Let's Not Forget the Good Times
- 10 August, 2001 09:00
Not every industry is going down the tubes. Here are four strategies for CIOs fortunate enough to be coping with rapid corporate growth.
ENOUGH DOOM AND GLOOM.
If you're worried about scarce resources and tense budget meetings with your cranky CFO, read "Welcome to Hard Times". But darn the economy, some businesses are still cranking full speed ahead. Last year, for example, Providian Financial's revenue grew by 77 per cent, and Wall Street analysts expect the company to average 25 per cent growth for the next five years. Meanwhile, storage vendor EMC is an $US8.8 billion company talking about $US10.5 billion, and QVC, now hawking goods via the Web as well as its television channel, is adding 250,000 new customers each month.
Eventually, the economy will perk up. These things go in cycles, as Adam Smith assured us more than 200 years ago in Wealth of Nations. Other ships will again rise with the tide. So whether you're in growth mode now or still scanning the horizon for signs of land, here are four tips - beyond the obvious stuff like "buy bigger processors" - that veteran CIOs offer for riding the growth rocket.
The Differences Between:
Cross-train your staff for flexibility.
Be wary of outsourcing arrangements.
Hire more in-house contractors.
Focus on customers and process.
Let your people specialise and focus.
Outsource minor application management.
Avoid giving contractors all the good assignments.
Focus on process and customers.
1. Know When to Fold 'Em
One of the drawbacks of a high growth rate is an endless cascade of demand for new applications with new functionality. To meet those demands, the IS department can end up using stopgap applications and spaghetti-code upgrades. A word to the wise: it's better to replace those applications than to keep upgrading them.
Clearly, businesses that are quickly building revenue and adding employees need highly scalable IT systems, networks and applications. For example, Pennsylvania-based QVC runs its core transaction processing on fault-tolerant Stratus systems. "It's not a real popular platform these days, but the people who use it need either the fault tolerance or massive throughput," says QVC CIO John Link. Or both. Link says the system hasn't had a single second of downtime in at least a year. And that's despite the retailer's wildly unpredictable transaction loads, which can spike up to $US7 million of orders processed in a single hour when a particularly hot set of items runs on the TV channel.
The problem is that most high-growth businesses don't allow CIOs time to mull over architecture decisions or to code the most flexible systems; when revenues are spiking upward, the demands on the IS group are immediate.
Tanni Graichen, executive vice president of Integrated Card Business and CIO at Providian's credit card unit in San Francisco, recalls a four- or five-year period when her company really hit the big time. "The demands from the business became a relentless waterfall," she says. "Or as my managers referred to it: Drinking from the fire hose'. The expectation was that we would deliver [new applications and functionality] every three weeks." As a result, some pilot applications were thrown into use just to keep the company moving forward. These kinds of systems eventually become a bottleneck to future corporate growth owing either to lack of functionality or scalability. Even though Graichen now oversees a well-resourced, 800-plus-worker IS department, "You can't deliver enhancements every three weeks when it's spaghetti code on top of spaghetti code," she says.
The lesson: CIOs must be willing to pull the plug on outdated systems.
Providian now has a standard process for putting old-timers out to pasture. Mission-critical applications slated for replacement receive only the minimum upgrades necessary to keep them wheezing along until the new application is ready. Maintenance of minor applications, though, is outsourced - handed over to offshore coders. This has two effects. One, the cost of maintenance on the older system goes down. Two, Providian's internal group can focus its attention on getting the new system right for the expanded business requirements.
2. Make Friends in Marketing
How many extra desktops will you need to buy next year? How many more megabits of bandwidth or gigabytes of memory will next month's expansion demand? Graichen looks to a surprising source to begin to answer those questions: the good folks over in marketing.
"Any company that is growing probably has a very good marketing arm, and those people tend to be people who forecast," she says. The marketers can tell the CIO what kind of growth to expect for the company and what business drivers are generating that growth. Then it's up to the IS team to translate those business factors into a related forecast for IT needs. (For more good thoughts about the marketing department, see "IT Versus Marketing", page 82.) For example, "If the business is going to add 150 new call centre agents, then we know that means we need X number of additional security people to get the [new agents'] network IDs up," Graichen says. At Providian, that translation is done by a team that meets on a monthly basis to review what's going on in the business environment and to make sure that IS is staying on track. The team is led by the head systems analyst - who has project management experience - and includes operations staff, desktop personnel, systems and development managers, and database guys.
Graichen notes that some marketers are optimists and others are pessimists. So it isn't enough just to read their numbers off the sheet; the CIO must forge relationships and know which way the numbers are likely to lean.
3. You Want Specialists, Not Generalists During hard times, the wise CIO makes sure his employees are flexible and trained to take on a variety of tasks. Fast growers, however, say their IS team members are more productive when they are allowed to focus on one job. That requires a clear organisational structure for the department so that everyone knows which task he is supposed to be handling. It also helps if line-of-business workers have a single point of contact within the IS group. That avoids confusion and prevents IS workers from doing double duty as expectation managers.
Dave Ellard has been CIO at EMC for less than a year, but he was readied for the storage highflier by 13 years at nearby Boston Scientific, which grew from $US30 million to $US3 billion during his tenure. Ellard's first concern at EMC is maintaining alignment with the goals of the rapidly growing business side. And his solution for alignment at his new job starts with an organisational change: putting in place a set of process and portfolio managers who will serve as the 750-member IS group's face to its internal customers.
"When the business is growing fast, it has process challenges. And the only way you get a bang for the buck in a technology project is if you change the processes," Ellard says. The traditional technical silos will remain in place at EMC - network management, application support, data centre - but the workers in those silos will no longer be confronted by a deluge of business-side requests. Instead, the portfolio managers (line-of-business employees with IT training) will take all user requests and prioritise them using a standard methodology. And the process managers will ensure that old, manual processes - atavisms from EMC's smaller days - are revamped and streamlined before they get encoded in software.
The key result of this reorganisation, Ellard says, is that the most important projects will get the most attention, while the lead technical personnel are freed up to do what they do best: deliver great service levels.
Graichen uses a similar plan with a somewhat different explanation. "When you're a little company, a lot of deals get done in the hallway. When you get bigger, you can't work that way; there are too many groups to coordinate," she says. Her solution was to create a project management office. "The project managers are independent of the manager who is responsible for the deliverables; they give the users someone to go to and keep the communication going, while the deliverables people can still keep the trains moving."
4. Give Contractors the Boring Stuff.
There's no way around the fact that high growth means lots of work. The trick is to avoid letting those demands turn your IS shop into a sweatshop.
Ultimately, if your IS shop has a reputation for burning people out, it not only causes the employees grief but also, by making those employees less productive, slows the business's ability to steam ahead. It's a well-known management mantra that employees are more willing to work hard when the work is interesting. Unfortunately, keeping the juicy assignments in-house is difficult under rapid-growth stress.
"We used to use contractors every time we put a new module in," says Graichen, "because all our people were busy keeping the other stuff alive. So the staff felt like the contractors were getting all the cool stuff." Even in the face of crazy expansion like last year's, Providian has forced itself to scale back on contractor use. Graichen says contractors currently make up less than 10 per cent of the IT workforce.
Link says reputation makes a huge difference in hiring, and word gets around whether a given company is exciting or just exhausting. "We focus our hiring efforts on local colleges and people with local ties," he says, "and we have a reputation locally for having a lot of technologies and a lot of projects." QVC has a goal of adding 50 new positions in the IT department during 2001, and 44 were already on board by the end of the first quarter, so something's clearly working.
Nobody claims rapid growth is easy, but it sure beats the alternative. Following these four strategies will smooth the ride for both the CIO and the IS staff.