It's not unknown for CIOs to have to spend much of their time pushing the IT message to a hostile board that's not only deeply suspicious of every dollar invested in IT but also convinced they are simply not getting value for money.
The results can be a little hard to handle.
But what happens when the chairman of the board is an IT enthusiast with strong ideas about the direction IT should be taking the company - ideas that differ drastically from those of the CIO? The results may ultimately prove highly beneficial for the company, but they aren't necessarily great for the CIO concerned.
When Lend Lease chairman Stuart Hornery decided to outsource his company's entire IT operation, he met fierce resistance from his CIO and won. For Hornery, it seems, the issue was simple: partnering with a large IT services company was the only way to support his business' global expansion plans.
For Lend Lease, a True Blue company with big ideas, it may make good sense to piggyback on IBM's resources to support its globalisation program. Until five years ago the company had its eyes firmly on the domestic market. Today its expansion into markets around the world is a given; the company knows it can never look back to its days as a purely domestic player. But it also knows creating a global IT operation would be impossible without the backing of an IBM.
So when Hornery, a former Businessman of the Year, showed up at the August launch of IBM's Asia Pacific Geoplex, CIO magazine was eager to chat with him.
Regular CIO contributor Sue Bushell took the opportunity to ask him and IT&T investments director Susan Young about Lend Lease's initial decision to partner with IBM, its plans for the future and the original driving force behind the partnership decision.
Along the way we gained some insights into Hornery's thinking as one of the relatively few data processing managers from the 1960s to have so far made it to the boardroom.
CIO: Tell me about your initiatives to reposition Lend Lease to compete globally?Hornery: Lend Lease, up until five years ago, was largely a domestic company with the usual array of legacy systems. About two-thirds of our business is in financial services and one-third in property, so it's quite diverse. We're a great outsourcer of everything we do. We outsource investment management, for example; we don't manage our own money.
It was only really at the beginning of this decade that we found somebody to whom we could outsource IT. After all, no respectable programmer or systems analyst was going to work for the DP department of a life insurance company owned by a property developer. So we started a courtship with EDS that went on for about a year or 18 months. In the end we decided we were totally incompatible from a cultural point of view. EDS was more like the army, while we're sort of regarded as a shade pink - we have a more tolerant attitude towards our employees and that sort of thing. We actually think they are important.
CIO: So you were concerned that if your IT people went across to EDS it would be an unhappy relationship?Hornery: Absolutely. For us that was a number one consideration. And while there are certainly differences between the IBM culture of old and these days, I think there was good compatibility between them and us. It was pretty early days in the IBM transition from being a box manufacturer to being a services provider and now a solutions provider, so it was probably a pretty gutsy call at that stage to put all your eggs into the IBM basket.
CIO: You were one of their first outsourcing clients?Hornery: Yes. And even by world standards at that time it was quite large. We didn't just give them the boxes, we gave them the whole lot, applications as well.
CIO: Was there a lot of argument about that, about whether it was ceding some competitive edge to outsource application development?Hornery: You can argue it either way, but I've never been worried about competition. I've always felt if you're worrying about the competition they're too close to you and you're not far enough in front.
Since then, we've rationalised - we had seven cc:Mail systems, all that sort of thing. A lot of the focus in the first two years in the life of the contract have been this sorting it out. At the same time we've gone global, so we're now in all the countries of the world.
CIO: How much has the technology driven or enabled this global push?Hornery: We had to go anyhow; I think most large Australian companies have no choice but to expand offshore. Australia is a very small economy and sooner or later you bump your head up against that, but I think there is no question that the technology is helping us get there. Even simple things like being able to communicate. We've got our own network now so that we can have audio-visual and actually run a board meeting or conference and patch people in. That's fairly basic stuff but it's pretty important stuff, particularly for an Australian company that's so far away. I spend my life on an aeroplane and you can't really do without communication. We've got Lotus Notes, and Susan [Young] can tell you about a project we've got called Trilogy, which is our first truly global collaborative project.
Young: It's our foray into electronic commerce and our electronic online service capability strategy for the world. We are looking - along with different business units in the States, in Australia, UK and Indonesia - to basically have a common look and feel to what we are going to do with Notes.
It's the first opportunity to achieve that. Through collaborative groupware like Lotus Notes we've got certain database set-ups so we are able to communicate with each other and type input back and forth as well as having face-to-face meetings. It's actually pretty innovative for us.
We can talk about Trilogy a couple of more months down the road. It's in prototype stage right now so we're still trying to keep it reasonably confidential in terms of strategic advantage.
Hornery: Another example is a project that we call Horizon that once again is Lotus Notes. We manage a lot of shopping centres. Every shopping centre has got 240 tenants and there are a lot of data entries. Every tenant is on a different deal, with different projections on rent and outgoings and so on, so ledgers have got lots of entries. To actually do a forecast of the cash flow for a shopping centre is hugely complex, even on a spreadsheet. It takes a person a month to do and institutional clients like AMP need them every month because they get a spreadsheet and they stick it in their system. It's hugely inefficient. The Lotus Notes application allows us to put rules into the ledgers and we can do a forecast in two hours instead of four weeks.
Young: It is an incredible reduction in terms of time.
Hornery: We're now rolling that out in the States first, because while we manage 30 shopping centres here, we manage 50 in the States. Now, what that will then do is allow us to do lots of other things. For example, we will know how much we spend on energy everywhere so that we can then buy energy globally.
Horizon won an award at a Lotus Notes combined fair in Florida recently as one of the most innovative projects that has ever been done in terms of merging several types of systems.
IBM basically provides all our services, so it's managed by us in terms of an application but they do development of most of our systems. For example, for the Trilogy project, which involves a lot of graphics, we're using IBM Multimedia in Atlanta.
Young: We actually went to that facility specifically. IBM has a number of really terrific interactive multimedia centres and we went to one that could really deliver the best in terms of what we were looking at. We are working with them but ISSC is still managing the project with us. That's not to say that we won't bring in extra people or extra talented software if we need that to complete something that we're trying to do.
Hornery: We've also just acquired a largish manager of real estate in America called Equitable Real Estate. It manages something like $25 billion worth of property.
CIO: So you've got to find a marriage between their systems and yours?Hornery: That's right. One of the subsidiaries to that organisation, called Compass, is actually what's called a facilities manager. We manage all of Digital Equipment's buildings all around the world. We manage Mellon Bank corporation's facilities throughout America. [We manage] anything from occupancy in a high rise to a bank branch in San Diego. You can't do that without technology. All the communication along with the management systems is run out of Atlanta, it's not run out of here.
Young: As part of the due diligence on that project, people went in and looked at their systems and the robustness and how they would be compatible with ours.
Because of course there are problems if you've got a "marriage" and the systems don't work together.
Hornery: It's a common issue now of mergers. Again that's an area where IBM can help us, because people don't carry that sort of skill in their organisations.
If we're doing a merger IBM is part of our due diligence team. We'll see what costs are involved people-wise and cost-wise or time-wise in integrating or not integrating.
Young: We really value that partnership and we view them as a strategic ally to help us take our core businesses into the places that we need to be in for the future.
CIO: Is it correct to say you wouldn't have been able to go global to the extent you have without that marriage? Hornery: Certainly. They (IBM) have allocated a senior manager who just happens to be domiciled in Atlanta who looks after our partnership worldwide. We have a contract here because a lot of revenue is Australian due to our history, but in the future it [will be] global. His role is to manage all the disparate businesses we have around the world, and the relationship between IBM and ourselves, making sure that services are provided and needs are anticipated.
One of our corporate projects is to develop the worldwide infrastructure that we will need. We don't have it yet - no organisation has it yet - but we're patched into IBM so they give us a little share of their [communication] lines until we develop our own. That's going to take us 18 months, but we'll be able to collaborate around the world. At the moment we've got some dedicated collaborative lines. We don't have them in all places at the moment, but certainly we can't do what we want to do without [eventually] having that infrastructure in place.
CIO: You were a very early adopter of the concept of technology partnership?Hornery: Yes.
CIO: Who drove that?
CIO: Was it hard to get the board on side?Hornery: Not the board but certainly it was over a lot of other people's advice, particularly with data processing, the chief information officer. The last thing the chief information officer wants to do is to outsource his whole shooting match - it's seen as a reflection on him or her.
So we're in the process of recruiting the chief information officer, who will probably come out of North America, who may well be located in North America and like all of us spend time in a plane.
Young: The CIO role has also become so important in recent years. When I was in the States in April, one of my old friends who is in executive search said the people filling CIO positions are actually making a lot more than chief executives.
CIO: You seem to know a lot more about IT than most senior executives. How has that come about?Hornery: My era knew nothing about IT. I actually ran a data processing department in the '60s in Holland. They sent me around the world. That was in the era of 6020s and 6030s and "I've got a bigger one than you, I've got a 36040." It was the days of punch cards. But I've always had an interest and even then I could see it would have a big impact on business.
CIO: In your opinion, will more and more companies move to technology partnerships to help their global expansion plans?Hornery: They have no choice. You can't get the resources. It's a cliché to say the IT world is changing, but it is. We've watched the move from legacy systems direct to networking. Of course we might well be wrong. We might not be right at all, but commonsense tells me that outsourcing is the way that you empower employees. After all, we are now moving into a services economy everywhere around the world and if you can't run service you can't function.
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