InformationWeek

Ask The Secret CIO

By Herbert W. Lovelace
Issue date: April 8, 1997

Your letters to my print column and this E-mail forum ask some serious questions about managing information technology in today's world. Since today's world is essentially absurd, my serious responses may sometimes sound a little whimsical, and my occasional whimsical ones, serious. In any case, if you want to participate, write to me at secret@cmp.com . I'll respond to those letters that I can. I reserve the right to edit for size and content. Just sign your E-mail the way you want it to appear online.

Dear Herb:

Are IT purchase decisions really centralized in the CIO's office? I understand the need for an overall networking strategy and the economies of scale from centralized purchasing, but in your experience, aren't the guys with the long hair, empty Coke cans, and pocket protectors the major purchase influencers? After all, they have their Hershey- smeared fingers on the pulse of the network and you are stretched between competing technical and fiscal responsibi- lities. They stare at the tube 24 hours a day and chew on Maalox tablets every time the computer beeps. And my guess is that they influence you greatly. How much do you rely on these propellerheads for input?

My question has practical implications: If you were a vendor, where would you spend your marketing effort -- on you or on the propellerhead?

John L.

De ar John:

If I were a vendor, I'd spend my time with me, rather than with the technical experts you call propellerheads. Since selling is a hard job, people who do it are entitled to a little relaxation, and it is easier to explain why you took me, rather than them, to a good restaurant on your expense account.

And how much do I rely on them for input? The answer: a lot. You are correct that they have their pulse on what is going on, so their ideas are worth a great deal. The buying process is an amalgam of the quality of the technology, how it fits into the strategic direction of the company, the price, the contract terms, and the reliability of the supplier. In order to make the sale, you really have to touch all the bases.

Mr. Lovelace:

I have a proposed addition to your " Law of Meetings " series. I call it the Volatility Factor. The higher the V-factor, the more likely fireworks will occur.

As unlikely as it may seem, our organization suffers from frequent adversarial meetings. While they are just as unproductive as other meetings, they are, at least, more entertaining. The intensity of these meetings may be represented by the V-factor (V), where:

V = PD^2

P represents the number of people in the meeting, D is the number of departments.

This theory is further modified to include "inverse teamwork" -- for which I chose the variable C -- which stands for "competitive departments." Good examples are sales and engineering -- each a bright lot -- but unable to get through a meeting without blaming one another for something.

The final factor in many organizations is marketing. M represents the number of marketing types in attendance:

V = PD^2 + (DC)^M

Thanks for your time and consideration.

Ed D.

Dear Ed:

Just when I thought we would never get any more interesting letters on the laws of meetings, someone comes along with a clever addition. The idea of "inverse teamwork" is brilliant. I am not s ure about the factor for the number of marketing types in attendance. My experience indicates that marketing people are so full of ideas that they don't recognize there is anyone else sitting in the room. As a result, I question whether it is fair to blame them for any disruption, since they are holding their own meeting regardless of who else may be in the room.

Dear Herbert:

Your column, "Paranoids Have Enemies, Too" ( January 20, 1997, p. 120 ) was quite interesting. "Even if we don't like the results....." Well, consider the quantity of highly confidential information that is collected about you each day via various sources. I could, without much difficulty, become you - down to an ID and SS [Social Security] card (Lexis' P- TRAK being a great resource for SSN's [Social Security number]). Even your signature is available -- just sign for a UPS package.

Consider that the only information about you that no one has (unless you've been arrested) is your fingerprint data. Now guess who wants that information? The State of Georgia passed a law that requires that your fingerprints be [magnetically] striped to your license. Of course, they refuse to guarantee that they won't sell that data along with the rest of the data they sell daily to anyone with the required fee in hand.

Security -- personal security -- is far more important these days than ever before. Most of us will "...muddle through..." and not be concerned. A few of us will actually consider the ramifications and think twice before offering up any personal information to anyone.

Of course, I could be wrong.

Laura N.

Dear Laura,

I don't think you are wrong. There will be a few people who consider the ramifications of providing personal information, but I think the majority of people will value the convenience more. People have been acting that way for years and I suspect they will continue. After all, recognize that anyone who uses a credit card today is providing a very detailed h istory of their lifestyle. The same holds true if they use a video store, since they keep a record of the tapes that are rented. And the information on insurance applications is not exactly the type of thing most of us would care to have distributed widely.

By the way, I believe social security numbers are not now available on P-TRAK. If memory serves me correctly, they were accessible on the database about a year ago for a 10-day period, before Lexis-Nexis removed them due to the outcry about privacy.

Dear Herb:

I would like to obtain information concerning annual IT budgets for medium and large firms and the relationships (if any) of these budgets to corporate revenues, number of employees, units of production, number of offices, and so forth. I am especially interested in data for firms in the transportation industry (motor carriers, railroads, package delivery firms, etc). Could you please advise me where I might find such information?

Thank you.

Peter C.

Dear Peter:

There are several sources for this type of information. Some publications in the information technology field, including InformationWeek in its IW500 issue , provide it. Also, consulting groups such as CSC Index, Ernst & Young, and others periodically issue reports on such spending. Finally, advisory services such as Gartner Group and GIGA keep track of comparative budgets.

Dear Herbert,

I am a data center manager for a food company that is considering outsourcing its IS functions. It seems to me that "outsourcing" is just another fad, like "client-server." Client-server is distribution processing that has been repackaged with less reliable equipment that has more expensive, and more labor intensive.

I fail to understand why senior management in many companies wish to outsource their IS functions. After much research, I have found that:

There has not been one successful outsourcing venture in any Fortune 500 compan y to date. (Kodak tried, and threw out the outsourcing company after seven years in a 10-year contract worth $1.2 billion. Wonder who lost on that deal?)
The only companies that outsource their entire IS function are usually companies that are losing money, or who are deep in the red. What does this say about upper management?
Most outsourcing contracts take more that 12-18 months to complete if handled properly and your current IS staff sits in stagnation and resentment.
Users find out that "customer service" from the outsourcer isn't nearly as good, nor as fast as it once was. In most cases, additional fees are charged outside of the contract.
Most IS budgets often triple just to pay for the outsourcing agreement.
Loss of control!

These are just a few facts from many that have been compiled. If it's such a good thing, why isn't everybody doing it? I would like your opinion on outsourcing.

Thanks for the great articles, and I look forward to readin g more of them.

Thanks

JFP

Dear JFP:

Most new business trends are presented in the popular press as the panacea for all the ills that trouble you. Rarely do they deliver to the extent promised and outsourcing is no different. Analogous to Mark Twain's comment, "The reports of my death are greatly exaggerated," the reports of outsourcing success have also been greatly exaggerated.

Outsourcing is a reasonable alternative when:

internal expertise is lacking or is better utilized elsewhere,
it is desired to make changes that are politically unpleasant, or
important capital is tied up in data center equipment.

While I would argue that selective outsourcing agreements (such as maintenance of legacy systems or data-processing operations) can be a success, the flops have not been widely publicized for the obvious reason that people do not like to talk about their failures. Successful outsourcing requires a high level of internal management time to ensure t hat the vendor and client goals mesh and that the vendor understands what is expected and delivers to that level of expectation.

One area that you did not mention is the problem a company faces in disengaging from an outsourcing agreement. If you think making the changes necessary to transfer your staff and systems to an outsourcer is complex, consider what is required to go the other way. Some years ago, I was talking to [former Eastman Kodak CIO] Kathy Hudson about the Kodak outsourcing deal she had just announced. I remember asking her over lunch if she had thought about how she could move the services to a different outsourcer or back in-house. I was more than a little skeptical when she told me that it would be hard, but that it didn't matter because it would never become necessary.

Recognize that it is difficult for people in the IS shop to do anything about an outsourcing initiative except to provide such good service in the first place that the issue never comes up. Look at it from the CIO's p erspective. The boss comes in and asks (if you are lucky) your opinion about outsourcing to save money and provide better service. If you forcefully start to point out the pitfalls, you run the risk of being branded as defensive and dropped out of the loop, and probably out of a job.

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