Tuesday, October 11, 2011

Wait! Not so Qwick...

The CIO position is as much or more about leadership as it is about technology.  Since IT is a service, CIO's must always, always do whatever is possible to best advocate for customers and the needs of a business.

The impact of great leadership can be substantial.  Steve Jobs, who just passed away last week, will probably be described as the post-millennial Jack Welch.  By the accounts of friends and co-workers Jobs was not really all that sociable or "nice".  He didn't give away his billions to charity like Bill Gates and Warren Buffett seemingly are these days.  And he didn't cultivate a carefully orchestrated public persona, wear designer clothes, or sail a huge yacht across the seven seas.  What Jobs did, however, is create the world's most valuable company.  He did it by having an incredibly insightful, clear vision of the future and a singular drive for making things happen.  Jobs was relentless in advocating for his customers and passionate in enforcing his plans.  In short, Steve Jobs understood what his customers wanted (not always needed) and utilized his incredible leadership skills to bring the world along with him.  The benefits to Apple from his leadership were and are legion.

Now let's take a look at NetFlix.  For a long time - that's five years in tech speak - NetFlix was on its way towards becoming a household name.  The company almost singlehandedly destroyed Blockbuster and Hollywood video while providing the entertainment industry with a hugely profitable outlet for its older movies, videos, and shows.  Netflix did so well that by the early part of this last summer, its stock had hit about $300/share.

As with all businesses, challenges always emerge and must be overcome.  The big challenge for Netflix was what to do about the inevitable shift away from physical media, mostly DVDs, towards online downloads called "streaming video".  In a textbook example of how not to manage, the leadership of NetFlix led by CEO Reed Hastings went into a "back room" and with apparently no regard for its customers and a lack of sanity came up with a solution.  What was this solution, you might ask?  It was twofold -
  1. Almost double the price of monthly subscriptions
  2. Split the Netflix business into two parts - "NetFlix" for a streaming video segment and "Qwikster" for the traditional postal service delivery segment
Not only would customers be asked to pay (a lot) more, they would have to go to separate websites to order postal or online delivery.

Needless to say, the customer backlash was immense.  In the first week NetFlix/Qwikster lost hundreds of thousands of subscribers.  When asked for a reaction, CEO Hastings replied that "We" (meaning the management team) knew that some of our customers would be unhappy.  But we are secure in our management brilliance and anyone who doesn't get our vision and greatness can just go pound sand. (In the spirit of full disclosure, the last sentence in italics is strictly my editorial summation of the thinking of Hastings and his leadership team)

By leading from a position of complete disconnection from its customers, Hastings and the leadership of NetFlix took a great company and applied a heavy coat of tarnish.  But don't just take my word for it.  The fallout from this poor leadership was huge.  The stock price fell from $300/share in July to $112/share in October, just *three* months later, an astounding 63% drop, or 21% per month!  If you owned 5000 shares of NetFlix in July, your investment would have lost $940,000 in value as of today.  In a classic move of closing the barn door after the horses got out, today NetFlix announced that it would drop the "Qwikster" business and recombine everything back into the original NetFlix brand.

So the moral of the story is that good leadership is critical.  If you put the right people in place (Apple), your organization and customers will be winners.  If you put the wrong leaders in place, no matter if you are staffing at the lowest or highest levels of your company, you WILL pay a price - just like NetFlix and its exceedingly unfortunate investors are today.

Thursday, September 15, 2011

Tickle the keys

By now most of us have seen how the era of the tablet PC is upon us.  The market is pretty much dominated by Apple at this point, but with so much money to be made in that space it won't be too long before there are viable competitors to take on the fruit company (just not HP). 

Just for fun, let's list all the great things about tablets:

  • They are light and easy to pack
  • Their batteries last forever (or 5-10 hours, whichever comes first)
  • The viewing aspect, set at 16:9, is perfect for HD video
  • Lots of cool, easy to use apps that rarely crash
  • No "blue screen of death"
  • You look really cool using them
  • They are multi-media superstars - meaning that you can use an app, listen to your music, watch movies, compose music - all from the same device.  No reboot required, by the way
  • You DO NOT have to take them out of your bag at airport security <My Personal Favorite>
  • You can pack a whole library of books inside a tablet.  A big space saver if you're a packrat like me
  • You can make phone calls, video conferences, web chats, and do all kinds of instant communications through them
So what is really the only major drawback for tablets at this point?  If you've ever tried to type on them, you already know.  Unlike a standard keyboard, the typing interfaces on tablets are slow and frustrating to use.  With my tablet I will never be able to sit down and bang something out like I can on a regular keyboard.  (You can guess that I'm not typing this post on my iPad!)

The next big thing in tablet computing is going to be a revolution in the typing interface.  If you're an entrepreneur looking for a way to make an easy billion or two, focus on this problem.  Once people have a way to quickly and comfortably type on their tablets, that will be the day that the laptop dies.  The PC as we know it will not be long in following.

Thursday, September 8, 2011

BMW, Timespan, and Freddie Mercury

You are probably looking at the title and asking, "What do BMW, Timespan, and the lead singer of Queen have in common?"  Since he died before the first smart phone was ever on the drawing board, the easy answer would be "Not much".  But when I think about how to create a winning IT leadership team I often reflect back on a specific lyric Mercury, who would have turned 65 two days ago, wrote over 30 years ago.  It goes - "Build your muscles while your body decays."  I think Freddie was referring to the inevitability of life's struggle against the progression of time.  My thinking is much less grand, being drawn to the design, purpose, and functions of roles within leadership.

BMW is one of the most successful car companies in the world.  If you are buying a 2011 model today you can be assured that its design was being perfected back in 2005-6.  As I write this post today, BMW is working on its 2018 and 2019 models.  They know that their future, eight years from now, is being decided by the actions that they are undertaking today.  From this same principle we can begin to understand why companies have adopted the hierarchy of roles that look more-or-less like the following: CEO-SVP-VP-Director-Manager-Supervisor-Individual Contributor.  Each one of them has a part to play in the organization, from the most tactical to the most strategic.  Like genetics in nature, Corporate America has taken on the organizational characteristics that give it the best chance of surviving.  The design above is an intrinsic acknowledgement that, while day-to-day issues must be handled well, the foundations of future success are laid long before that success is realized.  And the organization must have people who understand this tenet and can be the forward thinkers who are so critical to ensuring continued existence.

For the sake of this post I'm going to focus specifically on one of the stalwart roles of any IT leadership team - the IT Director.  Depending upon the size of the company and organization, sometimes the director plays a supporting role, possibly leading a department.  Other times the director may lead the entire IT function.  In any case, a person in a director role must spend quite a bit of time and effort focused not on the present but what will be happening within IT and the company, over a minimum 3-5 year time horizon.  After all, with the way that technology is constantly changing and the time it takes to implement a significant project, if directors are not thinking about the future the business will always be playing catch-up and will likely be relegated to a permanent position well behind the curve of emerging technologies.  Not good if that business is trying to be competitive - and face it - aren't they all?

Applying the meaning of Mercury's lyrics to modern IT organizations, you might suspect that the concept of managing time spans is not on the mind of most people.  I see this play out  over and over when I have conversations with various leaders, most of whom repeat similar themes.  In these discussions I hear and see a lot of talk (quite proudly) about how they carefully focus on daily operational meetings, maintaining tight controls over tasks such as managing expense reports, and reacting to the daily break/fix situations.  When I probe further by asking about what will happen in IT two years out and how that might impact the finances of the company or competitive position, very often I am told by director-level managers that they are simply too busy dealing with current issues to engage in speculation about the future.

When you think about how important the future strategy of IT is to a company's success, you should wonder why a director-level employee would be focusing on tactical issues.  What value does a company derive from an IT director who never thinks past the next three months?  Should a director be great at handling daily operational meetings, signing expense reports, assigning tactical work tasks, or handling break/fix events?  All of these things are important, to be sure, but maybe for someone with a shorter time span.  A director who isn't fanatic about preparing for the future is probably just building their (organization's) muscles while their (company's) body decays.

Monday, August 22, 2011

HP, Windows 8, and the Forbidden Fruit

Today's posting is about double my usual size.  Stick with me, though, because it's worth it!

If you pay attention to the hot news in technology you have probably heard two big announcements over the past several weeks.  The first is the tectonic splash HP made last week where they announced that they were getting out of the personal computer business.  Wow.  Wasn't it almost 10 years ago when HP, under the "leadership" of then CEO Carly Fiorina, staked its entire future on the PC business when it acquired Compaq?  Guess that hasn't worked out so well.  The second, maybe quieter, announcement was by Microsoft as they began the beta testing of their newest operating system - Windows 8.

Both of these moves were heavily influenced by that "Forbidden Fruit" referenced in the title of this post. (Any ideas what fruit we're talking about??)

Microsoft's last OS, Windows 7, has been out for about two years now.  In terms of product life cycles, the pending advent of Windows 8 might seem a little bit early.  So why the hurry and what could possibly be so influential to several of the most mammoth tech companies in the world?

To figure out the mystery, we have to take a look at the core purpose of Microsoft and HP.  When we strip away all of the strategies, products, etc., we see two companies focused on making profit and dominating their industries.  In the case of Microsoft, they have owned the personal desktop experience for well over 20 years.  If you bought a PC, laptop, or some other computing device you almost certainly purchased a Microsoft OS as well.  In the case of HP, they have had a major strategic relationship with Microsoft because every computer they sold to a consumer has had a Microsoft Windows OS on it.  In the world of operating systems, Microsoft has held a virtual monopoly on the PC market. (Even Intel has some competition from AMD!)  But yesterday's successes do not always predict the course of future events.

At this point we have to discuss the "Forbidden Fruit".  Of course, we are talking about Apple.  For the longest time the most valuable company in the United States has been Exxon.  In this instance, value is measured by the total market capitalization of the company, or the total worth of all the outstanding shares of stock.  As of August 2011, both companies were approaching of value of US$350 BILLION.  In the last four years marking the emergence of the iPhone and iPad, Apple has created products that are almost singlehandedly driving the personal computing market.

As you might expect, Microsoft is no fool.  It realizes that without an operating system that can function as effectively as Apple's iOS, it will not be able to create a product or user experience that could compete with Apple.  Also, with so many consumers, world-wide, switching from PCs to tablets and smart phones, the sun is quickly setting on the era of the personal computer.  Proving this true is the essence of Windows 8.  This new OS is clearly designed for the tablet environment.  Take a look at some of the early emergent features of Windows 8:
  • The display is optimized for a viewing aspect of 16:9.  In layman's terms, this aspect is the same one used by modern HD televisions AND is the aspect used by the iPad.
  • The interface is designed to easy support touch-screen computing.  (A trend is developing)
  • The time to complete a boot-up cycle is greatly reduced from that of Windows 7 and earlier Microsoft OS platforms.  (How long does it take an iPad to come online versus a PC?)
  • There is a heavy emphasis on HTML 5.  This part might be the most important competitive advantage for Microsoft.  In short, if you view online video, you are probably viewing it through one of three applets - Flash (the most popular; made by Adobe), Windows Media Viewer (native Microsoft), or Quicktime (Apple's product).  One frustration shared be most Apple product owners is the fact that they are blocked from viewing anything online that is enabled by Flash or WMV.  By focusing on HTML 5, Microsoft has a chance to reinvent itself as the primary enabler of online content.
Microsoft can see the writing on the wall.  If they don't become a viable player in the tablet hardware and software environment in short order, they may be in for a nasty fall.

In HP's defense, it was highly unlikely that they could have predicted in the early part of the last decade how quickly Apple would change the entire landscape of personal computing.  From their perspective, it was probably an easy bet to assume that the PC market would not change radically for at least another 20 years.  But now that Apple has made PCs "so yesterday" in a little less than two years coupled with its own complete failure to compete in the smartphone or tablet space, HP is in huge trouble.  It has been forced, quite literally, to bet on a future that does not include a computer manufacturing component.  Quite a risk indeed to pull the plug on an 11-figure (dozens of billions of $$$) gamble it made not 10 years ago.

So you can imagine the fearful curses from Microsoft and HP,  directed toward that "Forbidden Fruit" company in Northern California.  Apple has the entire old-guard of the tech sector on the ropes and is moving in for the kill...

Friday, August 5, 2011

The "Fabric" of our lives

Just like we don't stop to consider how our electricity or mail gets to us, neither do we put much thought into how data moves around our networks and the Internet.  Every day we sit down to send and receive emails, browse the Internet, and read the news.  Data flows to and from our devices and we never see exactly how - it just happens.  (When it doesn't we call IT, right?)

Everything that I described above is completely and totally dependent upon networking.  The best way to think of a network is to think of plumbing inside of a house.  The pipes move water (and other things) to and from the source and the final destination.  Until recently, most networks have been constructed in what are called "tiers", or layers.  The cores of networks are found in data centers where most data is stored.  Branching out from the core, the networks further consist of layers made up of various pieces of hardware, usually a conglomeration of routers and switches.  In simple terms, wherever you have a physical presence, such as an office, there you will find hardware that creates the network on which you operate.

Over the past few years technology has evolved very rapidly.  When you hear terms like "virtualization", "the cloud",  and "IPv6", behind the scenes the demand for fast and copious network bandwidth have been skyrocketing.  The old-style networks that first emerged in the 1980s have not been able to adequately scale to meet these demands.  There are many reasons for this problem.  With the conglomeration of devices, often times there have been as many as six or seven hops between origination and destination for data moving across a network.  Like a local train stopping at every station, the traffic moves too slowly and with too much latency.  The newer technologies don't work well with these limitations in a network with so many layers to work through.  As a result, there has been an intense focus on finding innovative new ways to move data more quickly from point to point.

The current pinnacle of network design has created a new type of network technology called "Fabric", as evidenced in new cutting edge products like Juniper Network's "Q Fabric".  Fabric technology has been created to eliminate a lot of the need for remote networking devices and software protocols.  The design aims to utilize data-center class equipment to do most of the routing, switching, and "thinking" for the network.  By moving away from a reliance on many remote peripherals, Fabric technology is reducing the number of layers in the network from six to two.  Not only does this evolve us from the metaphor of the local train into the express train, it eliminates a lot of the complexity of a widely dispersed network.  One of the ultimate goals of the Fabric technology may be that the network equipment in the data center may one day communicate directly with your computer.  When that happens you can say goodbye to your home Linksys device!

In the next five years when you download a full-feature, high definition movie in just 10 seconds, you will probably be moving your data over a Fabric network.

[My thanks and credit go to Shehzad Merchant for his excellent article and reference information on Fabric technologies.]

Friday, July 29, 2011

So you want a Tablet?

If you follow the news about the tablet wars (and I do), you'll see that the battle is shaping up as the iPad vs. everyone else.  There are a host of challengers out there for Apple.  They include HP, Samsung, Dell, and many others.  So considering that the first iPad shipped in April of 2010, why are we still talking about the POTENTIAL for iPad challengers?  Why isn't there a true alternative like Coke vs. Pepsi, Dominos vs. PizzaHut, or Ford vs. Chevy?

The answer is a fairly straightforward one.  Apple knows what we want and is giving it to us.  The rest are still trying to market tablets in the same way they marketed PCs and laptops.

Here is something to consider:  Unless you are a hardcore gamer, when was the last time you cared about the type of processor, amount of memory, or graphics engine that was in your smartphone or tablet?  If you didn't automatically answer, "Huh?!?" to that question, you're still probably a member of the large majority who hasn't given much thought to those questions since about 2007-08.  There are very, very few people who own an iPad today who can tell you much about the technical "guts" of their tablet.

So let's compare an Apple commercial to one for the Samsung Galaxy or an HP whatever.  Apple is all about the EXPERIENCE of owning an iPad.  They focus on showing how pretty, how cool, and how much fun owning an iPad can be.  They show the millions of songs and apps you can get from the Apple iTunes store and how easy it is to buy and use them.  Best of all, Apple is very trendy with their marketing right down to the music they use. (How many people knew who 'Feist' was before that Apple ad in 2008?)  Apple knows that people buy their products because of the experience and only rarely for the tech specs.

Now let's look at some recent ads for the "other" guys.  Without naming names, what I see is a focus on the screen resolution, the processing power, the amount of memory, and the camera capabilities of their units.  Relevant, informative, and BOR-ring.  After 18 months these companies are still trying to market a tablet to us like it was a computer.  They are still missing the mark and that's why Apple is continuing to dominant the market and absolutely rake in the cash.

So you want a Tablet?  Odds are that you are going to buy it for the experience - how it makes you feel and how it makes others feel about you - rather than what's under the hood.

Friday, July 15, 2011

A quick thought on IT training budgets

The benefit of sending IT workers for training has never been easy for me to quantify.  After all, a significant amount of "effective" learning occurs on the job through daily work and partner interactions.  However, because technology changes so quickly new skills can sometimes only be learned through direct classroom time.

Another difficult aspect of creating a meaningful training program for IT workers is the subject of willingness.  While some workers are highly motivated to continually learn and advance their credentials through training, many others are very ambivalent. 

So what is the solution or happy medium?

Through experience I have come to the conclusion that there are several "averages" that work well for most situations.  They are:
  • Offer one (1) week of offsite training per year
  • Spend an average of $3,000 per worker (if you have an implemented ERP system) or $1,800 per worker if you do not have an ERP system
  • Require every employee to conduct a 30 minute report out to their teams on any class they attend
Several assumptions go into the components above.  First, I believe that effective training for complex IT systems can only occur away from the office.  If an employee is anywhere near a ringing phone or their everyday job, they simply cannot focus.  Second, a standard ERP training class lasts about a week and costs around $3,500.  Considering that some will attend training and others won't, an average of $3,000 is appropriate.  Third, requiring a report out ensures that the employee will (a) pay attention and (b) understand that the week out of the office is not a holiday.  You'll be surprised at how quickly you will separate the serious learners from the non-serious with the report out requirement.

If you want highly skilled, capable IT workers you will have to invest in their training.  These guidelines will help you develop your own approach.

Wednesday, July 13, 2011

Are you a Slave to your Master (Data Management)?

If you follow the trends in IT you'll know that right now the topic of Master Data Management is red hot.  So other than having more M&As in it than an annual report from Oracle or Microsoft, what makes this topic so interesting? 

When you think about what your company does, most likely your thoughts will turn to some type of relationship where you make and sell a product to your customer for which they pay you.  These products have characteristics - weight, cost, location, shelf life, etc. - and you track them inside some type of software application.  As you gain a new customer, you collect information on them - name, location, phone number, SSN, email address.  Again you store this information in some type of application or program.  These programs can be of a number of different types such as ERP packages, customer service applications, or sales/contact repositories.

The data you collect and store is constantly changing.  Products move through version cycles, people move, leads mature or fade.  As you update these records within your systems you do so to the "master records".  Or at least you hope you do.  When a change is made you naturally expect that one entry is all that is needed to complete the work.  After all, how wasteful and expensive would it be to have to go into, say, six different applications to perform the same customer address update?  Yet over time, as IT systems proliferate throughout a company it is exactly this redundancy that begins to occur.  Duplicate repositories of master records pop up as Sales, Operations, and Finance begin to use disparate systems to track the same master record types for different purposes.  As expected, the end state is a mess as different departments run reports on what is supposed to be the same data but the results just do not match.  A great example of this situation can arise out of reports that list customers of a given product.  The customer service department will pull a report of the "X Widget" family that shows a total of 112 customers while finance pulls a report of seemingly the same data and gets a total customer count of 97.  How maddening!

So what is master data management?  It is an emerging approach towards the creation of a single-point-of-truth (SPOT), or one repository that all applications in the entire IT portfolio interface with to add/change/update/delete master records.  This repository becomes the parent, or owner, of master data records such as customer and product information.  It is there and only there that master data can be stored.  In theory, this approach eliminates the disparity of master records throughout the company because no system, expect for the SPOT, is allowed to manage the information.

As I mentioned earlier, this field is emerging and that means the science behind excellent master data management is still under development.  But given the rising importance of IT and the intense need for "clean" data, the timing is ripe.

Tuesday, July 12, 2011

Guest Blog on PlanBox

I was asked by the site "planbox" to do some guest blogging on the topics of Agile project management.  Please go there and check out the site and my content!

Agile Project Management

Monday, July 11, 2011

IT Superstars - Who Needs 'Em?

The answer is - "We all do"

It is not an easy exercise to define what makes a stellar IT resource.  Because they come in all different flavors - awesome programmer, superstar analyst, omniscient DBA - there is no one stereotype.  Probably the best way I know to describe an IT "A" player is to say that they are the type of people that get things done.  I'm not talking about just showing up to work every day.  I'm talking about creating order from chaos, "operationalizing" vague goals, and solving crises in the middle of night.  All done with no excuses, just results.

All that I have said so far is not likely to come as a surprise.  But this next part will.  IT superstars are usually the hardest of all employees to manage.  They are often "problem children" who are difficult to satisfy, require constant attention, and continually stretch the rules.  While this may sound sensational, my over 20 years of observation of top IT performers has confirmed this truth over and over again.

As a CIO I have striven to build teams that can perform at the highest levels.  I've done this knowing that I will spend over half my time carefully leading and tending to these individuals.  Rare has been the day when I'm not mentally exhausted after creating/managing challenging goals, refereeing conflicts, giving meaningful praise, or managing strong emotions.  Contrary to many leadership books that I've read, top performers are not self-sustaining.  They are like hot rod cars - they are built to go turbo but need constant tuning and adjustment in order to run efficiently.  Ultimately these people will help create a world-class IT organization that can handle most any challenge, current and future.

So doesn't every leader in every organizational realize this truth?  Not by a long shot.  There are many IT leaders who believe that the best people to hire are what I refer to as "Honda Civics".  These types of employees are, as you would expect, very reliable and require very little in the way of maintenance and tuning.  You can hire a "Civic" and they will show up every day (for years or decades) and do their jobs with nary a complaint, hardly making a wave larger than a ripple.  But these people will rarely, if ever, rise above an average level or take your IT capabilities to a whole new level.

The importance of having a strong, adaptive IT organization has become quite apparent with the amount of automation that has occurred in the U.S. and throughout the world over the last decade.  We should all take a look at what our IT leaders are doing when it comes to talent acquisition and development.  If things are too smooth, if there is no "buzz" coming from that area then your company has probably hired a fleet of Civics.  Not a good situation to be in if you are looking for IT to be a prime facilitator in efforts to differentiate from the competition and evolve...

Wednesday, July 6, 2011

iPad in the Office?

The Apple iPad has been on the market for about 15 months now, long enough even for the second iteration (creatively called "iPad2").  From the first days of its release, there has been a buzz about what its place might be in the corporate environment.  Just this last quarter I have seen articles about the iPad replacing flight manuals in Alaska Airlines cockpits, finding its way on to the floor of the New York Stock Exchange, and even into some hospital operating rooms.  (Can you imagine a cardiologist searching for an app that does by-pass surgery??)

All of that is very interesting, but how will your company integrate the iPad into its own environment?

As you would expect, the answers to that question will vary widely.  But there are some specific integrations that will be common to the majority of companies embracing the iPad.

1. Email - A hallmark of the iPad is its wonderfully simple yet elegant email interface.  Since most companies use Microsoft Exchange, your IT department will use the "Webmail" functionality to import messages directly into your mail application.  Microsoft Webmail is the same tool that allows you to access your corporate email from any web browser.  The downside for your information security team is that you will also be able to integrate your own personal email (GMail, Yahoo, POP, IMAP, etc) into your iPad without breaking a sweat.

2.  Your own corporate desktop - There is a big trend today towards desktop virtualization.  Without giving you a long, technical explanation, desktop virtualization is basically moving the processing and storage functions of a PC into a large server in your corporate data center.  You still have a monitor, mouse, and keyboard, but you are connecting over the network to the data center for all of your dynamic computing.

There are a number of companies that create virutalization software, the most well known being Citrix and VMWare.  Citrix has built an app (downloadable from the App Store) called "Citrix Receiver".  This application takes your desktop image and puts it directly onto the iPad.  You could literally be working on your office PC, pick up your iPad and log into Receiver, and watch your image disappear on PC and re-appear on your iPad exactly as you had left it.

If you don't have a virtualized desktop, you can use an application called "Log Me In - Ignition".  It works very similar to Citrix Receiver but does not require any special changes within the data center.

3. Web Enabled Applications - If your company has created/deployed web based applications (you access them through a web browser), you'll have direct access to them through the Safari browser on the iPad.

4. App Store - Apple has recently started allowing companies to create applications that are specific to their own needs and store them within the App Store.  If employees need the programs, they can pull them down directly from the there while non-authorized personnel will never even know they are there.  As you might expect, the thought of putting corporate intellectual property on the App Store causes indigestion for more than a few IT professionals.  But given that there was NO way to deploy internal content previously, this is a big step.

There are many other ways that the iPad is used in the corporate, military, and healthcare environments.  The examples above should give you a good introduction of what your IT department is likely doing to make the device available to you.

Tuesday, July 5, 2011

The Fastest Way to Kill Your ERP Budget is...

Three Simple© words - "Time and Materials"

Having made a living in the consulting world, I love to work on projects where the engagement is "time and materials" as opposed to "fixed deliverables".  The former reflects an agreement with a consultant where s/he will work on your problems while charging you for the time worked and materials consumed.  The later reflects an arrangement where the consultant is paid for achieving pre-defined milestones on a project or some other endeavor.

To defend those on the consulting side, it is very difficult, especially on large ERP projects, to accurately price an entire project composed of fixed deliverables.  There are several reasons for this.  First, the client will almost assuredly try to squeeze out-of-scope items into the deliverables.  Not a good situation to be in where you, as the consultant, have to constantly be the "bad cop" enforcing the contract.  Second, the nature of ERP projects is that they are human engineering endeavors as much as they are system implementations.  They involve a great deal of diplomacy, change management, and adaptability.  One recalcitrant team refusing to meet their deadlines can throw a carefully planned project off schedule/budget by 20%.

On the flip side, if your contract does not hold your consultants accountable to produce X service by Y date, you are setting yourself up for failure.  The consultant is (usually) not your friend and they are in the business to make as much money for as many services as possible.  If you give an opening, don't be surprised if they take it.

So what's the best way to proceed? (I'm not going to address the topic of change requests here...)

Tell your consulting service provider up front that you are going to insist on a "fixed deliverable" contract.  Then have a frank and honest discussion about how to create a plan that addresses your need to ensure value for what you pay while giving them a reasonable chance of meeting your expectations.  Be prepared to be a little more generous that you might have originally planned, knowing that you are setting up a situation where your service providers rightfully assume their share of the risk.

Good contract negotiations are not about conflict - they are about creating the most optimal conditions to ensure the reasonable success of all parties.

Monday, July 4, 2011

SAP Middleware - Your Achilles Heel?

Staying on the topic of SAP - what is typically the most significant, long-lasting error made by most companies when they first implement the system?  The answer is middleware.  I'm guessing that a number of my readers do not really know what I'm talking about here.

When a company installs a large ERP (enterprise resource planning) software like SAP or Oracle, they also typically plan to interface a number of other non-ERP systems.  These could be custom built plant maintenance programs, specialized accounting packages, CRM applications, warehouse tracking systems, and hundreds of other possibilities.  Given everything that a system like SAP can do, it would be logical to assume that it has built in "hooks" for these other legacy applications, right?  WRONG.  Any software application not built by the ERP manufacturer requires a special "bolt on".

Can you ignore the need for middleware?  Yes, if you like to fire up your $60 million ERP program, while inviting the CEO, CFO, and Board to the launch party, and then watch absolutely nothing happen (except for a bunch of error messages).

Middleware is an essential requirement for ensuring that the ERP system that you are implementing is able to talk to the rest of your IT infrastructure.  A good middleware capability will ensure that you not only have a successful launch but that your SAP applications play well with the hundreds of other software programs that are likely powering your company.

If you haven't heard of middleware before and would like to know more, I would suggest researching two of the most prevalent solutions.  Probably the most popular package is IBM's "Websphere MQ" series.  SAP also makes their own flavor called "SAP Xi", also associated with "SAP Netweaver".  I wouldn't recommend spending a lot of time looking at the technical interworkings of the packages.  Rather, take a close look at the whitepapers and diagrams that show how the middleware packages make data flow between applications.

As always, if you have any questions please post them to the forum and I'll be happy to share what I know.

Sunday, July 3, 2011

Your SAP training program should learn from video-gaming!

Is your SAP training program working?  Probably NOT!

As a preface, I must say that I'm a huge fan of SAP.  It's one of the most wonderful systems ever devised and contributes greatly to the efficiency and profitability of businesses all over the world.  But at the same time, most people I know consider it one of the most difficult software programs to learn, let alone master.  Let me put it this way - you have a better chance of successfully hitting 100 straight drives on the fairway than you do mastering SAP.  Not good odds...

But why is that?  Why do companies spend hundreds of thousands of dollars trying to effectively train their workforces on a multi-million dollar system, only to fail?  The answer can be found in video games.

Most people don't realize that the video game industry brings in far more revenue each year than does the combined box office receipts of Hollywood.  There are all sorts of games - Madden Football, Halo, StarCraft, World of WarCraft - that are extremely difficult to master.  Yet people spend their own money to buy them and then go on to dedicate hundreds (if not thousands) of hours learning, studying, and blogging - all trying to get better.  You certainly don't see people going out of their way like this to learn SAP.

So what is the missing element?

It's actually two things: competition and a robust rewards system.  In all of these video games a person is rewarded for spending time and energy.  These rewards come in the form of (virtual) money, higher levels, better prizes, and a leg up on the competition.  Contrast this with an SAP training program that usually requires people to spend dozens of hours in front of a computer doing boring exercises with the ultimate reward of, possibly, a certificate.  Not much of an incentive.  It is hardly surprising then that most SAP training programs fail to provide much value because they offer little reward back to the student.

So that's all interesting, but what do we do about it? 

The answer is to involve Human Resources in the creation of a reward system that is built into your training program and ultimately your job descriptions.  Use financial, organizational, and recognition rewards in your training programs.  Define levels such as beginning, intermediate, experienced, and advanced  such that when someone attains them (you have to be able to define and test for each increment), they are recognized.  In the past I have built cash bonuses, organizational recognition, and role progression into the jobs of people I send to training.  The better people get at using SAP, the better they are in their jobs and the more valuable they become to the company.  I've even restricted promotions to senior level roles until people achieved "experienced" levels of proficiency.

In almost every case, when I attach specific, tangible rewards to my SAP training programs, their effectiveness usually triples.  Oddly enough, employee satisfaction also trends up in a significant way.  As humans we are built to compete.  Video game companies recognize this (and profit from it) and so should your company!

Friday, July 1, 2011

IT Budgeting - More than meets the eye

As a CIO, one of the most common issues I have to address is how and why IT spends the money it has allocated (and then some). In previous posts I alluded to the term "Black Hole", which is a common moniker that seems to get applied to IT spend.  Almost everyone at the manager level and above has either said or heard some variation of this statement:  "When it comes to money, IT is like a black hole.  We keep feeding money into it and it only wants more.  Where does it all go??"

In order to address that question, I have to describe what the difference is between an IT budget and one that is more "operational".  Let me do a little compare-and-contrast.

Similarities
As you might expect, there are parts of the IT budget that are common to all business units.

1. Salaries - Labor costs are a big part of IT.  But please remember that in this context I am talking about internal, or FTE, labor.
2. Recruiting/Training/Travel - Pretty self explanatory.  Even now in the depths of the recession/depression, IT unemployment is around 5%.  We are always recruiting.
3. Facilities & Overhead - IT has to pay for space, power, A/C, etc.

Differences
Here are some categories within the IT budget that other business units usually don't have to address. (I said, "usually")

1. Depreciation - I'll save you the long, technical/financial explanation.  Basically, whenever a company buys software, computers, hard drives, networking gear, memory, and other pieces found in the data center there is a purchase price.  However, in subsequent years all of that material is depreciated.  That means while there is no more acquisition cost, about 20% of the original purchase price is charged to IT's budget.  No cash is actually spent but that amount is treated as a debit against the budget.  To put it in perspective, one year I managed a budget of $82 million.  Of that total amount, $24 million of it was depreciation!  Imagine asking for that kind of money at the yearly board meeting knowing that there will be *nothing* to show for it.  Remember if you are not in IT and you're buying IT hardware, while you will likely never see it, IT is going to be absorbing the depreciation for it into its budget.

2. License Costs - this is similar to depreciation.  Put simply, if you buy a professional software license for $100, the software company is going to be charging you/the company about 22% of the purchase price every year to provide support.  This item provides patches, upgrades, and phone help if you need it.  Almost nobody that I've spoken to about software licenses understands the ongoing costs that occur after the purchase.  In fact, a lot of software companies will be VERY generous on the purchase price of their software just to get your company locked into long-term maintenance contracts.

3. Contract Labor - IT work is almost always very specialized: programming, data bases, enterprise systems, project management, training.  Typically, IT has between 15% to 60% additional headcount in contractors or consultants.  Almost everything within U.S. companies is computerized these days and IT must continually, although temporarily, augment its staff to ensure that the proper skill sets are available.  Every additional program, system, or server that is brought into the company adds a fractional need for extra head count.

4. R&D (also known as the "gadget group") - If your CIO and IT team is properly servicing your organization, they will be constantly experimenting with new technologies to either accept or reject them.  You may not know it, but that is how Blackberries, tablets, iPhones/iPads, cell phones, and laptop computers probably came into your company.  There is so much technology out there today that we are all being exposed to and the marketing makes us crave it.  We're told, "If you don't have X, you are being outpaced by your competition." (Also, you're just not cool..)

As a CIO I can tell you that it is very, very difficult to go to the CEO/CFO to ask for money to experiment.  Yet, the R&D function is critical to identifying tech that will help position the company for future success. So, unlike anything other regular business unit, a good IT group is always allocated money to R&D.

This list is not all-inclusive but should give you a better idea of why IT budgeting is not always easy to understand or appreciate. 

Einstein-ian Physics for Dummies

Ok, I promise I'm going to get back to my blog on IT Budgeting.  But I just had to make one last comment on astrophysics. 

Since I'm not a professional and don't play one on TV, take this one with a grain of salt.

Some (many) of you may have seen sci-fi shows like "Sliders" that had plotlines where the main characters crossed over into other, parallel universes.  I certainly enjoyed them because the possibilities were endless.  But let's take a look at one of the most famous equations of all time:


E=MC2

What it means is that all of the energy "E" in our universe is exactly and permanently equal to all of the matter in our universe multiplied by the speed of light squared.

So, if you happen to be a supremely lucky individual who ventures to another universe, remember this: Don't bring back anything.  Not a speck of dust, lunch (in your stomach), or breath in your lungs.  If you do, all of Einstein-ian physics will no longer be valid and the Earth will probably explode... :-)

Tuesday, June 28, 2011

Black Holes - Nature's first recycling program?

I'm getting ready to do a post related to IT-budgeting and the moniker, "Black Hole".  As I was thinking about what to say, I got a little side tracked on astrophysics.

Since I'm an engineer, I was taught in college that matter will always trend toward the lowest possible energy state.  My instructors called this concept "entropy".  They said that the Universe is destined to die a cold death some billions of years in the future.  Like a match, they told me, the Universe would burn brightly in the beginning only to slowly fade and burn out.

Fast forward 20 years - I was reading a number of articles about astronomy.  Apparently, at the heart of every galaxy (that we know of) there is (super)large black hole.  In a sense, these black holes help the galaxies to form and keep them held together through gravity over a very long time.

Looking at most of what these black holes "eat", scientists observe that majority of the matter is low-energy dust, dirt, and debris.  So it would seem that black holes help promote entropy by gobbling up all this stuff and turning it into nothing.

But wait!  Upon looking at black holes on the x-ray spectrum, these things are emitting an enormous amount of ultra-high energy particles.  In fact, they look like halogen headlights of Schwarzeneggar-like proportions!  So it appears that black holes are, in fact, actually recycling low energy matter into an extremely high energy state.  Mother Nature's first and most awesome recycling bin...

Maybe the Universe won't be fading away anytime soon...?

Monday, June 27, 2011

Solid State Hard Drives - Not your average Zenith TV!

For those of you old enough to remember the original use of the term "solid state", you might recall it being used to describe TVs that came out in the 1980s.  These units did not use tubes and did not have the two minute warm up period. (I remember having to turn on the TV five minutes before my show started so I wouldn't miss the intro!)  My family had one of these new TVs, a Zenith, and when we bought it I thought we were like the Jetsons!  Solid state now means something new in the world of IT.

If you are somewhat of a an aficionado when it comes to personal computers, you may have heard about the new hard drive technology called solid state drives or "SSD".  They are all the rage for people that play a lot of games on their PCs.  They are also being discussed by the hardware people in your IT department.  The buzz is that they are faster, more reliable, use less power, and generally look more sexy in the PC chassis. If you go to your local Best Buy, Fry's, etc., you will see them for sale.  When I first saw them I was comparing parts for my custom-built computer in July 2010. I could get a regular hard drive with 1TB (terabyte) for $129 or a 140MB (megabyte) SSD drive for $459.  I went with an SSD...

So what's the difference and why should you care?

Well, the "old" style hard drive is made up of moving parts, specifically a group of platters and a reader. In more common terms, an old style hard drive is made like a record player.  The platters, or "records", spin up and the needle moves across them reading data.  This technology has some limits.  First, the hard drive has moving parts that can break and wear out.  Also, the data access speeds are directly related to how fast the platters spin. Ultimately your hard drive speed is limited by speed and inevitable wear-and-tear.

A solid state drive (SSD) is almost exactly similar in function to a "thumb drive", or those little things you carry around in your pocket that hook into USB ports.  They have no moving parts because the data is read and written directly to memory.  They are so much faster because there are no moving parts - no need to spin up any platters to get to your data.  And since nothing is moving, the SSD hard drive is much less likely to wear out meaning that you 10,000th use should be just as fast as your 1st.

The price is very high right now because buyers are paying the "early adopter" rates.  As competitors get into the market, prices will come down quickly.  Pretty much every computer you buy in 2014 and beyond will be equipped with a solid state drive!

Tuesday, June 21, 2011

Cloud Computing - the Simple version

If you're reading this post, you have already heard about how the "Cloud" is going to revolutionize technology and business.  Companies are talking about how to incorporate the "Cloud" into their strategies.  If you read CIO.com, you may have seen how the "Cloud" might even make your job go away.

So what is the Cloud? (no more quotation marks, I promise)

Put simply, the Cloud is nothing more than a hard drive that you can't see, somewhere in the Internet.  It looks and feels like part of your computer (or iPad/smartphone/etc) because you are able to send and retrieve storage and run your programs.  But instead of using your own gear you're getting the same services from someone else's hardware.

The cool part about this arrangement is that you don't have to lay out the cash to buy a hard drive and you (usually) only pay for what you consume.  If you need more, you can get it instantly.  Very attractive to a business that has been paying thousands (or millions) for storage growth every year.  It's a great way to save money and time.

Of course there is a downside.  You are completely out of luck if your Internet connection goes down.  Also, your stuff is on another firm's hardware so you are trusting that they have the ability to provide you the availability and security that you need (oops, Sony).

Wednesday, June 15, 2011

What is Virtualization?

One of the hottest new concepts in technology is called "virtualization".  You see the term in commercials, read it in magazines, and see it bandied around in magazine articles.  You might also hear about companies named "VM Ware", "Citrix", "IBM", "EMC", and probably the blue-chip names as well (IBM, HP, etc).  The pundits say that virtualization is the next big wave in IT, that it will save companies millions, and that it will change the footprint of the data center.

I know this topic is big because I am frequently asked to perform ad-hoc consulting to companies on Wall Street that are trying to find the next big "high riser" stock.  Many of the consultations I perform involve my having to give primers on the basics before getting to specific technology trends.

In a nutshell, there are roughly three different types of virtualization.  If you are an IT pro reading this blog, please refrain from correcting me! I know that the list could be described as much longer but, as per my handle ("Simple CIO"), I'm trying to keep it simple.

Server Virtualization -  Remember that IBM commercial where the guys in suits are freaking out because all of the machines in their server room are gone?  The tech guy smiles reassuringly and tells them to relax.  He has replaced all the numerous boxes with just one sitting in the middle of the server room.

In the old(er) days of IT, there was a one-to-one relationship between software programs (called "applications") and server boxes.  If you bought a new application, you bought a correspondingly server.  As you grew the number of applications the number of physical machines in the data center grew proportionally.  Fast forward 10 years and you've got a data center (or 2 or 3 or 7) stuffed full of servers.  These machines each need to be tended to like individual tomato plants - they need plenty of power, cooling, and human-rendered TLC.

With the advent of virtualization, an IT organization could buy one big (*really* big) server.  That server could be carved, or "partitioned", into numerous independent servers.  The catch is that all of this partitioning occurs within the brain of the big server.  So, 50 physical boxes are transformed into 50 "logical" boxes within the mind of the big server.  Lots of stuff is now happening on server administrator screens but to the outside viewer, 50 just became one...

Desktop Virtualization - This concept has a lot of similarities with server virtualization.  Again, in the old(er) days of IT, the brains for a PC or laptop would reside within the hardware sitting on or under your desk, or possibly on your laptop.  The problem with that setup is that each device has to be powerful enough to do everything you need, have "oodles" of memory, and a big fat hard drive.  And of course, with all of that dynamic hardware you need small armies of IT techs running around fixing machines, upgrading software, swapping computers, and convincing people not to download software from their favorite entertainment sites.

Fast forward to the past five years where desktop virtualization has become a hot item.  A virtualized desktop has had its brain, memory, and hard drive transported to a "big" server sitting somewhere in a data center that you can't see.  The look and feel, or "experience" of the desktop still looks the same.  However, what you see is being piped to your monitor/keyboard/mouse from somewhere else.  What you are seeing is essentially a web screen designed to look and work just like your old computer.  But IT is no longer having to maintain an ocean of equipment, software, and security.  Whatever you need is "granted" to you by a server administrator.  If you desktop isn't working, another push of a button gets you session automatically refreshed.  And by the way, since all of your files and programs are in the data center now, you'll never again lose any information when your hard drive crashes.

While the concept of desktop virtualization sounds a little like "Big Brother", there are all kinds of benefits.  IT becomes less of a black hole for budgeting and you get to start using the virtualization software to move your desktop functionality to an iPad.  Trust me, once you have your office computer ported to an iPad, you'll never want to go back.

Storage Virtualization - Remember the discussion on server virtualization?  Now think of hard drives everywhere within your company.  They are on PCs, servers, smart phones, laptops, everywhere!  Using equipment called a "SAN" (storage attached network) or "NAS" (network attached storage) companies essentially purchase big boxes full of very fast, very large, very reliable hard drives.  These SANs are almost always connected to your network with fiber-optic cables, which means that they can serve up data faster than McDonalds serves up burgers.

The whole concept of storage virtualization is that you can consolidate multiple, disparate hard drives from all over on to one centralized, turbo charged storage bank.  Really cool, really fast, really reliable, and saves a bunch of money over time.