need to know when we're sailing close to the wind with bandwidth, or when there is a problem with a router. The network is our biggest growth area and we need stringent management tools," Cooper says. "The 15 per cent would probably still not be enough, but it would be close." Close, that is, to paying for a "reasonable" network management system. But it wouldn't fund an entire enterprise management system which would alert IT when a server struck a problem.
"It would let me know when a line was down or when there was a problem with the bandwidth. It's a question of managing the network or managing the enterprise." But to meet his long-term ambitions of a robust enterprise management system for the bank, that would allow remote management of the network and the remote servers, Cooper would need a corporate godmother with a 50 per cent budget windfall.
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