هو إستراتيجية

هم يستطيع حصلت بعيدا بمناولة في البداية. But as the data grows, depending on an outsourced company to provide the infrastructure to gather the intelligence from information is extremely risky proposition. Never outsource your core competency!

Buried in the WSJ blog they do talk about Virgin America’s homemade software (no details available). If that homemade software is specific to Virgin America’s business strategy, they are doing everything right. If the customized software is only about cost savings and nothing to do with understanding ‘customer life time value’, then sorry to say, in a few years they will be Southwest look alike.

Update: Nov 30, 2007

Finally, today I got motivated to blog about Jet Blue’s IT Strategy.

 

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Information Week article “Younger Workers Demanding Web 2.0 Tech on the Job” talks about how Web 2.0 has become important part of social life for the new generation workers.

Our company has its own internal blogging and its interesting to see that the young hires and interns start blogging almost instantaneously. In some cases, I see them blog on their first day at work as soon as they get their own laptop. In fact, one hire started writing how boring the orientation training was - during new employee orientation!

It’s an interesting balancing act for organizations to provide infrastructure for blogging, social networking etc. and at the same time make sure that employees use it to improve productivity.How do you calculate the ROI of Web 2.0 at work? Will organizations be able to monitor privacy and security of information? How do you treat Intellectual Property (IP) of the organizations? These are some of the issues the company’s executives need to start addressing soon.

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The Knowledge worker is still perceived as a semi-skilled or an unskilled worker by the mid level executives. This is how it typically plays out in a budget meeting. One of the finance management member looks at the amount that is being spent on sustaining the application that has been in production for past 2 years. They want to reduce the cost (because IT is cost center and everyone is looking to IT department reduce cost). Let’s say two developers are involved in sustaining that system. Executive will begin talking in term of reducing the head count to 1.5. How can you reduce 2 developers to 1.5 developers? To the non IT management this is simple. Ask one of the persons to be on the sustaining application for 50% of his time. Find another project to work on, to fill another 50% of his time.

It seems simple superficially, but as we dig deeper it’s impossible to divvy up the work this way. Knowledge worker’s output is not strongly correlated with time. Granted more time IT programmers spends more lines of code he writes. But the inspiration/ideas to program come in bursts. It’s not extraordinary for a programmer to write most of the code in 2 hours after 5 pm after seemingly loitering his time during the day (meeting anyone?). This is not typical to IT but to all knowledge workers. By putting time limits (work only 4 hours in the morning on sustaining work and afternoons on another project), the management executives will end up making the Knowledge resource less productive. Again, it would have worked in Industrial Assembly line (Work 4 hours on Car A assembly line and then later in the afternoon move to work on assembly line for Car B) for semi-skilled workers.

This is a bad strategy to save cost and I see it done again and again. I would challenge all the IT managers to educate themselves and their non technical peer about the short fall of such a method. In the long run this is not a cost saving strategy.

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SaaS or On-Demand application delivery as a disruptive delivery model is challenging traditional

Enterprise applications. Adoption rate is the fastest in the SME (Small and Medium Enterprises) space. But, large multinational organizations are slow to embrace the on-demand delivery model.

SaaS has both pros and cons as explained in my previous blog. But, its not the cons of the On-Demand delivery model that is holding back the CIO’s of the large organization from joining the SaaS bandwagon. But, believe it or not, its one of the advantages of SaaS that is stirring up a political problem for the CIO. The main advantage of the SaaS delivery model is that it needs a smaller IT team. No need for large IT resource to integrate and sustain the traditional

Enterprise application. Smaller IT department is great for reducing IT costs, but it creates the illusion of loss of power for the CIO. Typically, larger the department the more perceived power the executive possesses.

CIOs pretend that they need complex application, so that they can justify bigger budget and larger IT resource. If the enterprise application is outsourced (SaaS is a unique way of outsourcing) then suddenly there is no justification of a large organization. This development, in the tribal world of executives, leads to diminished power for the CIO (because he now has a smaller army).

In my view CIO should not fear the reduction of size of IT department. If the software systems that support tactical and non core businesses is outsourced then it frees up the resource to focus on the strategic aspect of the business. Identifying and implementing software systems that enables core competency of the organization will make the role of CIO more relevant to corporation.

Making a major impact on the business strategy the CIO can thus showcase real power in the boardroom even with a small organization.

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After 15 years being IT Organizations’ central focus, Enterprise applications are getting old and decrepit and desperately needs a facelift. Like it or not these applications can now be classified as Legacy system (Read Koch’s IT Strategy Blog Riding the ERP Bus Forever for more on ‘Legacy’ Enterprise systems). Implementation and Integration of Enterprise application has become more and more complex (instead of getting simpler) after several versions of upgrade. From a customer’s perspective Enterprise application calls for a large IT department to implement and sustain this behemoth (which adds to thier cost). Hence, companies are now looking for other ways to handle Enterprise applications.

It appears that On-Demand delivery model or SaaS (Software as a Service) model has emerged as a preferred choice that makes lot of economic sense to the companies. It’s being adopted at a rapid rate. This is a model where vendors own the enterprise system. The organization /customers pay for using the system but not for owning the system. This disruptive delivery model is bound to shake up the current leaders in ‘legacy’ enterprise applications. This unique delivery model will make Enterprise applications more agile and relevant to the company’s strategy.

Some of the advantages of SaaS

1. Smaller IT resources.

2. Quicker implementation and faster training for the employees and thus reducing TCO (total cost of ownership).

3. Faster ROI due to lower up-front cost.

4. Lower hardware/software cost due to reduced investment in installing, upgrading and sustaining of enterprise system.

SaaS has some challenges that vendors have been successfully trying to address –

1. Loss of control: Because of Reliability/Uptime

2. Data security: This is a tough pill to swallow for the corporate executives. Can they trust third party vendors with the data?

3. Privacy of data: Who owns the data now?

4. Different integration need: How will the SaaS application integrate with the existing systems?

In my view, advantages of SaaS delivery model far outweigh the shortcomings and it’s only matter of time SaaS will be the “preferred” delivery choice for Enterprise applications. Small and Medium Enterprises have already embraced the SaaS delivery model. Larger organizations are slowly opening up to this disruptive delivery model. When I was in Melbourne Australia last month I read an interesting article about SaaS in Australian Post related to explosive growth and adoption by large organizations of SaaS

There are some political implications for the CIO’s of large organizations to fully accept SaaS model, which I will address in my next blog.

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As organizations begin to span the globe, it’s becoming increasingly challenging to the corporate executives to manage these resources. Since each knowledge resource is unique, a lot of effort needs to go into understanding the uniqueness of each person. The question then arises - how do you build the ‘relationship’ if the labor is dispersed all around the globe? How do you map their unique culture (including their regional and country culture) with the corporate culture? These are some of the challenges we will have to start addressing very soon. My thoughts in this blog are specifically to IT/Software Development talent.

The usual globalization of work force in IT is driven by 2 reasons.

1) Labor arbitrage: Cheaper labor in India, Russia etc. can get the job done at a fraction of cost compared to US/Europe.

2) Follow the Sun: Having development team in 2 different time zones gives organizations the added advantage of increased bandwidth of labor. When a team in one time zone is ready to call it a day, another team in a different time zone can pick up the work and continue working.

Both these reasons look tempting to the corporate executives, but as we have seen in many corporations, execution to the above mentioned reasons can be extremely cumbersome. Complexity of communication and management increases dramatically with globalization of labor. Dissimilar cultural values and ethics further exasperate these issues. As it turns out the cost savings are not that great. In my opinion the executives should shun the narrow vision of cost saving due to cheaper labor as the only reason to expand their labor globally. In fact it’s the wrong reason for globalization.

The main reason or the only reason the organizations should go for global labor distribution is to achieve diversity. Diversity means acquiring human resource with differing/unique skill sets, collaborating to get multiple perspectives on problem definition, understanding different ways of solving problems at hand. As the market expands, especially in Asia and Latin America, the labor diversification in those regions means local knowledge in that consumer market. Finally, diversity of labor is diversification of labor and sensible human resource risk management. With a large number of ‘Baby-boomers’ retiring in US, globalization of labor reduces the risk of shrinking labor and the work can move where the labor is ready.

I will elaborate more on these views in my future posts.

Updated Sept 13th: Read the continuation of this blog - Globalization of Labor -II

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Great blog by Mike Vizard called IT Needs to Be About Intelligence Not Information on the need for IT executives to ferret out intelligence from information.

Evolution of Information Age: In the early years of Information Age, the person with the access to exclusive information had the power. As information started to become more democratized with the Internet, the person who was able to organize the information was in demand. Now, with accelerated Democratization with the advent of Web 2.0 (bloging, social network etc.) there has been an information overload. Today, multiple sources of readily available information can lead one to conflicting conclusions. The source of some information can be dubious and some sources have their own agenda to market/sell their opinions. In today’s environment the person who has the ability to decipher the information and translate it into intelligence will be in demand.

Thus, this new breed of IT executives will not only have to keep the pulse on all sources of information (print, TV, internet, blogs) but also will need to have an ability to effectively articulate an intelligent solution. In my opinion IT executives need to execute an IT Systems Strategy that can align with Business Strategy based on that intelligence. If the focus is on information only and not on intelligence, then the same overwhelming information will render that information useless, since its humanly impossible to consume all that information. The IT systems will become more reactive to the changes in business needs. Thus, confirming Nicholas Carr’s view that ‘IT Doesn’t Matter’ as mentioned in my blog post IT Does Matter.

IT executives need to recognize that if they wish to make IT Department ”add value” then the focus has to be about intelligence that comes out of information, NOT on information itself.

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IT is knowledge based and one of the important issues faced by IT management is ‘people issue’. This issue not only revolves around hiring, training etc. that can be classified as ‘Talent Management’, it also involves cultural issues (both organizational and country culture as more and more organization become global). In this evolving complexity, one department that needs to be at the center of this is Human Resource. It appears that HR is left standing on the sideline and is not providing a viable pan organizational solution. HR management still looks at knowledge industry from a manufacturing perspective. HR organization has not evolved to meet the challenges of Knowledge Industry. The solution they have in place is archaic. For Ex: “Let’s move the resources around…” is the usual mantra for Resource Allocation. This made sense for low skilled work with minimal training requirement. It does not work for IT department. You cannot move advanced .Net developer to be advanced Java developer with a week of training.

Problem is not with HR management alone. I think the blame mainly falls on the CxOs - many of whom think HR as a ’second class’ organization and do not involve them in evolution of a business strategy. How can HR understand the strategic needs an organization if they are not involved in the process? HR should and must plan a pivotal role in the business strategy because sustaining a competitive advantage is mainly people centric.

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