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From The ediTor

The ideas of outsourcing and core competence are not as new as might be commonly

18th Century Outsourcing Truths You can’t master it all. Your peers are begining to see that. What about you?

believed. Both can be traced to the 18th century economist David Ricardo and his Theory of Comparative Advantage. The British economist believed that nations should maximize the natural or other advantages they enjoy in the production of specific goods and simply buy the other goods from other countries. This, Ricardo asserted, would bring maximum benefits to all countries, and forms the basis of international trade. In Ricardo’s time, modern corporations didn’t exist. But one could apply his theory to today’s companies and the message is just the same: do what you do best, and buy the rest. Nevertheless, outsourcing wisdoms are far from obvious in IT even though a large IT industry has sprung up in the country servicing overseas clients. Few Indian companies Indian firms are testing the and CIOs outsource their IT requirements. outsourcing waters for reasons But that is all beginning to change, as our other than reducing cost. One cover story (Page 32) reveals. is to benefit from emerging Foreign companies began to farm market opportunities. out their IT requirements to companies in India mainly to save costs. But cost benefits are not significant to Indian companies. In fact, it is conceivable that Indian companies could reduce costs by managing their own IT infrastructure. Indian firms are testing the outsourcing waters for other reasons. Dabur, for example, outsourced its entire IT needs and management to Accenture for at least two significant reasons. One, it wanted to be agile in taking advantage of emerging market opportunities, and not be shackled by IT management; and two, it sought to buy, rather than build, what was clearly not core to its business. Come to think of it, what is core and what is non-core is constantly being debated, and consequently being reviewed and redefined. Sonata Software CEO B. Ramaswamy offers a message to those who doubt the wisdom of the debate. “Instead of looking at core and noncore processes, it is better for organizations to look at processes and ask: ‘Are these best done by outsiders?’” he says in a fascinating interview you can read on Page 52. I believe the experience of Dabur and the sage advice of Ramaswamy will be food for thought for many of you not convinced about IT outsourcing.

Bala Murali Krishna Executive Editor balamurali_k@cio.in 2

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Anil Garg, assistant GM-IT of Dabur, says that the FMCG enterprise has ensured constant availability of IT talent by its decision to outsource IT management and maintenance.

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Project Management

Executive Expectations

COVER STORy | Outsourcing | 32

VIEW FROM THE TOP  |  52 Sonata Software CEO B. Ramaswamy on how his company seeks to add value to business processes and build strategic relationships.

A growing number of Indian organizations is proving that outsourcing is a real option. But how do you determine if it will work for you? Extreme Outsourcing|  42 Gone are the days of outsourcing merely for labor arbitrage. The future is in disaggregating IT processes and figuring out who’s best equipped to handle them. Feature by Ben Worthen

Breaking It Down |  50 To make the best use of the Flat World model, CIOs need to know the processes that are being distributed to their outsourcing partners, says S. Gopalakrishnan, CEO & MD of Infosys Technologies in an interview with CIO.

P hoto by dr lohia

Cove r: design by bin es h sreedharan

Feature by Kunal N. Talgeri

Interview by Kunal N. Talgeri

Interview By Balaji Narasimhan

Making IT Work Innovation Alchemy  |  24 Balancing process and environment creatively for cost-effective innovation is at the core of real CIO leadership. Column by Michael Schrage

Advanced Communications The Buck Starts Here  |  56 What you say about your budget – and how you say it — sets the tone for your IT department. Here’s how to make your budget presentation more effective. By Michael Fitzgerald

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content

(cont.) departments Trendlines | 15 Social Networking | Data Flies Into Danger Web Scam | Pssst...Wanna Buy a House? Malware | Hey, Get a Load of This! Online Secuity | Happy e-Card Virus CIO Role | Crisis Management Tips Mobile | Social Networking On the Go Internet | Getting Paid to Surf Porn Intelligence | Survey: Geeks Are Cool Web 2.0 | New Ways to Justify Web 2.0 Identity Fraud | Facebook Users, Bulls Eye!

Essential Technology | 65 Data Center | Thinking Inside the Boxes

Feature by Katherine Walsh Unified Communications |

Always On, Always Reachable Column by Thomas Wailgum

From the Editor | 2 Outsourcing | You can’t master it all. Your peers are begining to see that. What about you? By Bala Murali Krishna

Inbox | 14 NOW ONLINE For more opinions, features, analyses and updates, log on to our companion website and discover content designed to help you and your organization deploy IT strategically. Go to www.cio.in

c o.in

Govern Upgrading Rural Access |  60 On the back of Project Bhoomi’s success, the Nemmadi initiative seeks to improve geographic reach in rural Karnataka using a wide network of telecenters.

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Feature by Kanika Goswami

Making IT Work HITTING PAY DIRT |  28 Negotiating the requirements process — no matter how wellintentioned — can be a constantly uphill task. Here’s how you can conquer that problem. Column by Michael Schrage

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ADVISORY BOARD Management

Publisher & editor N. Bringi Dev

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Group CIO, Mphasis Alaganandan Balaraman Vice president, Britannia Industries Alok Kumar Global Head-Internal IT, Tata Consultancy Services

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President & CIO — IT Applications, Reliance Industries

Vikas Kapoor; Anil V.K. Jinan K. Vijayan; Sani Mani Unnikrishnan A.V; Girish A.V MM Shanith; Anil T PC Anoop; Jithesh C.C. Suresh Nair, Prasanth T.R

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Singapore Michael Mullaney Events General Manager Rupesh Sreedharan Managers Ajay Adhikari, Chetan Acharya Pooja Chhabra

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IFC, 7 & 17

Interface

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Krone

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Manish Choksi Chief-Corporate Strategy & CIO, Asian Paints M.D. Agrawal Dy. GM (IS), Bharat Petroleum Corporation Limited

Microsoft RGF, 8 & 9

Rajeev Shirodkar VP-IT, Raymond Rajesh Uppal

Ricoh

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Chief GM IT & Distribution, Maruti Udyog Prof. R.T. Krishnan

SAP

35

SAS

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Tyco

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Professor, Corporate Strategy, IIM-Bangalore S. Gopalakrishnan CEO & Managing Director, Infosys Technologies Prof. S. Sadagopan Director, IIIT-Bangalore S.R. Balasubramnian Executive VP (IT & Corporate Development), Godfrey Phillips Satish Das CSO, Cognizant Technology Solutions Sivarama Krishnan

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reader feedback

technology solution which enables information to be leveraged by an organization in an effective way. V. SUBRAMANIAM CIO, OTIS Elevator Company, India

Games People Play

IT — A Habit I have a few observations from your articles on Agility (From Here to Agility, July 15, 2007 2007) and IT (Here’s Why IT matters, July 15, 2007). Being agile is important in today’s age of speed. Agility in design, development and deployment of enterprise systems, infrastructure and people is very important to support the organization in being agile and in meeting the expectations of the customers, who in turn are becoming agile. I like the mottos: Knock the ‘T’ of can’t to make it ‘can’. And: You can if you think you can. As for why IT matters, this has been discussed a lot in many forums. Plenty of articles have also been written on how IT matters. IT is like a habit. If you remove ‘H’, ‘A BIT’ remains. Remove ‘A’ and ‘BIT’ remains. Remove ‘B’ and ‘IT’ remains. If IT has to become a ‘HABIT’ in an organization then it has to create an IT culture by deploying reliable and efficient integrated enterprise systems which are aligned to business requirements. It has to address the needs of internal customers as well as the end customer, drive customer value through IT and also train users in the effective use of the systems. Once IT becomes a habit, then IT definitely matters. IT is the strategic backbone for an enterprise. Information is an asset of an organization. It is the deployment of right information 14

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I found two columns by Michael Schrage ((Buttressing the Business and Stop Seeking Buy-in, August 1, 2007 2007) very interesting and stimulating — as always. As technology descends from the ivory towers it once occupied, into the thick of business, CIOs can no more keep aloof from the somewhat murky goings-on of real flesh-and-blood organizations. The writing has been on the wall for quite some time - ever since technologies, initially devoted to data processing in a remote back office, grew to be powerful enough to have a say in the structure, processes, and even strategies of an organization. So, a CIO has no option but to get real and partake in all that it takes to survive in the corporate world and make meaningful contributions. That calls for skills in handling and managing people and relationships. He needs to manage not only a data network but the human network too and the protocols here may occasionally be too archaic for his taste! Moreover, as the relentless and exponential growth of technologies continue, dependence on vendors is on the rise and probably a CIO has to spend half his time managing vendors,

Once IT becomes a habit, then it definitely matters. IT is the strategic backbone for an enterprise. Information is an asset of an organization. which again is a very different cup of tea compared to managing technology. He is inextricably caught between vendors on one hand and users with ever increasing expectations on the other. The problem is further compounded by the current hyper mobility among young IT staff. So, as pointed by Schrage and many others in your earlier issues, CIOs have to learn to play mind games of a different kind. Their initial faltering steps in this direction may not be taken too kindly and that could be the reason for the sneering question: Do organizations really need technologists? As an aside, I would like to hear from technologists in the CIO role regarding how deep they are able to dig into the multifaceted advances in IT by going beyond acronyms, hypes, sales pitch and promises. I would also like to know how they have learnt about the games that people play. A.K. UPAdHyA yAy yA AyA yA Assistant GM - IT, Bank of Baroda

What Do You Think? We welcome your feedback on our articles, apart from your thoughts and suggestions. Write in to editor@cio.in. Letters may be edited for length or clarity.

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new

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hot

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IllUSTRATIoN By BINESH SREEDHARA N

Data Flies into Danger S o c i a l N e t W o r k i N g Users who access Google Gmail or the Facebook social-networking site over Wi-Fi could put their accounts at risk of being hijacked, according to research from Errata Security, a computer security company. It's not just these sites but any rich Web applications that exchange account information with users, including blogging sites such as Blogspot or even SaaS offerings like Salesforce.com, wrote Errata's Robert Graham, CEO, and David Maynor, CTO, in a paper. Most Web sites use encryption when passwords are entered, but because of the expense, the rest of the information exchanged between a browser and a Web site is not encrypted, said the paper, which was presented at the Black Hat 2007 security conference in Las Vegas. Using a packet sniffer, which can pick up data transferred between a wireless router and a computer, it's possible to collect cookie information while a user is accessing one of those sites over Wi-Fi. Cookies consist of bits of data sent to a browser by a Web site to remember certain data about users, such as when they last logged in. Included in the cookie can be a ‘session identifier’, which is another bit of unique information generated when people log into their accounts.

By collecting cookie data and the session identifier with the packer sniffer and importing it into another Web browser, the hacker can get inside a person's account. But attackers may not be able to change a person's password, since many Web 2.0 applications require a second log-in to change account information. Nonetheless, it could allow a hacker to create blog postings, read e-mail or do other malicious activity. Meanwhile, the victim is directed to a version of the Web page they intended to visit, which Errata calls ‘sidejacking’. There is a remedy, however. "The consequence of this is that users should never use a Wi-Fi hotspot unless they are using VPN (virtual private networking) or SSL (secure sockets layer) to access their accounts," the paper said. — By Jeremy Kirk

Pssst...Wanna Buy a House? Web scammers are turning to online property forums to collect personal information about users for later attempts to swindle them out of money, according to a security researcher. Renters and buyers often post phone numbers, instant messenger nicknames and e-mail addresses on forums along with specific descriptions of the kind of property they're looking for. This makes it easy for scammers to write proposals that will elicit further information, said Chris Boyd, security research manager for FaceTime Communications, a security vendor. "They basically treat these Web sites as a gold mine of information," Boyd said. The scammers then contact the property seeker, offering them a similar property to what they have described, complete with photos, Boyd said. The potential victim is also often asked a range of other personal questions, such as their occupation, marital status and even if they have a pet. But there's a catch: the scammer usually asks for a deposit before the seeker can see the property. The requested deposit is

Web Scam

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usually below market price, another way the scammer tries to lure the victim, Boyd said. The e-mail pitches are similar to so-called 419 scams, which offer some greater reward in exchange for money in advance. A user on one property forum posted part of an e-mail from one scammer illustrating an unsuccessful swindle. The post read: “Sounds like a born again Christian. I'm sure she wouldn't want to rent her place out to a ‘cohabiting couple’ like us!” Reading the ‘header’ of such an e-mail, the part of the message documenting its route over the Internet from sender to receiver, can help determine who really sent it is one way to spot a scam. It is possible to fake some header information, but other parts can't be changed. Although the property promised in this message is in the U.K, the e-mail's header reveals that it originated from an IP (Internet protocol) address belonging to Nigerian Telecommunications — a big red flag. — By Jeremy Kirk REAL CIO WORLD | s e p t e m b e r 1 , 2 0 0 7

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treNdliNeS

Hey, f o d a o L a t e G This!

Vista party-pooper. Stow those party hats and noisemakers. The millions of Windows sufferers who've been waiting until the release of Service Pack 1 to join the Vista party will have to wait till next year or even longer for relief. Microsoft says it will release only the beta of SP1 — but not the final version — before year end. Meanwhile, rumors swirl that MS will actually release SP1 in bite-sized pieces over the next year, making it harder for enterprises to gauge when it's time to hold their noses and dive in. The problem isn't that Microsoft continually shoots itself in the foot. The problem is that it's got too many feet. Most companies that screw up this often go lame and limp home, but Microsoft is the millipede of software makers. Space case. A NASA computer destined for use on the International Space Station was sabotaged earlier this week. However, there is no truth to the rumor that astronauts broke the machine when they tried to use its ExpressCard port as a bottle opener. Music nabster. Security researchers have identified an Internet worm that infects users' PCs and then eats all of their MP3 files. The recording industry denies all responsibility, though RIAA CEO Mitch Bainwol was seen conversing with a large tapeworm wearing a trenchcoat. —By Robert X. Cringely 16

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Happy e-Card Virus o N l i N e S e c u r i t y Think you got a cheery greeting card from a friend via e-mail? Well, think again. A new form of fake e-card notification e-mails are unleashing nasty viruses and virus-carrying Trojan horses on unsuspecting users. Viruses and Trojans triggered by e-card-are not new, but the latest versions are becoming more difficult for typical anti-virus and anti-spam defenses to detect, according to alerts issued by security software vendors Avinti and F-Secure. The new complication, said Dave Green, CTo at Avinti, is that the latest slew of fake e-card e-mail notifications are using plain text in their messages, which don't get scanned and scrutinized by antivirus and anti-spam defense applications. While the e-mails don't contain pasted links or attached files that a recipient can click on to get a computer infection, many e-mail clients automatically convert the included text into a clickable link when the e-mail clients recognize a Web address in the text. All recipients have to do to trigger the virus is to click on the link created by the e-mail client, Green said. Adding to the seriousness of the problem, the perpetrators are sending these e-mails using the names of the most popular electronic greeting card companies, he said, Avinti's alert said the links to the fake e-greeting cards lead to IP addresses in various locations, including the U.S. and Eastern Europe. The damaging payload files are new variants of the Storm Worm virus that was first detected in January. Anti-virus and anti-spam vendors believe that if messages include plain text without links and attachments, it could cause no harm, said Danny Allan, director of research at security analysis vendor Watchfire. That approach has to change, he added. Zully Ramzan, a senior principal researcher at Symantec's security response team, said Symantec has seen plain-text attacks before and doesn't view them as a new problem. —By Todd R. Weiss

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IllUST RATIoN By UN NIKRISHN AN AV

So many stories, so little snark. Here are a few news items that almost slipped under the radar. G whiz. When pundits predicted Silicon Valley would revolutionize the cellular industry they were right, but they may have been off by one letter. It's Google's oft-denied-yetapparently-real G phone, not the iPhone, that may change how and where the world connects to the World Wide Web — especially if the G men manage to bag a big chunk of the wireless spectrum. However, there's no truth to the rumor that Google will try to sell more phones by putting Sergey's and Larry's numbers on speed dial.

m a lWa r e


trendlines

Crisis Management Tips R o l e "If I wasn't a CIO," says Joe Beery, CIO of US Airways, "I would probably be an ER doctor." Beery clearly thrives on stress. And at US Airways, he's in the right place, dealing with 3,742 daily departures, 36,602 employees and an extremely demanding, often agitated customer base. If you add to all that his ongoing challenge of integrating America West's and US Airways' computer systems after their late 2005 merger, Beery becomes a perfect person to ask about crisis management. Having recently dealt with long lines and extensive travel delays caused by a troubled switch to a new computer reservations and ticketing system, Beery CIO

has some well-earned insights and advice on how to handle emergencies. His four best practices are:

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may come later, when everything is fixed. But during the crisis, you focus on fixing the problem while reminding yourself why you partnered up in the first place.

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Don't abandon what you know. Go back to basics. An emergency is not the time to try something new. Make sure that you and your team execute on the blocking and tackling. The play doesn't need to be pretty, but it definitely needs to work.

Lead, communicate and get into the field. This is not a time to disappear. Communicate more than you ever have; be clear in your communication and, if possible, do it face-to-face.

Lean on your partners and team. You know what they can do and you have to trust that they will rise to the occasion. A crisis is not the time to put a partner or vendor on notice. That time

Deal with problems head-on. Be as realistic as possible about what the problem is, and be even more realistic about what it will take to fix it. —By Michael Friedenberg

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Mosh, short for Mobile Sharing, lets anyone upload and share video, images, ringtones, games and mobile applications from their mobile phones. The new site, which is Nokia’s beta of a mobile social networking site, has many features of other social networking sites, including the ability to tag and share content with others and create collections of content. The site is free to use and isn't limited to Nokia phones owners. Anyone with a phone that has a WAP (Wireless Application Protocol) or standard browser can view the site from their phone. However, Nokia phone users can download an application that offers them quick access to the Mosh site. The site is also accessible from a computer. Users can download content to their PCs and then transfer the content to their phones, in order to avoid potentially costly mobile data charges. To upload content, a user must register, although anyone can view the content. Registered users can upload individual items with a maximum size of 100MB. Nokia didn't specify the monthly upload quota but said it is generous and "higher than any user will probably need." Mosh sounds similar to the offering from Twango, a company Nokia announced it acquired about a month ago. Twango is a free service that lets users store and share photos, videos and other media. Users can upload files to Twango from a variety of devices, including

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phones, and anyone can access files without having to sign in. For now, Mosh is a closed beta, meaning that only approved users can sign up and start using the site. However, the Forum Nokia site offers community members a password to enter the site. Forum Nokia is a community for Nokia mobile application developers. Mosh joins several other services Nokia has launched that are available to a wide audience, not just Nokia phone owners. For example, its Smart2Go mapping software is available to certain Nokia, Windows Mobile and Linux mobile devices. WidSets is another Nokia offering available to most Java-enabled phone users. It lets users put widgets on their mobile phones. —By Nancy Gohring

Illustratio n by Prasanth T.R

Social Networking on the Go

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treNdliNeS

Survey:

Geeks Are cool A forthcoming book by Mark J. Penn, the CEo of PR heavyweight Burson-Marsteller, proposes that geeks are not anti-social losers. According to his polling about social trends, which he relates in Microtrends: The Small Forces Behind Tomorrow's Big Changes, the most enthusiastic technology users also love a good party and enjoy talking to other people. Penn says those who shun new technology — using it only when they have to — are the most introverted. He calls these shy, retiring types ‘reluctants’, and defines as ‘new geeks’ those who keep informed about the latest electronic gadgets, who look forward to new versions of operating systems and whose friends think they're knowledgeable about new technology and computer software. iNtelligeNce

IllUSTRATIoN By UN NIKRISHN AN AV

Getting paid to surf porn i N t e r N e t How many people can claim that their jobs allow them to surf porn, sports and millions of other websites that are not allowed anywhere near PCs in corporate America? Gene Toye can. An analyst for St. Bernard Software, a maker of messaging security products, Toye evaluates and categorizes websites. "My friends think it's a crazy job," he says. "Everyone thinks all I do is look for porn all day." During the past five years this college student has worked part-time at St. Bernard, classifying sites into 73 general categories — such as real estate, society, malware, lingerie or phishing. An in-house software application guides Toye and 15 other part-time analysts, providing them five sites at a time to assess. Having a human in on the evaluation — rather than just automated technology — is critical, says Morgan Christian, a development manager and Toye's boss. Categorized websites are automatically fed into St. Bernard's iGuard database, which now contains more than 30 million URLs and IP addresses. The database populates St. Bernard's iPrism appliance, which enables small and midsize customers (mostly educational institutions and midsize businesses) to block employees' unproductive digital desires. At Network Services, a paper and janitorial supply distributor, CIO Paul Roche has reaped the fruits of Toye's labor with iPrism. "[St. Bernard] has people who literally go to websites all day long," Roche says. From the 73 categories, Roche can tell iPrism which sites to allow and which to block for his employees. His company now has a more locked-down Web environment. "My [appropriate use] policy is so easy to enforce," Roche says. "And it's nothing my IT staff has to do." Back at St. Bernard, Toye prepares for another shift. Not surprisingly, there's always something new to see. —By Thomas Wailgum

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SOME OF thE nuMbERS: Techies are twice as likely as the tech-averse to opt for a night on the town as their entertainment; 58 percent say they "talk easily to almost anyone for as long as they have to"; 41 percent report they like to stir things up at parties. one data center director who was shown these stats said he was skeptical. He didn't think they described many of his colleagues. It's certainly true that a party full of software developers (or a party full of magazine editors, for that matter) looks and sounds way different than, say, a party full of sales reps. But how people like to party is really the point. Penn doesn't distinguish between the tech-fashionistas who lined up for the iPhone and the guys in the basement tuning the network. He merely points out that technology is so ubiquitous as a social tool and source of entertainment that anyone who wants to be engaged with the world has to be a little bit tech savvy. Here's the rub. According to Penn, when today's gadget hounds embrace technology as something cool, they can influence the next generation to pursue technology careers. So they can invent some other cool things. Thus, rescuing the world from a shortage of homegrown technical talent. —By Elana Varon

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New Ways to Justify Web 2.0 2 . 0 William Hayes is working on a pilot project that he hopes will eventually bring wikis, blogs and RSS technologies to employees throughout Biogen Idec, a pharmaceutical company based in Cambridge, Massachusetts. But Hayes, Biogen Idec’s associate director of library and literature informatics, knows that proving the worth of such Web 2.0 tools to senior management will be difficult using traditional return on investment metrics. "The ROI is going to be qualitative for us,” Hayes said. “If it improves interactivity and we’re getting usage of the tools and there is better communications in the company, then we will consider it a success.” As part of the pilot project, Hayes and his team are creating a wiki to house content generated from research requests, along with feedback on that research. The plan also calls for using NewsGator Technologies’s RSS server to provide Biogen Idec’s researchers with feeds anytime new information about a particular drug is posted online, Hayes said. Web

He noted that the group is eschewing some traditional paths of gaining management approval for the project — for example, it has opted not to require formal sign-offs from executives in each unit that is expected to use the new tools. Typically, technologies move forward “only if there is a huge driver, or an executive vice president or better who really wants something to happen,” Hayes said. But, he added, “we can essentially do [Web 2.0 projects] in somewhat stealth mode as pilots and prototypes. It’s a lot easier to roll things out in a small fashion and allow them to grow in a grass-roots way.” Oliver Young, an analyst at Forrester Research, contended that the difficulty of proving the financial worth of Web 2.0 tools to top executives is the biggest roadblock to corporate use of the technology. “You are immediately stacked up against everything else IT has to deal with,” he said. “Suddenly, all these other initiatives that generally do have good ROI models associated with them become the benchmark.” — By Heather Havenstein

Facebook Users, Gotcha! Fraud Users of the Facebook social-networking site are too gullible in giving up personal information, which could make them the targets of identity theft, according to Sophos research. Sophos fabricated a Facebook profile and asked 200 Facebook users at random to give up personal data. Sophos says its probe involved setting up a profile page for 'Freddi Stauer', an anagram for ID Fraudster. "It's extremely alarming how easy it was to get users to accept Freddi," said Ron O'Brien, senior security analyst at Sophos, which makes security products for anti-malware and network-access control for business. Out of 200 requests, Freddi received 82 responses, with 72 percent divulging one or more e-mail IDs; 84 percent their full date of birth; 87 percent providing details of work or education; 78 percent listing a current address; 23 percent giving their phone number; and 26 percent providing their IM screen name.

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In most cases, Freddi also got access to respondents' photos of friends and family, plus a lot of data about personal likes and dislikes, and even details about employers. Facebook users were all too willing to disclose the names of spouses and partners, with some even sending complete resumes. One facebook user divulging his mother's maiden name — the old standard used by many financial and other Web sites to get access to account information. Most people wouldn't give this kind of information out to people on the street but their guard sometimes seems to drop in the context of a friend request on the Facebook site, O'Brien says. According to Sophos, the results of what it calls its Facebook ID Probe has significance for the workplace as well as personal life because businesses need to be aware that this type of socialnetworking site may pose a corporate threat.

"They can put a significant strain on the network and can also expose confidential corporate data to malicious outsiders," O'Brien says. — By Ellen Messmer

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8/31/2007 3:41:06 PM


Michael Schrage 

Making I.T. Work

Innovation

Alchemy

Innovatively balancing process and environment for cost-effective innovation is at the core of real CIO leadership. 24

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Michael Schrage

Making i.T. Work

A

t the CIO 100 Conference in America, a panel get the best return from your innovation investments? From on innovation produced some provocative the people you hire? From the innovation processes you put in glimpses into how a few of the world's most place? Or from the innovation environment you seek to create? Think these CIOs gave the oh-so-politically correct answer of IT-intensive enterprises — including Capital One, Circuit City and 1-800-Flowers — reorganized themselves ‘people’? Sorry; not a one. The split winners were process and environment. Why? Because as one of the panelists put it, "Even to create new value. The panelists — all top-notch CIOs — were remarkably if you hire the right people — and we think we do — they need candid about the challenges they faced as they pushed to be in an environment that encourages them to be innovative in ways we can use." their companies to convert technical capacity into business The CIO who championed process capability. Circuit City, for example, put it another way: "We like the set up select teams of innovation consistency and discipline that good champions from operations, process provides. Innovation should but discovered that its people be a business process." struggled to balance their everyday responsibilities with their new innovation missions. 1-800-Flowers Environment vs. Process found that small, quick and dirty These are distinctions with a rapid-prototyping teams could open difference. Environments are up vast new market opportunities not unlike the weather; they faster, better and far cheaper than create climates where informal expected. Capital One achieved collaboration and spontaneous some good results by rotating highinteractions are warm and 7 september 2007. NeW DeLHI potential managers from business encouraging or chilly to the point units into IT leadership positions. of being frigid. Environments stress Each CIO acknowledged that recognition-and-reward systems traditional notions of accountability where leadership by example is the required tweaks when enterprises genuinely commit norm and the organization provides resources that ostensibly themselves to innovation — not just operational excellence reinforce the values it claims to aspire to. For example, — as a medium for growth. These CIOs, for instance, talked organizations that celebrate teamwork and collaboration have about how they installed new reward incentives and had to be open office plans with open and inviting meeting rooms along more creative about managing the risk associated with trying with water coolers and coffee carts that have nearby lounge something new. They had to make special dispensations for chairs and whiteboards. Healthy innovation environments failed experiments. might feature ‘show and tell’ brown bag lunches where project When the time came for questions from the floor, I couldn’t team leaders present early-stage prototypes to interested people resist the urge to focus the wide-ranging conversation on some from around the organization in search of constructive feedback fundamental principles. So I asked: where do you think you and useful criticism. Oh, yes: the Boss — the CIO, CMO, CFO or

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even the CEO — occasionally stops by to see what’s going on and Why is this so important? Because CIOs, whether they like it communicate support. or not, have to recognize that their innovation processes and By contrast, process is about consistent and rigorous their innovation environments need to dovetail with innovation methodologies that reliably turn selected inputs into desired, environments and processes throughout other parts of their measurable and measured deliverables that the organization organizations. If you’re an innovation process CIO and your genuinely values. Process is about continually looking for ways to CMO is a brand-driven, innovation environments kind of leader, subtract wasteful time, energy and investment while adding new you’ve got a compatibility problem. Similarly, if you’re running an value. Process stresses recognitioninnovation environment shop where and-reward systems where leadership everybody’s an innovator and your is measured by the ability to make that VP of sales is Ms. Sales Force Process process more reliable, agile, robust Excellence, good luck on implementing and cost-effective. Healthy innovation that channel management rollout. processes invite aspiring innovators While it’s true that virtually all to attach some discipline and rigor organizations of size have their own to their wilder ideas. Think GE’s little innovation process pockets Six Sigma initiatives — sure, there and micro-climates, the truth is that were teething pains in the beginning, CIOs have a special responsibility to but the new metrics and mind-sets strategically re-think how best to blend it fostered yielded enormously process-defined and environmentproductive changes. The relative shaped innovation enterprisewide. 7 september 2007. NeW DeLHI lack of arbitrariness and politics in a Precisely because IT organizations healthy innovation process make it enable innovation throughout the something that invites participation enterprise, the supply chain and and contribution. Not surprisingly, good innovation processes the customer, CIOs have to devote special care in determining enable good innovation environments. whether process or environment offers the better organizing Whether you agree or disagree with these distinctions, principle for innovation initiatives. the clear consensus from the panel was that one of the most Listening to the CIO 100 panel, it was absolutely clear to me important strategic allocations CIOs can make is defining what that these are precisely the questions these leaders are wrestling people, process and environmental investments they’ll need for with. They know they need to be more innovative; they know innovation. Yes, balance is nice. But a well-designed innovation their IT shops need to be more innovative; and they know their process attracts and inspires people as surely as does an open and companies need to be more innovative. Indeed, they’re looking challenging innovation environment. for innovative people to hire and train. But there’s no doubt While people remain the vital ingredient, the fact remains that that they’re paying extra special attention to whether it’s better CIOs do have serious choices to make about whether they’ll get a environments or better processes that will tap better return on their innovation investments from creating better the innovative best in their own people — and in environments or better processes. While this isn’t an either/or people enterprisewide. CIO proposition, CIOs need to ask themselves whether they prefer to be ‘branded’ by their colleagues and employees — not to mention their CEOs — as successful creators of innovation environments michael schrage is co-director of the mItmedia Lab’s emarkets or as reliable leaders of innovation processes. Initiative. send feedback on this column to editor@cio.in

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Hitting

PayDirt

Negotiating the requirements process – no matter how well-intentioned – can be an uphill task. Here’s how you can conquer the problem. 28

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A

s the cynical saying goes: ‘There are lies, damned run sophisticated statistical algorithms to gain immediate insight lies and statistics. Alas, responsible CIOs have to into the behavior of particular customers. The problem was that building in that requirement would add manage an even greater deception than statistics: at least four months of development time, a month more testing requirements. Requirements are the bane of cost-effective software and an additional layer of complexity that would both be both development and deployment. I’ve personally witnessed far more more costly to maintain and risk degrading the overall CRM money wasted in the creation of bad requirements than I’ve ever performance. This was a multimillion-dollar decision. The clients seen thrown away by bad coding or testing. (Gosh, where do we were prepared to pay for both the development and the delay, if think so much bad coding and testing comes from?) We know IT promised to allocate the resources. A statistically savvy IT project companies always complain about manager looked at the requirement the costs and confusion generated by and found that a three-day undocumented code. Let’s talk, instead, programming effort would reformat about the costs and chaos imposed by the CRM data so that analytics could undocumented requirements. The be run in not-quite-real-time on road to applications development hell any PC with the right off-the-shelf is paved with ‘good’ requirements. statistical software package. In other The reason is as simple and obvious words, the project manager reframed as it is horrifying: most clients neither the original requirement in a way that know what they want nor truly gave the clients more than 95 percent understand what they really need. of the desired functionality for less They’re ignorant. They don’t quite than 1 percent of the original cost. ‘get’ IT, and their grasp of their own 7 sePtember 2007. NeW DeLHI The clients looked at the revised internal processes is uncertain. If a requirement numbers and effectively little knowledge is a dangerous thing, said, "Even though we’ve never done then these clients are lethal. They’ll real-time CRM analytics, that’s what destroy any chance IT has of bringing a significant software-based initiative in on time, on budget and we’ve declared our requirement to be. Our management signed off on it; you signed off on it. So do it. We promise we’ll pay you — please excuse the irony — according to spec. Of course, any CIO with an ounce of brains and two ounces more if you don’t show this alternate spec to the general manager." of experience already knows this. However, because we’re all Shamefully, IT went along. supposed to hold hands and sing ‘Kumbaya’ and be sensitive to client needs and truly listen to what they’re saying, IT ends up This story does not have a happy ending being the unhappy appeaser. Shame on CIOs for permitting this What makes such tales particularly atrocious is that so many pathology to persist. At one Fortune 250 company, internal clients clients live with the pathetically self-serving delusion that they insisted they needed real-time analytic capability baked into their actually do understand what they want and that IT was put on new CRM system. This marketing group wanted the ability to God’s Green Earth to give it to them right now! Consequently, their

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well-documented requirements read either like a wish list or — stop gathering requirements after the first 20 to 25 and then do a worse yet — a rigidly defined spec sheet that ultimately contains quick and dirty prototype to lure the client into co-development. more internal contradictions and paradoxes than a high tea chat Why? For two excellent market-tested reasons: you tend to get with Lewis Carroll’s Mad Hatter. Increasing conflict, confusion better quality requirements when they’re generated by ongoing and cost become inevitable. client interaction with a constantly improving prototype. The obvious thing to do is to roll one’s eyes, grit one’s teeth and Prototype-driven requirements ultimately lead to better apps try not to be too condescending to clients who want the world than spec-driven prototypes. for $1.50 a function point. After all, The second excellent reason they know not what they do. How relies on Psychology 101: clients are can they? Even we can’t be sure what happy to cavalierly reject your work. a purportedly innovative app will They tend to think twice, however, really run like before it’s implemented before throwing out their own work. — so how could they know? We’re In other words, when clients are not good at predicting the future. No vested in software development one is. So shall we hazard a guess with more than just money, you get as to how much IT executive time both a better development process and ingenuity is spent on correcting and a better software product. The mismanaged expectations? economics of software prototypeIndeed, IT conversations would driven requirements are inherently be profoundly different if we less dysfunctional than the 7 sePtember 2007. NeW DeLHI banished the word requirements economics of requirements-driven from our software vocabularies and software development. substituted expectations in its place. To be sure, CIOs and the IT Instead of ‘requirements analysis’, we’d be doing ‘expectations organizations do occasionally get to work with savvy clients analysis’; instead of ‘prioritizing requirements’, we’d be who know what they want, know what they need and know ‘prioritizing expectations’. how to define requirements in a way that makes both economic This more honest IT approach would recognize that clients and technical sense. However, they’re not the problem. To the are, in fact, acting rationally when they game requirements: they contrary, they’re the people who make being a CIO both fun are responding all-too-logically to the peculiar and perverse and important. economics of requirements-driven software development. Unfortunately, most CIOs today also confront clients Requirements inherently create a world where clients have and colleagues who have allowed the perverse economics of unambiguous incentives to avoid rigorous thinking, shun risk requirements to create unrealistic expectations and dysfunctional management and kick difficult design trade-offs to IT. This business behaviors. Requirements should be a means to an end, defines dysfunction. not the end itself. Responsible CIOs had better Think about it: how much does it really cost a client to come start requiring their client-IT teams to spend up with yet another ‘good’ requirement? The answer is, almost more time creatively designing the right software nothing. So why should anyone be surprised by the surfeit of requirements than rigidly requiring the right requirements, enhancements and improvements that inevitably software designs. CIO materialize as development proceeds? I’m not embarrassed to say that I’ve made a better than michael schrage is co-director of the mItmedia Lab’s emarkets comfortable living advising software development groups to Initiative. send feedback on this column to editor@cio.in

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Post-outsourcing, Anil Garg, assistant GM-IT at Dabur, says he can spend 80 percent of his time with end users, planning for future business applications.

outso u


Cover Story | Outsourcing

Reader ROI:

The value of outsourcing beyond cost-savings How to make your SLAs work for you

By outsourcing its IT needs, Dabur has attempted to recreate a similar view: of markets beyond its immediate surroundings. In May 2004, the Rs 2,234-crore enterprise was among the first in India to outsource IT entirely after it signed a 10-year contract with Accenture. The year would, however, become famous for Bharti Airtel’s $750-million deal with IBM to outsource its networks and IT systems, a value which reportedly doubled earlier this year. To a great extent, the huge success of the telecom major’s experience has put to shade the increasing activity in the outsourcing domain in India.

o urcing Redefine your role in the organization

By Kunal n. Talgeri

Photo by dr lohIa

A

bout 25 kilometers off New Delhi, it’s hard to miss Dabur India’s headquarters in Ghaziabad. Even a rainy day fails to rob the nine-storied swanky structure of its glint. Swankier still are two glass elevators that begin modestly in the basement of the FMCG enterprise before ascending to the ninth floor – to provide a panoramic view of Ghaziabad.

IllustratIon by bInesh s reedharan

A growing number of Indian organizations is proving that outsourcing is a real option. But how do you determine if it can work for you?


Cover Story | Outsourcing options. Are enterprises prepared for the pangs that accompany the Dabur, which has been tight-lipped about the contours of its transition? The Dabur experience has some answers – and points to outsourcing arrangement over the past three years, is not a path for enterprises to consider while outsourcing IT. complaining. It is business as usual. “Accenture’s role is like any other department in this organization,” asserts Anil Garg, assistant general manager-IT, Dabur. “They are like my extended IT arm – that is, after all, the spirit of outsourcing,” he adds. abur India’s initiation to technology happened as early as The spirit hadn’t caught on in India until 2005 (see ‘Major IT the 1950s, when it began to use unit record machines. By the Outsourcing Deals In India’). “A business needs to have matured late 1970s, it had introduced PCs for depot-level counting, which sufficiently for high levels of IT spend,” notes Ameet Nivsarkar, translated to billing applications and inventory management at vice president-research at The National Association of Software sales depots. IT became a key unit in the organization towards the and Services Companies (NASSCOM). “A Bharti or SBI fall in that turn of the 20th century, comprising between 25 and 30 people range. Today, there are a handful of companies in India who have until late 2003. the scale to completely outsource IT,” he adds. “Sometime then, we had a home-grown application,” recalls Garg. Unsurprisingly then, enterprises and their CIOs are developing “We had carry & forward (C&F) agents (the industry equivalent of more confidence in outsourcing IT systems. In an August 2007 distributors) who did their billing at the end of the day and sent the study, PricewaterhouseCoopers (PwC) found that outsourcing in data packet to the central office through e-mail, depending on the the Indian market has matured beyond cost reduction to become volumes and connectivity of that time. These were consolidated, a means for organizations to get better access to talent, develop and reporting would be available the following morning — updated flexibility, and focus better on their core businesses. Dabur India, up to the previous evening,” he says. for one, admittedly outsourced IT to ensure a constant availability Meanwhile, Dabur India had begun to grow into what has become of IT talent during phases of expansion. “If I want to continue being a 50-brand-strong organization. Today, it spans 13 manufacturing on the leading edge of technology, the people I’m using will always facilities, including five production units on foreign shores, apart be in high demand. I cannot then maintain bench strength. On the from a distribution network that involves 47 C&F agents and more other hand, an outsourcing partner can. It was one of the primary than 5,000 distributors. It’s big. It was no mean feat for its IT team to reasons [we outsourced],” says Garg. cater to this expansion. For good reason then, Dabur did away with In a period of economic boom, enterprises are going to find its home-grown application and opted for an ERP implemented by talent dearer, if nothing else but because of the increasing number Thirdware Solutions by early 2003 before Accenture became part of IT offices in the country of its outsourcing plan. The (Read ‘War For Talent’, CIO, IT foundation was intact, August 15, 2007). It explains, even though Dabur would in part, why several BFSI migrate entirely to SAP by Indian enterprises that have ousourced IT after 2004. and retail organizations April 2006.

Tracing the Technology 'Root'

D

Major IT Outsourcing Deals in India

have begun outsourcing IT already. The other reason being the expansion spree. “You didn’t have a Fortune 500 company till five or 10 years ago,” says NASSCOM’s Nivsarkar, offering a macroeconomic perspective. “Now, we have multiple companies on the global scene. They have reached a size where they feel that their industry requires high IT spend. That’s when you can outsource,” he states. According to NASSCOM’s latest quarterly research, software spends have overtaken hardware spends for the first time in the history of the domestic market. The market is ripe with outsourcing 34

Sector

Bank of Baroda

BFSI

N.A

N.A

Bank of India

BFSI

N.A

10

FMCG

N.A

3

BFSI

$68

10

Britannia Dena Bank

Construction

$29

10

HDFC Bank

DLF Ltd

BFSI

$80

N.A

Idea Cellular

Telecom

$700

10

Manufacturing

N.A

N.A

Government

$78

N.A

Manufacturingprocess

$2

10

$226

5

N.A

7

INVISTA New Delhi Government Sanmar Group

Tata Teleservices Communications

s e p t e m b e r 1 , 2 0 0 7 | REAL CIO WORLD

Cover Story - Part 01.indd 34

Value Duration (million) (years)

Enterprise

Yes Bank

BFSI

List not comprehensive, includes publicly announced contracts

Source: Gartner

“It was a tough call because there was no quantified benchmark internally,” recalls Garg who had to ascertain the nature of the vendor’s involvement across processes, the size of the team, and the timeframes for tasks that were until then performed internally. “We carried out a 20-day exercise, measuring the SLAs that were being delivered by our IT team. This was our roughcut benchmark of what a 27-person IT department can achieve. Then, I negotiated with Accenture about what needed to be delivered,” he explains. (Tips on creating SLAs: Best Practices Recipe see box on page 41)

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Cover Story | Outsourcing Garg also insisted on a monthly evaluation report from Accenture, over a short period, to review the terms Dabur had drawn. “Our internal experience on the SLA front was limited. We kept refining the SLAs,” says the IT head of Dabur. Nine months after the start of the outsourcing project, the two parties reached a final SLA. “We also took help from external consultants to help us in drawing out the SLAs,” he adds. The brief to Accenture was to maintain and manage IT infrastructure, including its networks and run applications over a 10-year period. “There are parties that provide different kinds of services. Accenture manages all those third-party vendors,” says Garg. In effect, if Dabur hires a third party to maintain its PCs, Accenture, as its ‘extended IT arm’, assists Garg in a technical evaluation. With Accenture’s input, Dabur awards the contract to the chosen party. The deal itself is evaluated on the basis of SLAs. “For our outsourcer to fulfill its SLA on a consistent and sustainable basis, it has given me a set of OLAs (operation-level agreements),” says Garg. The OLAs require the IT chief to adhere to one set of requirements with any third party, so that Accenture can fulfill its SLA with Dabur. “All the contracts of third parties, except Accenture, are still with Dabur,” he adds. Dabur’s decision to outsource IT coincided with an important business development later that year: its Rs 143 crore acquisition of Balsara. This would be the first major integration project for Dabur post outsourcing, and Garg cites it to make a poignant observation: “When you talk of IT outsourcing, it has nothing to do with business strategy, but it has everything to do with synchronizing IT with business strategy.” Like the decision to outsource IT, the contours of the plan to acquire Balsara had been laid out by Dabur’s management committee, headed by the CEO and comprising all functional heads. “We devised a strategy for a phased implementation of the Balsara acquisition,” recalls Garg. “The whole plan was shared with me. At this point, Accenture worked as my extended IT department. Its think-tank was part of my team. So, we discussed the three possibilities to proceed with the business, how we would take care of merging and maintaining the two systems, etcetera. Then, we developed a phased implementation plan and ensured that it corresponded with the business plan – before going ahead with the execution,” he explains. Charanjit Mohan, executive director for operations at Dabur, recalls the integration process: “For about 2-3 months, we 36

s e p t e m b e r 1 , 2 0 0 7 | REAL CIO WORLD

I believe that quarterly strategic consulting meets, bring tremendous value in the post-outsourcing environment.” — Charanjit Mohan

executive director, operations, dabur India

allowed the two IT systems to run in parallel. It allowed us to understand two unique systems before integrating them.” The integration process turned out to be smooth, and this was evident from the ease of managing data coming from the existing setup, he adds. Even the sales force of the two entities was merged in less than a quarter, says Mohan. Planning how to integrate two IT systems has become a common feature prior to

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Cover Story | Outsourcing

The Monetary Branch

W

hen ventures are proposed, most CIOs normally examine the impact on costs before seeing benefits. Well, there isn’t great news over the short term on the savings front. “If you do a one-to-one comparison services pre and post outsourcing, there are cost savings. But if you compare IT budget in isolation, you will see an increase. This is because growing businesses will have new projects and ventures,” says Garg, averring to Dabur’s Rs 20 crore IT outlay. In one case Dabur's SAP rollout across its international subsidiaries, pegged as a new project, significantly swelled its IT budget. “Sure I spend much more than what I used to three years ago. But if you compare how much I spent on the same set of services three years ago, I am spending less,” asserts Garg. Gopal Kuchibhotla, head of PwC’s outsourcing advisory group, concurs: “In the medium- to long-term, the costs tend to stay with the market because of the prevailing competitive environment.” With other outsourcing solution providers around, an outsourcer has to keep costs low because his expenses are spread across multiple customers, he adds. Second, competition will ensure that he uses the right people, processes and tools to improve productivity of the enterprise. “The larger the enterprise, the greater the benefit,” asserts Kuchibhotla, who is also an associate director at PwC. “But the larger the organization, the greater the risks associated with the transition to an outsourcing partner. As a result, costs go up and performance actually dips in the immediate aftermath of an outsourcing engagement,” he points out. To cope with this, enterprises need to focus on governance mechanisms and a means to escalate issues if performance drops after outsourcing, says Kuchibhotla. The comfort level that the outsourcer is able to establish really comes into play. There also risks associated with strategy, structure, people and processes that enterprises need to seriously address before embarking on an outsourcing journey, he adds. The onus is on CIOs then, to ensure flexibility in its engagement with the outsourcing vendor — and to quantify performance. There is a school of thought which says that in a really successful outsourcing agreement, there are no measurements except the contribution to the business of the client. In such a case, it — Shyam Sunder Vice president (quality & IT), Britannia Industries would be up to the enterprise CIO to develop

Outsourcing requires a CIO to acquire a higher level of business understanding.” 38

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Photo by srIVatsa shandIlya

an acquisition, signaling yet again how businesses have matured, says Nivsarkar of NASSCOM. These companies, spanning sectors from telecom and retail to manufacturing and the airline industry, constitute the domestic market for outsourcing, adds Gartner’s senior research analyst Arup Roy. “In contrast to western markets, where the drivers to outsource are often to control cost and enable a focus on key business initiatives, companies in India strategically use outsourcing as a means to reduce capital outlays, increase scalability of their operations and improve business agility in fast-growing markets,” he states.


Cover Story | Outsourcing metrics to measure the contribution made by IT to the client. PwC’s Kuchibhotla cites the mobile users’ satisfaction (number of complaints related to bill payments, for example) as a good indicator for a Bharti Airtel to measure the contribution of IBM. On its part, Dabur developed a series of metrics encompassing major operational areas in IT, such as infrastructure, networking, availability of servers, messaging and mailing systems, SAP systems, and so on. “Accenture is evaluated on each metric with the aid of computer-based software, where all the incidents are logged,” says Garg. “The software generates MIS, which helps evaluate whether SLAs are being met. This also becomes part of our annual internal IT audit where we check if the evaluation is happening correctly or not,” he adds. More significantly, Garg points to a section in the terms of references titled ‘New Projects’, which don’t necessarily constitute part of the vendor’s routine operations. This is a critical component for any large enterprise on a growth path. “Routine projects in the functioning of any department in Dabur, which keeps coming periodically, are handled by the outsourcing team automatically. But if there is a full-fledged, independent project, we go through an RFP route to locate the requisite solution providers. After an

artner predicts that India’s leading companies will increasingly consider outsourcing. One of the reasons is to ensure their competitiveness in a globalizing economy. 40

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evaluation process, we award the contract to the best party. In this area, Accenture also becomes one of the bidders,” he explains. This gives CIOs more room to maneuver as they try to get the best value from a third party for the new project. Take Dabur’s ongoing forward integration project with its distributors and stockists. The strategy required Dabur to implement a point-ofsales solution involving key distributors to cover a major share of its business volumes. This will allow senior personnel to receive secondary information from every dealer on a daily basis. Says Garg: “This project was not part of the routine tasks for the outsourcing team. So, Accenture brought in business consultants in this area who worked with our sales and marketing team and came out with a solution. It was then given to the technical team for design development.

CIO Role Blooms

S

hyam Sunder, VP (quality & IT) of the Rs 2,200-crore Britannia Industries, believes that outsourcing requires a CIO to acquire a higher level of business understanding. Britannia, one of India's leading biscuit producers, signed an outsourcing contract with HP India in June this year. It encompasses IT infrastructure and covers the FMCG’s network suppliers and partners. “In a postoutsourcing environment, a CIO will have more time to focus on identifying and contributing to business process enablement through technology,” says Sunder. It is more important for a CIO to find ‘best fits’ in terms of appropriate technology to manage processes, rather than purely understanding the company’s technology needs, he adds. “If you are doing IT internally, you may not take too many technology initiatives,” notes Garg. “But if you have someone who is good at technology, an enterprise becomes bolder and takes new initiatives.” Further, the IT head of Dabur explains the vast difference in the type of problems placed before him. “Before outsourcing, my involvement was more tactical: whether IT systems work or not. Today, ‘MRP (material requirement planning)not-functioning’ comes to me as a business problem – not as an IT-system problem. The domain has actually changed. I now look into whether people need more training or whether there has to be a change in the process,” he explains. One of the changes is a competency center of three or four business users in Dabur who are also internal business consultants to the organization in terms of IT usage. “These aren’t IT people, but good IT users who are part of my team,” says Garg. Twenty percent of his role today entails managing the outsourcing relationship; the rest is devoted to systems optimizations across the organization. This means more time with end users and more time planning future applications and studying hardware upgrades, and so on. “Critical information still flows to me on an hourly basis. But today even if I’m touring, operations continue. I can do more internal networking inside the organization and think of new solutions in different business areas,” he explains. “Earlier, the onus was on me to fix technical problems and then follow-up the reporting,” says Garg. “But today, my CEO will not approve a new IT project unless I can tell him the impact it will

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Cover Story | Outsourcing

SLA: Best Practices Recipe H

ere are tips and advice, culled from the experiences of committed SLA users, to help clarify the process of defining, implementing and maintaining new contracts with the business. Don’t try to implement SLAs across the board. Start the SLA process by saying: where do I need SLAs the most? Doing it across the board sounds like a mandate. A CIO at Sun Microsystems once used the Rambo approach, testing SLAs among the skeptics, like engineering. These demanding people forced the CIO to write bulletproof SLAs. SLAs cannot exist in a vacuum. Develop a metrics scorecard that identifies key aspects of service levels that your senior executive group needs to monitor. Meet this group periodically to review the SLAs. Simultaneously, consider a

functional steering committee that could review an SLA scorecard relevant to IT infrastructure at a more granular level than the corporate steering committee; a project steering committee could also focus on specific needs of a project. Good SLAs are simple and few. Having too many SLAs makes tracking and discussing performance more difficult and tedious. Else, meetings with business to discuss SLAs could become long and complex reporting sessions, with less time devoted to more important issues like needs and satisfaction. Measuring SLA performance must be easy and automated. Manually tracking SLA performance metrics, such as network availability, is tedious and prone to error. Also, if someone outside IT — in finance, for example — is calculating the same SLA

have on the bottom line. These questions were not asked to me three years back; they were asked to the functional heads. If I was on the IT operations side, I would not have been able to do all this,” he says. The discussion he refers to constitutes part of Dabur’s quarterly review meets, where all departments and functions put forth their achievements and their plans for the following quarter before the management committee. During this meeting, the IT review is jointly presented by Anil Garg and a representative of the outsourcing team. “That’s where inputs from the others also come in. The synergy between IT and other business units are developed here,” says Garg. Charanjit Mohan, executive director for operations, believes that such strategic consulting meets bring tremendous value in the post-outsourcing environment. “Anil is able to focus more now on new technologies for future IT projects,” he says. The meetings also help the management committee come to terms with hardware and capital requirements, and see the direction IT will be taking with the outsourcing arm, Mohan notes. The experience is not too different at Britannia. “There is a structured process of scheduled reviews with the steering committee and the management committee to qualitatively assess value delivery,” says Sunder. IT will contribute to driving top line

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metrics, the two groups may not agree. Using software tools to automate the measuring process, saves time and reduces error and conflict. Monitor the use of resources as closely as you do the SLAs. Resources such as staff time, are an important part of SLA negotiations and the performance measurement process. By setting resource allocations for each SLA — 1,000 person hours per month for desktop PC support, for example — IT can monitor the amount of resources applied to the particular SLA and a particular department. The goal is not to limit resource commitments, but to make it clear who is gobbling up resources. And remember, SLAs require a high degree of vigilance and maintenance.

— Team CIO

as well as bottom line, through the use of appropriate technology to enable cost-effective solutions for data availability at different operating levels, he adds. Gartner predicts that in much the same vein as Britannia and with similar objectives as the biscuit maker, India’s leading companies will increasingly consider outsourcing to speed up technology adoption, tap into external providers’ expertise, leverage IT knowledge-based skills and best practices of these providers, and, in so doing, ensure their competitiveness in a globalizing economy. CIOs must, however, focus on more stringent evaluation of contract provisions and benchmarks on the relationship with the service providers and customers. The success of the relationship, as Anil Garg says, has everything to do with synchronization of IT with business strategy. And therein, as the Bard would tell us, lies the rub. CIO

Chief copy editor Kunal N. Talgeri can be reached at kunal_t@cio.in

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outsourcing Gone are the days of outsourcing merely for labor arbitrage. The future is in disaggregating IT processes and figuring out who's best equipped to handle them.

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Cover Story | Outsourcing

by ben worThen

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itself isn’t going to get anyone a competitive advantage,” says Tom andan Nilekani, CEO of Infosys and the man who Sanzone, CIO of Credit Suisse. inspired the phrase 'The world is flat,' is pushing a new mantra that could become just as universal: 'Work will be done where it makes the most sense.' he new model is more refined and complex. Today, IT services Relaxing on the couch in his Bangalore office, Nilekani points out companies take work, break it down into pieces, and perform that his own company has offices in 39 countries around the world. each piece in the location that offers the best combination of skill, And it’s not alone. Wipro, another large IT services company, has cost, quality and manageability. If, for example, a new insurance eight offices in Europe alone, and TCS, the IT services arm of the application requires frequent contact with underwriters in New Tata Group, has 10 development centers and 10,000 consultants York City, any of the emerging global providers can do it there. But in the United States and Canada. if there is a component of that work that only requires cheap coders, Meanwhile, providers once identified as American are no these companies will do that component in China, or if they need longer so. IBM now has 53,000 employees in India, and Accenture to speak Spanish they’ll do it in Costa Rica or Spain. “This is the (which is based in Bermuda) will soon have more employees in future,” says Nilekani. “IT is being disaggregated. Slice by slice, the India than in the United States, and delivers its infrastructure and whole model is changing.” hosting services from 15 delivery centers scattered With change comes opportunity for CIOs, who can Reader ROI: in countries across the world. In other words, as tap into the global network that the outsourcing steps toward a more outsourcing projects have come to India, so have companies are building to improve quality, gain collaborative enterprise sourcing companies from the U.S. the flexibility and agility to respond to business How businesses can revamp And it hasn’t just spread. It’s evolved. Sourcing changes faster, and, yes, save money. The their networks to stave off isn’t just about finding cheap labor anymore. Yes, outsourcing vendors have spent the past several stagnation you can still take something, ship it offshore and How a marketing campaign can years establishing centers of excellence dedicated help change-management probably save a few dollars. “But cost in and of to specific tasks — Java programming or business

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New IT Supply Chain

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Cover Story | Outsourcing intelligence, for example. This allows for economies of scale and maximizes the chances that someone will find a way to improve the process. It also means that outsourcers have assembled deep rosters of talent, organized by skill and experience that most CIOs cannot match. To reap all the benefits that modern outsourcing can provide, CIOs need to start thinking like a service provider, says Dane Anderson, an analyst with Gartner. That means, examining your own internal model for IT service delivery and breaking down the work into the most granular pieces possible, just like outsourcing companies are doing. “You have to look at your operating model and ask how it developed and for what reasons,” says Sanzone. “Then you need to ask yourself if it still makes sense in today’s environment.” It’s a grueling process that Sanzone says can take any team months to complete. But it’s worth it.

Stop Outsourcing Problems

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hen a company first engages an outsourcer with offshoring capabilities, it is usually thinking one thing: reduce costs. True, the labor arbitrage can be staggering. But after the first year

of an engagement, McKinsey found, companies begin to focus less on cost savings and more on flexibility and agility. That takes time, money and management attention, and may blow away the initial cost savings. “If you are outsourcing a problem, it will still be a problem,” says Bill Homa, CIO of the supermarket chain Hannaford Bros. Breaking down IT processes into discrete components and analyzing which ones you can or should do and which ones a partner with subject matter expertise should do, lets CIOs avoid merely shifting bad processes to an external provider. Alan Boehme, CIO of Juniper Networks, knows how to break things up and parse the work sensibly. For example, at a previous job, he had to build an order configuration management system. He had his own people do the requirements gathering since they understood the business and worked closely with the users. The design was done with a mixture of in-house staff and contractors. Three groups — one in India, a team of onsite contractors, and students at a local university — did the actual coding. Yet another group did the initial testing before his team did the final regression and load testing and finished the deployment. “It made sense to do it this way since we didn’t have all the skills in-house and we couldn’t move people off of other projects,” Boehme says. But he found that breaking down the work like this allowed the project to be finished 25 percent faster and 20 percent cheaper than if he had done it all in-house or outsourced it entirely. Plus, his team was able to keep architectural control and retain the intellectual capital the project created. By understanding exactly what a process or task requires, CIOs can determine if they have the skills and the resources internally to do the project and if doing so would give their companies a competitive advantage. If not, an outsourcer can sometimes take better advantage of geographic location and a deeper bench of special skills to do the job. It’s a low-cost way to get the skills you need, in the place you need them, for as long as you need them. “Because of the size of their organizations they have the ability to offer advanced training programs to those people as well,” Boehme says.

How to Be Introspective

CIOs have to start looking at their operating model, and ask how it developed and for what reasons.” — Tom Sanzone

CIO, Credit suisse

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he first step to componentizing your IT department is to stop thinking of the various jobs IT does as functions, and start thinking of them as services. It sounds like semantics, but there is an important distinction: Functions describe something from the perspective of the person or group performing it, while services describe it from

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Cover Story | Integration the perspective of the person or group who benefits. “What is a help desk after all?” asks Gartner’s Anderson. “It provides a service to internal users of IT.” Look across the rest of the department, he says. “Everything can be considered a service. You just have to figure out who the customer is.” Once you adopt that mindset, you are in a position to think about your IT department like a discerning shopper and not get distracted because something has always been done a particular way. That’s critical, because componentizing your IT department will require you to challenge assumptions and the status quo. CIOs need to break each of these services into discrete processes, and each process into tasks. (In outsourcing lingo, tasks are a subset of processes. For example, requirements gathering might be a process; talking to users would be a task.) In some cases processes and tasks will overlap. In others, you will find extraneous or poorly performed steps. That’s one of the benefits of the exercise, says Louis F. Rosenthal, executive vice president of ABN Amro Services. “I don’t think that a company can be rigid with its own processes and expect to get maximum value from a strategic sourcing partner,” he says. CIOs must evaluate the processes they want to have in the future. The processes need to be broken down into specific tasks, next. For example, a company may have a group of programmers who understand every aspect of the business and turn out amazing applications that give the company a competitive advantage. Outsourcing the entire application development process in this case would be a nonstarter. But if you break down the application development process, you end up with a list that looks something like: requirements gathering, functional design, physical design, building, testing and deploying. Maybe, the team isn’t great at testing. Or maybe, there is a testing group somewhere in the world that can perform that task cheaper and more efficiently. Breaking processes into tasks gives you the opportunity to make these kinds of decisions.

— network monitoring for example. CIOs need to establish whether the person performing a task has to be physically present in order to get it done. This is the first question that Sanzone, the Credit Suisse CIO, asks when he is evaluating a task or process. He’s looking for a solid business reason behind the answer. For example, he recently developed a new trading application for his company’s brokers. The first task in the process — requirements gathering — is the sort of thing that needs a lot of back and forth between IT and the brokers. It could be done over the telephone or through collaboration software, but realistically the best results always come from face-

omponentizing your IT department will require you to challenge the status quo. CIOs need to break each of these services into discrete processes.

Questions to Ask

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he next step is to figure out whether a process or a task can or should be outsourced. The way to do this is by running each one through a set of questions. While the exact questions will vary depending on the company, department or process, here are some guidelines suggested by CIOs who have done it.

1 Does this have to be done inside our office? Almost anything can be done from anywhere, including tasks that would have seemed impossible to do from afar just a few years ago 46

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to-face meetings. And being co-located makes it easy to ask quick, stupid questions that someone offsite might not feel safe in asking. So, despite the fact that New York, where the traders work, is the most expensive market in the country, it made the most sense to do the requirements gathering there. And of course if the answer is no, then the process or task is a candidate for outsourcing.

2

Are there other geographic limitations? Sometimes a process or task doesn’t require face-to-face interactions but frequent contact is still important. It is possible to outsource these projects, but the outsourcer better be located nearby. Boehme was involved with a project during a previous job that involved a lot of data scrubbing. His department wasn’t staffed for the project, and it was low-level work anyway. “But at the end of the day you have to call people and verify their addresses,” he says. He found a partner in Mexico that had the computer skills, the language skills and, best of all, a voice over IP network, making the phone calls even cheaper. He decided on Mexico because he wanted to have people in the same time zone so they could call U.S. customers when they had to. It worked great. He tried to source a DBA project in Mexico

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Cover Story | Integration ability to grow the rest of his IT department. It’s not an obvious reason, and it illustrates why deciding to outsource something requires more than just a cursory level of scrutiny.

End of the Billion-Dollar Outsourcing Deal

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nderstanding your IT department at this level also makes you a better outsourcing customer. Rather than taking large pieces of IT and outsourcing them to one vendor in a megadeal that essentially marries the company to that partner, CIOs can use the insight they gain from the analysis to find the right partner for specific processes and tasks. In fact, Boehme suggests that CIOs should have at least two partners, and make them compete for your dollars. Jimmy Harris, managing director of infrastructure outsourcing for Accenture, agrees, although he warns of a few potential problems. First, he says, it isn’t a good idea to divide a process between vendors, despite some vendors’ claims that they can work together. Also, he says, CIOs should not spread out the tasks that form a particular process too broadly, because it just adds complexity. Workers are less motivated because they feel as though they have less invested in the final — Bill Homa product. And, he adds, “If you have to engage CIO, Hannaford bros. in thousands of low-level communications because you broke up the work at too fine a more recently, but after 90 days of interviewing, he couldn’t find level, you are going to lose stuff.” the skills he needed. He ended up moving the project to India and In fact, in order to combat the complexity that comes from having a team there work the night shift. spreading your IT processes and tasks around the world, some CIOs have created a high-level position to keep track of outsourcing Does having your employees do it provide you with a vendors and the projects that they are working on. “Vendor competitive advantage? management becomes much more important now. [Having that This is the number-one reason not to outsource something. And it group] helps us facilitate business decisions in ways that we is a determination that every company will have to make for itself. didn’t have to before,” says ABN Amro’s Rosenthal. Applying this There are some things that hardly any CIO would outsource — kind of methodology to your IT operations will let you see what architecture, for example. And then there are situations where components of your organization can be moved. By tapping into the answer may be counterintuitive. Homa, the Hannaford Bros. the skills network that outsourcing companies have built, you can CIO, doesn’t outsource his help desk, even though that has become react to new requirements faster. It’s enough to let even the smallest the low-hanging fruit for many first-time outsourcers. “I support companies act like a big company. about 300 internal applications and it would be very difficult to “We’ve been able to get our staff to move up the value chain,” train an outsider how to answer those questions,” he says. But it says Homa, reflecting on the impact that taking advantage of the would be possible. And if the cost savings were large enough, he new outsourcing world has had on his department. “It’s allowed might try to do it. us to raise our game.” CIO But there’s an important argument against it that isn’t readily apparent until you look — and think — more deeply. Hannaford Bros. is based in Maine, where IT talent doesn’t exactly grow on ben Worthen writes about emerging business trends. send your feedback on this feature trees. If Homa outsourced the help desk, he would be limiting his to editor@cio.in

If you are outsourcing a problem, it will continue to be a problem.”

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S. Gopalakrishnan, CEO & MD of Infosys Technologies, says CIOs need to figure out which processes they want to outsource if they want to start disaggregating.

breaking it down By Kunal n. Talgeri


Cover Story | Outsourcing

To make the best use of the 'Flat World model', CIOs need to disaggregate their processes. Here's how your outsourcer views that practice.

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n this exclusive interview, CEO and MD of Infosys Technologies, S. Gopalakrishnan, shares with CIO the contours of the 'Flat World' model. Having been a technology head for several years, he touches upon what CIOs need to be aware of vis-à-vis this unique model of outsourcing.

How did the 'Flat World' model evolve?

We started breaking down processes into sub-tasks in application development and maintenance ten years back. As we gained more confidence, we took it to adjacent services like packaged implementation, remote infrastructure management and BPO. The model has evolved across many business processes and become the 'Flat World' concept. Earlier, manufacturing could move around the world. Today, services can move around the world because they can be delivered from anywhere around the world. If CIOs need to prepare disaggregate processes, what complexities must they watch out for?

IM aGI GIn G by b In ES h SrEEdharan

Photo by SrIVatSa Sr ShandIlya

From a CIO's perspective, it is really about figuring out which processes he wants to enable and, then, what to keep in-house. Once you disaggregate services, some tasks will be done in-house and some with a vendor partner. One is distributing across various locations and the other is about distributing across different partners. A CIO needs to be aware of which processes will get distributed, which vendor partners he works with, and to whom he distributes which part of his enterprise’s processes. Typically, the client is not part of the disaggregating, but different outsourcing partners will have different methodologies. Therefore, the enterprise CIO needs to be aware of which processes are with which outsourcing partner. Can you provide a back-end perspective of how you view the disaggregating of services?

In a maintenance project, typically, the knowledge transfer happens onsite in the beginning. Then, the work transfers offshore, and a request directly comes to the offshore team, which completes the request and closes out a particular task or request. But when it comes to a development project, it is more iterative. So, we break down the task within the development

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project and for each of those tasks, we identify the best location to do this. We then distribute the work to multiple locations. Every single service that we have, can actually be disaggregated to individual tasks, and then we can look at where the task needs to be done. When you disaggregate this, you can also look at how granular the task is. So, we are applying the principles of the global delivery model to newer business processes. And when we apply it, we split it into tasks and sub-tasks before deciding where it is most appropriate to do. In doing so, we’re taking the global delivery model to newer services, expanding the footprint, and trying to increase the addressable market space. To do this, we need multiple enablers and the right technology infrastructure, excellent process discipline, and the mechanism of managing the activities as to tracking where the tasks are being done. Coordinating all the activities is very important — there are many things that facilitate this. It sounds simple in words; in reality though, it is a complex activity. Has Infosys been able to differentiate its centers of excellence based on expertise or skills of delivering services?

Certain centers of excellence do specialize. In Brno (Czech Republic), we have a center that looks at supporting our clients in specific functions, primarily in European languages. Another center in Monterrey (Mexico) has specialized in Spanish language support. We set up a center in Poland recently, which will support one client that came from the outsourcing contract Infosys got from Philips; we have another center in Hangzhou. Different centers have different responsibilities. To what extent is Infosys able to generate economies of scale across geographies with the 'Flat World' model?

It’s an ongoing exercise because the larger we grow, the larger benefits we get from economies of scale. You need to reach a critical mass in a particular location to fully leverage the investment we make in infrastructure, etcetera. In most of our locations in India, we have crossed that point and are yielding the kind of results we want. Now, we continue to look outside India for the same kind of results. CIO Chief copy editor Kunal N. Talgeri can be reached at kunal_t@cio.in

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Setting a

Different Tune

By Balaji Narasimhan

Sonata Software was founded over two decades ago, but even today the company has only about 2,200 employees, a fraction of the size of rival software services companies such as Infosys and Wipro. It says a lot about the organization which works in an environment where Big IT is scrambling to increase headcount to meet the needs of clients and adding value to their businesses. In this interview, B. Ramaswamy discusses ways to ensure the use of appropriate technologies, and their alignment with business goals, and the CIO’s role as ‘business impact creator'.

CIO: What technologies should leading companies consider in the near term?

View from the top is a series of interviews with CEOs and other C-level executives about the role of IT in their companies and what they expect from their CIOs.

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B. Ramaswamy: One should consider the mega trends occuring in the IT industry. In the ’60s it was IBM mainframes and in the ’70s it was minis. Then came the client server applications, followed by the Wintel platform in the ’90s. If you look back and then look forward, you will see that the trends of the future are based upon two things — the low cost of bandwidth and the Web emerging as a platform for computing. The technologies

that are deployed today arise out of these two trends. First off, there is Web 2.0, which is about using the Web as a computing platform, just like the desktop. Web 2.0, popularly called Enterprise 2.0 in the enterprise space, is pushing the use of the Web as a platform in organizations. Next comes SOA. Here, the thrust is on applications that were developed in the past, which are not talking to each other. These applications can no longer be islands and thanks to SOA they aren't. It is useful because it allows enterprises to leverage applications that are already there.

Photo by Srivatsa Shandilya

Sonata Software is not in the business of simply executing IT projects. It seeks to add value to business processes and build strategic relationships, says CEO B. Ramaswamy.

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View from the Top

B. Ramaswamy expects I.T. to: Create a positive business impact Add value to processes Drive customer focus

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View from the Top

Business intelligence is one of your offerings. What more should Indian CIOs do to push BI? BI has been around for a while, and today, people are more interested in business analytics, which focuses more on the realtime aspects of BI. Earlier, a lot of companies invested in ERP and today, these systems are throwing up a lot of data, which needs to be analyzed. The emphasis now is on the type of reports that can be generated from existing information. But BI can achieve much more for an organization. What needs to be done is to take a top-down approach in terms of business imperatives. This way, one can ensure that the BI software is highly aligned with business goals.

How do you plan to manage tax changes in 2009 and the constant rupee appreciation?

“ CIOs should tell CEOs they want to be measured on business improvements. CIOs should analyze how their operations impact business.” — B. Ramaswamy

Let me add one more complexity to the list you have mentioned: wage inflation. All these three are putting a big squeeze on companies. If a business model is conceived on the basis of manpower, there are going to be no good answers. So, in Sonata, we are not working on the headcount model at all. The only way we can do something positive is by looking at how we can add value to the business processes of our clients. We don't just do projects — we try to establish strategic relationships with our clients. This leads to repeat business, and only when you have repeat business do you find the opportunity to add value to your customers.

with supporting the software. Especially in the Indian context, it is not always feasible for every company to have a large IT staff built around supporting the software. Therefore, SaaS is even more relevant in the Indian context, especially for SMEs. But SaaS cannot be used everywhere. If the application is not standard — that is, if a particular application is unique to a company, then SaaS is not the answer. In any enterprise, there are a few applications that are core to the functioning of the company, and such applications are best retained in-house. Organizations should also pay attention to the security provided by the SaaS provider.

Where is SaaS relevant in the Indian context? Where is it not?

Do you think that Indian CIOs should consider open source seriously?

SaaS is important because the traditional model of software, which involves buying software from a vendor and continuing to pay for it as you go along, causes problems

Open source should be viewed from a TCO (total cost of onwnership) angle. It is not just about the license. The question CIOs should look at is support. If there is

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no support, then a CIO has to grapple with that in-house, and this may not always be easy. CIOs should also pay attention to application availability. With open source, application availability is sometimes restricted in certain areas. This will govern whether open source works for you or not.

As an enterprise that uses IT internally, can you talk about some best practices and processes you use? In the kind of business that we are in, processes are the key. We are a CMM Level 5 company, and we try to make sure that every process is watertight. The vital part is to be certain that these processes are aligned to the customer's requirements. In client-facing processes, the projects we do are collaborative — the client’s team and my team have to function as one virtual team in order to complete the project. This is possible only if we have an IT infrastructure that is completely compatible with the client's infrastructure. So, for every customer, we have a customer portal. We use this as a project management tool so that a customer sitting thousands of kilometers away knows the status of his project at any time. The portal concept has also been used to enhance collaboration within the company. For instance, our marketing department has its own portal, and this allows the marketing staff to collaborate with their colleagues around the world. Similar portals exist for other departments, like HR. We use the Web extensively for collaboration. These are some of the best practices that we have used, both internally and externally.

What is the best way for CIOs to sell ideas to the management? Based on my constant interactions with CIOs of our clients, I've seen that CIOs are expected to cut cost. Every CEO will tell

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SNAPSHOT The next step is to put a his CIO that his project is wrapper around these spending 90 million Euros. legacy applications, expose As long as cost is a CIO's them through SOA and you primary concern, the thrust are ready to use modern will always be on reducing it. Employees technologies like Web 2.0. I think CIOs are better off >2,200 This way, you have the best of when they say that they are 2006-07 revenue both worlds with the least risk. adding value to the business. $198 million (Rs 792 Here, risk is the key factor. No CIOs should tell CEOs that crore) CIO wants to scrap legacy they want to be measured on Indian systems that run mission business improvements. To Development Centers critical apps. It is a nightmare, do this, CIOs should carefully 4 and people who have tried this analyze how their operations Foreign Offices have faced serious problems. impact business. 10 Suppose a company wants AVP – Project to enable its entire mobile Should companies Office staff with a device like a outsource core N. Sridhara Blackberry. The moment functions? this is decided, people tend to look at the costs and the Instead of looking at core savings associated with this move. But it is and non-core processes, it is better for not about savings at all. It is about process organizations to look at processes and ask: improvement. It's about how you can are these best done by outsiders? Some improve your revenues by two percentage outsourcing companies can do a better points. What does this mean to the bottom job because they have better economies of line? If CIOs start wearing the cap of scale, or because they have competencies ‘business impact creators', then they will be that are of a much higher order than what talking to the CEO in his own language. an organization may possess in-house. So, even if you have a core function, you can outsource it, provided the company you are What migration strategies outsourcing it to can do a better job than old-economy companies what you can do. use to grapple with legacy For example, recruiting people is a core systems? area in Sonata. Still, if there is a company that has an automated and scientific process Much has been said about migration for screening applicants, and for shortstrategies, re-engineering, and other areas. listing them, I would ask: why not? Now, you Most of it has failed. But what has come could argue that I might lose my competitive across is that companies have understood advantage, but I don't agree. You only need that legacy systems have their own merits. to set the right parameters. For instance, I This is because legacy systems contain a lot would not want to outsource to the same of proven business logic — one that works. guy who is interviewing for Infosys and The only difficulty is that legacy systems Wipro — and ends up asking candidates to software usually run on expensive and choose between us and our competitors. It outdated hardware. Since these applications would not work — we need people who can were developed using old technologies, CIOs work in a specialized, virtual environment. cannot use newer technologies. The best Once such things are clear, there is a case thing to do in such cases is re-platforming, for outsourcing even very critical functions where you move the application and make it of the company. run on a modern platform.

Sonata Software

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What role does your CIO play in the company? Does he take part in driving the strategic direction of the organization? Absolutely. The way we are set up, the CIO's job role encompasses two areas: the first is related to technical infrastructure. The CIO has to know how he can impact areas like customer acquisitions or retention. Our CIO is also responsible for introducing best practices to the company. He also has to ensure that our clients are able to see the difference that we make. Second, the CIO's team members are a part of the customer group. Each customer has a dedicated group, and a member of the CIO's team is present with each dedicated group in order to execute the CIO's plan. That is absolutely frontline business. Thus, my CIO has an impact across the organization.

Should a CIO also be responsible for security? Or, should companies have a CSO? Security should be a part of risk management. Security is not about technology, hardware or software. It's about the overall view. Therefore, it should also involve physical security. For instance, this building where we are currently sitting in, has three access points. So, it is susceptible to a breach from three points, as opposed to another office of my company, which has only one gate. This has nothing to do with software or technology. Since we have to look at security in a larger context, the CIO can't handle security. You cannot set your own examination paper and correct the answers yourself. CIO

Special correspondent Balaji Narasimhan can be reached at balaji_n@cio.in

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Buck Starts The

What you say about your budget – and how you say it - sets the course for your IT department. Here’s how to make your budget presentation more effective.

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By Michael Fitzgerald

hen he presents his technology budget to senior management, Edward GrangerHapp likes to talk about a ’57 Chevy. “I tell them that we have to polish it and take care of it, and because it’s a ’57 Chevy, we’re living on borrowed time, especially if we’re using it for the daily commute,” says Granger-Happ, CTO at Save the Children. The spiffy car is a metaphor for a legacy system in use at the foundation, and it helps Granger-Happ make several points. First, it puts the old system in a context everyone on the business side understands. Second, it helps him make the argument that systems not only come with maintenance costs but that those costs grow, and take up more of his budget as the systems age. Third, he can tie maintaining or replacing the ‘Chevy’ to his strategic IT plan, priming the group for a future discussion. Vol/2 | ISSUE/20


Advanced Communications

Here Granger-Happ also says to tread carefully without being Granger-Happ says his approach to talking about the IT too clever, recalling the once popular comparison between budget usually gets him what he wants at the Rs 1,600the relative cost of computers and cars. “You remember crore nonprofit. His budget for the coming year is Rs 18.8 that comment that if cars were computers, Rolls-Royces crore. But he also knows that when the foundation sees would cost Rs 40,000 and get 100 miles to the gallon?” he fund-raising tighten, as is the case for the coming fiscal says. “It was pretty easy for someone to come back and say, year, he knows he won’t get major new initiatives funded, 'But they’d lock your windows every other week and crash and he doesn’t ask. without warning.' " Though, it may take up less than an hour at the executive Here’s how to make your next budget presentation a committee or board meeting, the budget presentation is winning proposition. one of the most important messages a CIO has to deliver. What a CIO says and doesn’t say — during both the actual presentation and in the months leading up to it — sets the course for IT not just for the next year, but where new For many CIOs, the budget presentation itself is antiinvestments are concerned, for years to come. climactic because the budget has already been debated Despite its importance, few elements of such a thoroughly during the preparation phase. By the time presentation are universal. What matters in a budget the CEO sees it, there should be no surprises on either presentation depends on the priorities of the company side of the table. and the personalities of the CEO, the CFO Therefore, CIOs need to view the and the board. That said, all successful entire planning process as a chance to Reader ROI: budget presentations do need to make communicate with the business side. a clear business case for spending and That means, at minimum 60 to 90 days the importance of doing your homework especially for new initiatives, and CIOs of parsing numbers, organizing projects How to build up for the had better have support lined up from the and setting priorities. The CIO should budget talk business units that should benefit. The spend some of this time on diplomatic tips while making presentation itself needs to be concise and sorties like lunch meetings with the CFO your presentation free of technical jargon. or with department heads, in order to size

Do Your Homework

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Advanced Communications It takes discipline to avoid slipping into tech-speak. up specific priorities, preferences and potential trouble Granger-Happ tries never to get into the technical nittyspots on which IT has an impact. gritty during a budget discussion. For instance, when Susan Cramm, an executive coach who was both a CIO someone asks during a budget presentation how a wireless and a CFO (and is a CIO columnist), recommends CIOs network will help achieve business goals, he avoids break their budget into two categories: project-based talking about its speed or range. Instead, because 'Save the services and utility-based services. Project services are Children' wants to improve network access for 3,400 of typically simple to explain — these are the projects the its field workers, many of whom are in remote parts of the business units want or will get obvious benefits from. world, he talks about helping them connect more readily. Because they can be tied to business results, their purpose Paul Cavanagh-Downs, CIO at Aristocrat, a gaming is typically clear. concern based in Sydney, Australia, observes that Utilities cover things like the help desk, network getting technical gets you labeled as disconnected from costs, software maintenance, hardware and the like that the business. constitute 60 percent to 70 percent of typical IT spending. “The businesspeople will often try to get into the “It’s a huge number, and that number is a mystery to the technology, but it’s not a good thing,” he says. There’s no gain organization,” Cramm says. Thus, it’s also the number for a CIO to explain the differences between, say, that causes the most tension between IT and the a frame relay network and a multiprotocol business side. “The CIO says ‘Why can’t you label switching network (MPLS). “Even just trust me? Why wouldn’t you expect if you’re asked the questions, if you to have to maintain those systems?’” The big answer, you’ll still get labeled as Cramm says. “The business side number being too technical,” he says. says, That’s a huge, hairy old It’s happened to him, and he number — why can’t you has business credentials as an explain it to me?” accountant who became CIO She suggests CIOs present after a long stint in finance. utility costs as if they were of respondents to the 2006 Cavanagh-Downs says his an outsourcer, on a perState of the CIO survey tack for avoiding technical department basis, whether it’s say that the ability to discussions during the budget for e-mail usage, help desk calls communicate effectively is presentation is to pause, then or the network. the most pivotal skill to use his answer to reframe the Some CIOs manage their their success. question: what matters is not the budgets as portfolios of investment technical difference between frame opportunities, in order to lend relay and MPLS, but which one offers structure to a budget planning process. the business better flexibility or scalability. Though it sounds complex, it can be done with At American Airlines, Ford goes one step a spreadsheet. “It helps you build a business case,” further and tables such inquiries. When businesspeople ask says Keith Kerr, a director at consultancy Robbins-Gioia. technical questions, he directs them to prepared reference Describing the IT budget as a series of investments that slides. Meanwhile, Ford keeps budget sessions focused businesspeople can choose from, is especially valuable on the business by having his lieutenants, who work most when a company doesn’t have the luxury of normal closely with American’s business units, participate in each planning cycles, notes Monte Ford, senior VP and CIO at business unit’s budget presentations. That strategy lets Ford’s American Airlines. During his six years as American’s department heads show off their business expertise and prove CIO, the company has made a major acquisition, suffered that IT’s portion of the payroll is going to good use. through the teeth of an industry-shaking downturn, Ford does not rely on charts to illustrate the value of endured a recession and struggled with high jet fuel prices. IT. “If I’m not doing my job in the eyes of my counterpart Ford says his budget allocations may shift by as much as say, the marketing executive, no function point analysis 20 percent in a typical year, and managing via portfolio is going to tell him otherwise,” Ford says. Ford cites his helps him track all the changes. He also makes sure to give current budget planning, in which one emphasis is faster the CEO and CFO at least one budget update during the turnaround on assignments. “We think we’re pretty quick, year, which helps the IT department stay on top of how the and we’re faster than last year, but there are a couple of budget is changing over time. business units that don’t agree with that.” So, rather than argue back with charts showing how fast IT gets the job done, Ford’s managers will explain how their plans will First, avoid jargon. Instead, explain technology spending improve timeliness even more. in terms the business side understands.

70%

Business, Not Technology

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Advanced Communications

Emphasize Results in Budget Presentations Don’t talk about spending money; instead, speak of results.

A

ny conversation about the IT budget needs to get the CFo on your side. Avoiding technical jargon is smart, says Sam Silvers, principal and national service line leader with Deloitte Consulting’s financial management practice, because CFos’ biggest complaint is that CIos simply don’t speak the language of business. But Silvers thinks CIos should go even further and remove the word ‘budget’ from their vocabulary. “Budget is a cost-based thing — it’s not investment based,” Silvers says. His phrase for the keep-the-lights-on infrastructure spending? ‘Risk mitigation’. After all, what happens if you can’t send

an e-mail because the company cut the budget for network upgrades? He recommends that CIos frame budget discussions in terms of how IT spending does six things: Increases business investment; Increases customer satisfaction; Enhances the customer relationship; Increases revenue; Improves decision support; Mitigates risk Vickie Barrow-Klein has had a CFo role at three organizations; her current job is vice president of finance and information management with Save the Children.

Some CIOs do, however, find that illustrating IT performance sometimes helps them make their case. Kevin Kearns, the former CIO and CFO (and now CEO) at Health Choice Networks in Miami, found budget benchmarks to be an effective tool for quelling unrest among the board members. As CIO, Kearns made sure the board of the community health center knew his spending, at about 2.5 percent of revenue, was below the industry average of 3 percent to 4 percent of revenue. The comparison helped him get his basic budget numbers passed.

Don't Forget the Polish Even though the budget presentation can be a pro forma event, it still has to be good. There aren’t rubber stamps in budget discussions. When all is said and done, Ford says, he expects he’ll be asked to spend slightly less than he’s proposed. Closing the deal in your favor requires a polished performance. Use these tips to shine: Be succinct. Kearns says that since he’s become a CEO, he realizes how focused presentations need to be. “I have this board, and I have five times the amount of stuff for them than we have time to do.” So Kearns has his CIO give him a detailed presentation about the budget, and then they talk about which things to highlight in the 30 minutes or so, allotted to the budget discussion with the board. Pace yourself. Naomi Deutscher, a presentation coach, encourages executives to speak quickly, but adds that

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She says that all these ways of framing budget discussions are music to her ears, especially the idea of positioning infrastructure spending as risk mitigation. She cautions, though, that the specific language one uses should be tailored to the organization one works for. For example, in most organizations IT doesn’t generate revenue directly. So BarrowKlein wants to hear about efficiencies. She notes that efficiency doesn’t mean doing more with less — “I’ve learned that with IT, it’s about doing more with more,” she says. —M.F.

it’s also important to vary your pace. In particular, she recommends pausing after a significant point has been made, or a new topic or slide introduced. Use slides for emphasis. Deutscher advises that slides contain only a few lines of text — six at the most — and that CIOs use these as talking points rather than reading them off verbatim. Using color or bold text for important points or statements helps get the message across. Get feedback. Practice giving a budget presentation beforehand, and, if possible, tape yourself. Then, after the presentation, “have a colleague tell you what worked about your content and style, and what didn’t,” says Deutscher. “People don’t do enough to find out what people like and get feedback on what worked and what didn’t.” But the annual performance is but one point in a continuous exercise. It requires strength in numbers and months of hard work, along with political savvy, corporate tea leaf reading and an understanding of the company’s strategy and IT’s role in it. CIO

michael Fitzgerald is a freelance writer. send feedback on this feature to editor@cio.in

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Ac c On the back of Project Bhoomi’s success, the Nemmadi initiative seeks to improve geographic reach in rural Karnataka using a wide network of telecenters. Reader ROI:

Developing technology infrastructure in the hinterland How everyone can win with publicprivate partnerships Value at the bottom of the pyramid

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Telecenters

Upgrading Rural

c cess It wasn’t so long ago that senior citizens

of Kadadakatte in rural Karnataka spent at least Rs 50 and the better part of two days traveling to the district pension office at the taluk headquarters in Bhadravati. Such journeys to collect money or process documents were regular ordeals for rural folk across the southern state until last year, when its government announced Project Nemmadi. This Rs 30-crore public-private initiative is an extension of the celebrated Project Bhoomi that computerized 2 crore rural land records in 2001. The objective is purely functional, say sources in the state government’s e-governance division. Agriculture is a critical part of the state economy, making land records — or, record of rights, tenancy and crops (RTC) — indispensable for a vast chunk of the rural population. Over time, Project Bhoomi received criticism in some quarters for centralizing land records at the taluk level. It still required villagers to travel up to the nearest taluk. To improve their

Govern Main.indd 61

reach, the state government put in place a rural telecenters project, better known as Nemmadi. It has certainly saved the rural residents the long commute as they can access records from the nearest telecenter. The e-governance department actually began the telecenter initiative in 2004 with a pilot project at Mandya in a town called Maddur to determine its efficacy across villages. The pilot showed a high probability of success, paving the way for the rollout of Namma kiosks in October last year. By February 2007, the basic infrastructure was ready in almost 30,000 villages across Karnataka’s hinterland. The locations were identified depending on the density of population and demand for documents and records. Today, there are 755 telecenters operational with rural digital service provided across 55 taluks. While the infrastructure has come into place in quick time, the process of change is more gradual as is the wont of any change management exercise. The e-governance

Illust ration by P C An o op

By Kanika Goswami

8/31/2007 3:54:40 PM


Telecenters income certificates apart from RTCs. Other services department has been providing training to tehsildars include providing information on agricultural and other officers such as the shiristedar, the village prices, availability of fertilizers and seeds, railway revenue inspector. reservations, insurance premium payments, and Meanwhile, the original plan of setting up 177 backinitiatives of the state education department like the office centers that link government centers at the SNAPSHOT Sarva Siksha Abhiyan program. taluk level is nearing completion. In fact, all of them Project should be up and running by December, according to Nemmadi government officials in the e-governance division. INveSTmeNT rs 30 crore The initial investment of Rs 30 crore has come from Nemmadi effectively dovetails Bhoomi, feeding on the state government and a consortium comprising its central database of almost 2 crore digitized land TeleceNTerS 755 Comat Technologies, N-Logue and 3i Infotech, records. Bhoomi benefited 67 lakh farmers across with 3i bearing almost 90 percent of the cost. “Our the state, making the model the first of its kind to bAck-OffIce ceNTerS investment is to the tune of at least Rs 25 crore,” be implemented in the country. Here, NIC has been 177 says Anirudh Prabhakaran, 3i Infotech’s COO for instrumental in developing a communications STAkeHOlderS South Asia. “That covers costs of all equipment, framework application to link Nemmadi’s telecenters state government connectivity, VSAT operations, real estate leasing, with Bhoomi’s database. 3i Infotech power, UPS and peripherals. Further, the cost of The operation model for Nemmadi has been running telecenters is also our responsibility. As far stringent in its SLAs. As Ashim Roy, VP for Comat technologies as operations are concerned, 3i Infotech has been the technology at Comat Technologies, says, “3i interface between the government and the project Infotech are providing us support in terms of n-logue management team,” he explains. procurement and so on. But in terms of architecting Project Nemmadi is expected to break even within the solution and managing the deployment, that’s the next five years. The role of the state government is totally our responsibility.” limited to providing data and connectivity. As of now, the telecenters On its part, Comat has built, deployed and maintained the provide 37 services ranging from utility payments to processing telecenters, referred to as rural business centers (RBC), for the first of documents such as death and birth certificates, caste and five years of the implementation. Its role in the project encompasses software development, hardware procurement, systems integration, kiosk maintenance and daily operations. These RBC kiosks offer both G2C as well as B2C services. Comat has also taken up existing Bhoomi kiosks, and scaled them up from being centers dedicated to land record-related services to B2C-friendly RBCs. Each RBC possesses dieseloperated backup power and is equipped with one computer, printer and camera. Some of these kiosks even have thin-client terminals for additional access, apart from VSAT connectivity. Comat has developed a Global — Anirudh Prabhakaran Services Infrastructure (GSI) that Coo (south asia), sia), 3i Infotech provides a common platform to deliver the diverse services. The rural digital service application collects data and issues certificates online, but can function even offline by writing data into the local queue. Once online, it’s synced with the central database at the state data center.

Power to the Telecenter

“project roject nemmadi emmadi required us to use technology in rural areas, and also enable the locals there to use it.”

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Telecenters The revenue model of Nemmadi assumes a complex form. “The government has fixed different charges for different services, depending on the area, season, nature of service, and the amount of database that goes into it,” says 3i Infotech’s Prabhakaran. “Each print costs between Rs 7 and Rs 15, which is split between the government and private partners. We do not have a specific turnover figure to share right now. Suffice to say, it has been a huge amount of hard work coordinating this scale of implementations,” he adds. In all, the PPP partner gets a share of the user charges, transaction charges for taxes and utility payments, data entry charges for updating or digitization of data, fees from the government for programs like Sarva Shiksha Abhiyan, B2C services with individual transaction charges, apart from other IT-based services that the telecenter may provide like DTP job work. The Karnataka government has also set up the Nemmadi Monitoring Cell (NMC), which receives 3 percent of the share of all B2C and G2C service charges. At the village level, the telecenter sources data from the state data center. So, in the case of Bhoomi land records, for instance, citizens can access RTC data online using the RTC-on-Web application. Other services include food coupons to rural citizens, updation of crop data, collection of panchayat taxes and digital photography, in addition to many utility payments.

Crossing Barriers It goes without saying that a project of such dimensions would have a number of challenges. Roy elaborates a few at the infrastructure stage. Despite Comat’s involvement in a number of rural projects, there were situations that occasionally created trouble. “Nemmadi was a completely different opportunity because it not only required us to use technology in the rural areas but also enable the locals to use it,” recalls Roy. There were problems relating to shipping, equipment and people within planned schedules. Getting the technical installation crew to the locations was another issue, and they took some time to settle down. “In order to test out each of these kiosks, we had to make sure that we identify the right location,” says Roy. “Not every building that we liked could carry the dish. So, we had put together a checklist for our team, with which it could identify the right place and then negotiate the lease agreement,” he adds. It was only after this process that the rest of the team and equipment could be shipped. “Our team would go in advance and ensure the basics like power availability. Then, the VSAT team from Hughes Software Systems set up the connectivity,” he says. The large distances also made planning difficult in many cases. “We would often underestimate the time that would be taken to travel. We would plan for 3-4 kiosks to be operational in one day. But in reality, in most cases, we were able to do only one,” says Roy. In some cases, rework was necessary. The issues that came up in the first 200 kiosks were the biggest part of the learning, he says. In several cases, the distance from a rooftop to the kiosk was so much that wiring cable was not available. Or, roofs could not accommodate a dish. “In one place, there were monkeys jumping on the dish,” Roy

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NIC was instrumental in developing a communications

framework application to link the telecenters

with Bhoomi’s database.

says with a smile. “We got no signal. We couldn’t figure out why there was no connection. It was a learning experience. After the first 200, our planning became a lot more specific due to this, and then it was much easier,” he recalls. According to Prabhakaran, managing attrition at the operator — as well as project level — was a huge problem. “There would be no prior notice, and the person would just not turn up for work. When all our plans were fixed, things would have to be rescheduled because of this,” he says. Motivating people to return to work every morning took a lot of the team’s energy. There were also problems due to the complexity of plans for setting up deployments. More importantly, there were technological challenges to handle. “Since this is a multi-tiered operation, multiple software was required. NIC had provided the software for the RTCs. But for the others, we had to create the software,” says Roy. Comat had developed GSI that provided a common platform for delivery of all RTCs. “We need a reporting system so that we get constant feedback on daily problems faced by the remote kiosks,” notes Roy. “We have developed an asset tracking system by which we can track consumables — like printing paper — as well as the cash coming in for payments,” he adds. The process of cash deposit had to meet specific requirements. Another huge problem Comat faced was breaks in connectivity. “Any break in connectivity affects the RTC printout. We have to keep track of all the papers. At the end of every month, we have to give a report to the government listing out the RTCs that have been issued, and even those that got damaged due to communications failure,” asserts Roy. To counter the problem of breaks in prints causing security or authenticity issues, measures like holograms that identify the documents’ origin and authenticity have now been introduced. In addition to this, there is a watermark numbered on every REAL CIO WORLD | s e p t e m b e r 1 , 2 0 0 7

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The Hands That Carry Nemmadi However, change management continues to be the biggest challenge, even from a citizen’s point of view. At one level, expectations have risen multifold. For instance, villagers resent having to spend two whole days to collect a caste certificate, even though the village accountant used to take a week to do the same task. Villagers now want the certificate in one day! The success of the project lies in people accepting change in its real form. The usage challenge arises from various quarters. Optimization of time has been tried out in Nemmadi processes. There is one SLA, which states that no paper can be kept pending for more than two days. Thereafter, it basically functions on a firstcome-first-serve basis. But rural residents will take time to accept this change. Caste and income certificates are yet to be incorporated into the database at the Nemmadi telecenters. Ten years ago, the village accountant had all this information on his fingertips. Today, this static data has still not been digitized. Another challenge that the government faces is the quantum of adjustments required. Dealing with a PPP is not easy because the corporate sector does not understand the depth of government processes in their entirety, just as government officials fail to understand the nuances of corporate procedures. The marriage takes time to adjust. Despite being burdened by criticisms and riding on the success of Bhoomi, the Namma Telecenters are running in 55 taluks. By 64

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“The government has fixed different

charges for different services, depending on the area and nature of service, among other factors.”

— Ashim roy oy

VP-technology, Comat technologies technologies

October-end, there are plans to cover all 177 taluks. Of course, the champions of the project — both public and private partners — are prepared for more resistance from middlemen, who will be eliminated with the success of the telecenters. Nemmadi continues to develop plans for the near future. The number of services will be increased and more utility payment options will be granted to the rural populace. Further, 3i Infotech plans to add financial services to be sold from the Namma RBCs. “We plan to introduce more banking, financial and insurance services,” says Prabhakaran. The opportunities to make the project serve multiple purposes are immense. As Ashim Roy puts it, “We are assessing our successes and failures on a daily basis, particularly in tracking wastages, to ensure that we can develop ways and means to reduce them. With all this learning on better implementation, our processes will only get better over the next six to 12 months.” From a private partner’s perspective, there could be adequate learning and hence improvement, but murmurs about the level of enthusiasm from the government also need to be tackled. In other states, there has been better backup support provided to the project implementation or infrastructure teams sent by the private partners. In Karnataka, it can still be better. This, again, is a learning experience — one from which the e-governance experience in India only stands to benefit. cIO special correspondent Kanika Goswami can be reached at kanika_g@cio.in

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Ph oto by sr IVatsa s handI lya

page. Each area gets a certain number of pages issued to be used to print the RDS. In case of a printer or connectivity problem, the page has to be kept in record and returned to the state government. Ministry sources reiterate the importance of security measures and authentication processes vis-à-vis RTCs. Project Nemmadi has taken interesting strides in technology in this respect. To cut down the time it took to issue and to cut into the processes of a document traveling to and fro for verification and final signatures, digital encryption signatures on documents have been introduced. Each tehsildar has an ID barcode that is used in all documents he authenticates — this is the equivalent of his signature. It is among the small, yet significant, steps in technological innovations designed to bring Nemmadi closer to daily processes.


Essential

technology Virtualized servers create power, hardware savings and headaches, if you’re not careful. Management tools can help automate oversight.

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From Inception to Implementation — I.T. That Matters

Thinking Inside the Boxes by Katherine Walsh

| For Monster.com, the initial benefits of virtualization in the data center were easy to see: with 500 virtual machines (VMs) running on 17 servers, Monster cut power and hardware spending and improved efficiency, since virtual machines can be deployed much faster than standard hardware. But as Monster’s virtual environment got big — and it got big fast — management problems arose. The worst one: the company didn’t have enough visibility into which applications were competing with each other across storage and server resources — and this was affecting IT’s ability to meet service-level goals, says Pete King, manager of monitoring and analysis at Monster. “We ran into a lot of contention,” says King. So, King turned to BalancePoint, a workload balancing and applications service-levelmanagement tool from startup Akorri, to ease the pain. BalancePoint shows when and why a particular VM is not performing up to standard, and based on that data, King can redistribute the load to increase efficiency. It analyzes performance on the VMware side and storage area network side to avoid virtual fights for resources.

Data Center

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essential technology

“Now that Monster has been using BalancePoint for a little more than a year, there’s less trial and error,” says Paul Neilson, senior vice president of technology services. Monster no longer has to move VMs around based on ‘intuition’, he adds. Almost everyone using server virtualization will bump up against one or more of the common management problems, including workload balancing, ‘VM sprawl’ and disaster recovery plan complications, says IDC analyst Stephen Elliot. Tools from VMware and a growing number of third-party vendors can help.

KeepYour Balance Workload balancing can be a tough problem to get your arms around. One key benefit of virtual machines is the ability to move them easily from one physical server to another. Problem is, it’s hard to know how many VMs on a particular server are too many — since the answer may depend on the applications, plus factors like memory and attached storage. In an environment where critical applications compete for

to another machine, and Distributed Resource Scheduler (DRS), which couples with VMotion to allocate resources to highpriority VMs based on pre-established rules you set. A key point: DRS and VMotion show where to balance workload, but they aren’t analytical and don’t see contention with other apps outside of VMware, King says. Since BalancePoint isn’t tied to the OS, it can see if VMware performance is impacted by other apps residing on the same SAN resources, he says. “DRS just sees what it sees for performance through the host, CPU, memory and storage, but it can’t see what the database server that’s on the same side as the SAN is doing,” says King. The more VMs you move into production, the more critical predictability becomes, says Rick Knode, director of computing and communications infrastructure for San Diego Data Processing Corp. (SDDPC), a non-profit provider of government IT solutions that serves customers like state agencies. Knode needed help managing

Almost everyone using server virtualization will bump up against one or more of the common management problems, including workload balancing,‘VM sprawl’and disaster recovery plan complications. the same server, it becomes difficult to see which applications are contending with each other, and this affects a company’s ability to prevent slowdowns. For Monster, managing this challenge required multiple tools, a situation that’s not uncommon. Monster uses Akorri’s BalancePoint to augment the capabilities of VMware’s two main management products, VMotion, which increases hardware utilization by migrating VMs on failing or underperforming servers 66

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resources in the company’s current environment (50 VMs on three servers) and in the future approximately 100 additional VMs will be added to production in the next fiscal year, Knode says. He looked to Vizioncore’s esxCharter tool to obtain performance information on SDDPC’s VMware ESX servers in real-time. This tool looks at performance levels and processes running inside the virtual machine. Being able to adjust the CPU power and memory allocated to

Average utilization of an Intel based server: less than 10 percent. Excess server capacity sitting around worldwide:

Rs 560,000 crore.

Source: IDC

VMs is critical when you need to make on-the-fly adjustments and terminate or move processes that are adversely affecting environments, Knode says. “It gives you more visibility into what’s going on.” For example, if a specific VM is eating away at one of his processors and affecting other VMs on that processor, he can use DRS and VMotion to move the VM onto another processor. But he says he wouldn’t know which VMs to move without Vizioncore. At Wachovia, the fourth largest bank in the United States, Tony Bishop, chief architect, turned to Scalent for help balancing workloads for his 1,000 VMs running on a few hundred servers used in development, testing and back-office roles. Scalent, which may be used independently or in concert with VMware, helps Bishop re-purpose servers quickly. “Some of the other [management] tools we looked at also have forms of provisioning, but they don’t have the ability to act in as near real-time as possible, like Scalent can,” says Bishop. Scalent’s software gives him management flexibility when apps are competing for resources, he says.

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essential technology

Masters of Disaster Flexibility also pays with regard to disaster recovery, an area where CIOs are increasingly looking to virtualization. Nate Stuyvesant, CTO of Genilogix, an IT consultancy, says disaster recovery is his company’s biggest IT management issue, period. He’s not alone. According to Gartner data, 70 to 75 percent of Gartner’s clients who use virtualization for x86 servers are also using it for DR. Genilogix runs 60 VMs on four servers across development, testing and production environments. Stuyvesant relies on VMotion to move a server over to another physical box and effectively eliminate downtime, VMware’s DRS tool alone is a cogent reason to consider virtualization in the first place, he says. Eric Miller, president and CEO of Genesis Multimedia, a Web hosting company that also designs its customers’ Web applications, uses VMotion to increase uptime and improve reliability in his environment of 55 virtual machines running on three hosts, where some customers need higher utilization than others. Miller relies on VMotion, driven by DRS, to move the VMs around. Genesis is no stranger to virtualization — it has been operating in a virtual server environment since VMware made its debut — but management isn’t always easy. The initial move to consolidate 12 servers used for Web hosting, and two larger servers for database systems, helped Genesis manage its physical servers, but moving virtual machines around, implementing patches and performing BIOS upgrades without experiencing downtime was difficult, Miller says. As an infrastructure provider, Genesis must provide high service levels, so uptime is critical. “We couldn’t maintain those without VMotion and DRS,” says Miller. Add-on tools can help address the problem of ‘VM sprawl’ by keeping track of how many VMs you have and where. “It’s somewhat ironic that the benefit of virtualization is resource optimization,

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Virtualization Options Among the vendors offering server virtualization software: VMware VMotion and Distributed Resource Scheduler (DRS) are part of the VMware Infrastructure 3 suite’s enterprise edition. DRS handles dynamic workload balancing, while VMotion migrates VMs across physical servers. Scalent Systems Scalent’s Virtual Operating Environment (V/OE) tools, which may be used with or without VMware, maintain network and storage connections while moving servers. Scalent also re-deploys servers in case of failure or load change. Vizioncore Vizioncore’s esxCharter tool augments the capabilities of VMware, letting you compare the performance of individual VMs, spot bottlenecks and create long-term performance reports. Akorri Akorri’s BalancePoint bridges the gap between server and storage components, providing insight into virtualized machines and the SAN, locating points of contention and providing troubleshooting analysis. You’ll find about 50 other vendors tackling virtualization management, says Cameron Haight, a research VP at Gartner, including: Platespin (disaster recovery and migration); Aurema (recently acquired by Citrix, VMware resource management); Cirba (data center consolidation planning); BMC (capacity planning); and CA (performance monitoring across multiple infrastructures, including VMware, Sun and AIX). —K.M

but it encourages messy behavior,” says Cameron Haight, a research vice president at Gartner, noting that almost all his clients cite VM sprawl as a big worry. “You can spend these things so quickly that you lose track of what you have,” Haight says. SDDPC’s Knode says Vizioncore helps him prevent VM sprawl in the first place. “By watching the metrics of the virtual environment, we plan ahead. So, by using VMware and Vizioncore I can see how many additional resources are available on an ESX host, and when is a good point to move machines or purchase additional servers or storage. We’re using the product as a preventative measure.”

example, King would like to see the tools in HP’s Mercury Business Availability Center suite, which Monster uses for transaction and infrastructure monitoring integrated with BalancePoint. Bishop agrees: “We’ve achieved very good results, but we’re trying to create an integrated management capability with all the tools in one view.” Bishop, who uses HP’s Mercury BAC suite, OpTier CoreFirst and Symantec i3, would like to see these tools better integrated with Scalent, VMware and DataSynapse, which he uses for application virtualization. After all, he says, virtualization tools can solve manageability issues, but CIOs want a holistic management picture. CIO

Virtualization 3.0 Monster’s King and Wachovia’s Bishop both say they’d like virtualization management vendors to take the next step — better integration of their tools with existing management software. For

Katherine Walsh is an associate staff writer. Send feedback on this feature to editor@cio.in

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Pundit

essential technology

Always On,Always Reachable Despite its obvious benefits, enterprises aren’t yet lining up to the Unified Communications counter. They won't — not until it’s a holistic solution. By Thomas Wailgum unified

communications |

You want some hype? Then, try unified communications, or UC, the technology that allows all data and voice communications to arrive at your one preferred device — no matter where you are! The concept is also referred to as unified messaging (UM), which illustrates how hype-filled UC is, since no one can agree on a name. You're going to be hearing a lot more about UC between now and 2010. Step aside iPhone, look out SOA and SaaS, and watch your back RFID and MDM! UC is here! Boiled down, UC/UM can transform an employee's handheld device, for example, into a universal ‘inbox’ for all communications —

to productivity gains and time savings by employees; control over business processes involving collaboration and communications internally as well as externally; and integration with mobility needs, as well as empowerment of dispersed workforces. Now here's the bad news: CIOs and other execs aren't lining up to hop on board the Unified Communications bandwagon. Lemelin reports that "IT managers and business decision makers want to hear about these benefits loudly and clearly from end users before they dedicate resources to make them available. To date, those voices have been rather muted." One of the big hurdles for UC/UM players

One of those service providers is Microsoft, which Lemelin writes in his report will play a key role in how messaging and UC play out on the desktop. In a recent article, Eric Swift, senior director of UC product management for Microsoft, said: "We're looking to ignite partner innovation to bring software economics to what has been proprietary." That should help, but there still seems lots of work ahead to bridge the typical hype versus reality gulf, always found around leading-edge technologies. As a result of UC's eventual acceptance inside the enterprise, Lemelin predicts that "traditional voice mail port shipments will shrink to zero by the end of 2009."

The challenge is to bundle the most impactful solution sets. Customers won't pay individually for every solution. wireline and wireless voice-mail, e-mail, IM, text messaging, and location-based services. In addition, dual-mode handsets (like the new BlackBerry 8820), can take advantage of cellular and Wi-Fi networks for both voice and data access. An amazing picture of the future, isn't it? Always on, always reachable, via any communications device you choose. According to senior analyst David Lemelin from research agency for advanced communications services, infrastructure and end-user devices, In-Stat, the top three benefits of a UC/UM environment are: real, tangible and measurable cost savings related 68

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has to do with cost. "The challenge for the industry is to bundle and price the most impactful solution sets that emerging capabilities allow. Customers do not want to pay individually for every solution available to them, especially when capabilities change quickly. They want a simple to use, but powerful solution set that meets their immediate and occasional needs — at an affordable price," he says. "This is particularly a challenge in the business arena, where different employees or workgroups have disparate needs. Bundling and segmented marketing will be a big challenge for providers.

That means in just about two years, your traditional office phone with your traditional voice mail will be gone (or at least make you feel very 20th century). That got me wondering if anyone will miss the good old days when you had separate accounts and mail boxes for wireline voicemail, mobile device voice-mail, e-mail and IM accounts, and all the other corporate messaging products? I know I won't. Will you? CIO

Thomas Wailgum is a senior writer. Send feedback on this column to editor@cio.in

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CIO September 1 2007 Issue  

Technology, Business, Leadership

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