Stand And Deliver

Many companies struggle with an 80-20 split between maintenance and innovation. Here's how some have closed the gap.
When it comes to efficient IT operations, one glaring contradiction involves the use of technology to lower technology's cost. Like the proverbial cobbler's children who go without shoes, IT departments have been slow to deploy and use technology to automate and simplify the work they do in managing and maintaining the business-technology systems that keep companies running. "It's shocking when you look behind the curtains," Hackett Group's Hayes says.

Software applications designed to automate IT operations include packages from major systems-management vendors such as Computer Associates, Hewlett-Packard, and IBM, and other more narrow offerings from companies such as BladeLogic, Opsware, and Optinuity (see story, "Lights Out: Software Automates Data-Center Tasks").

says Stephen Brown, senior VP and CIO. Photo by Raoul Benavides

Adopting an enterprise architecture has helped Carlson cut IT spending by 30%, says Stephen Brown, senior VP and CIO.

Photo by Raoul Benavides
There are dramatic examples of efficient and effective IT operations. The 80-20 split between systems maintenance and technology innovation has been flipped on its head at the Carlson Cos., says Stephen Brown, senior VP and CIO. The multibillion-dollar group of companies, which includes cruise lines, hotels, marketing firms, resorts, restaurants, and travel agencies, spends only 20% to 25% of its annual IT budget of about $200 million on maintenance and operations, Brown says.

The key, he says, is to standardize technology architecture and the processes the IT department uses. "We depend on two foundational elements: An enterprise architecture allows us to understand what technology we have in place and to rationalize the products and services we're provisioning. And we use ITIL to manage our core IT processes and standardize the way we handle IT problems," Brown says. ITIL--the information technology infrastructure library--is a set of standards for IT-service management.

Adopting and enforcing an enterprise architecture alone will help Carlson cut IT spending by 30% when fully deployed, Brown says. "Enterprise architecture and ITIL let us go after top-line growth, while at the same time ensuring that the IT organization is best in class." Carlson uses Remedy systems-management software from BMC Software Inc. to automate many of its IT processes. Remedy has several of ITIL's workflows built in at a procedure level, including change management, configuration management, incident response, and problem management. "We're working with BMC to make sure that all of the ITIL processes are represented in their product," Brown says.

Carlson also keeps a strict accounting of its business processes. "The other thing we do is benchmark ourselves," Brown says. "Every business unit in the company, and the company overall, is compared service by service. I know where I stand, always, and know where the gaps are and what areas need to be addressed."

Standardizing technology and the processes used to manage it seems basic, as does knowing how your costs compare with those of other companies and the value technology brings to your company. But many companies apparently haven't gotten the message. "I sit on several advisory boards, and I'm just appalled at how many of my counterparts don't know their costs or the value they provide," says Brown, who became CIO of Carlson in 2000. "One of my first moves was to make sure the business units understood how IT affected their P&L."

Hackett Group's Hayes agrees that adopting an enterprise technology architecture is a basic step that every IT department needs to take and that an IT process framework like ITIL can help enforce discipline. Most companies have cut IT spending by 10% a year from 2002 to 2004, but the top companies "have reduced spending even more because they've embraced best practices, simplification, and applied process discipline," she says.

Developing a better understanding of technology--what you have, how it's being used, and what can be standardized, simplified, and improved--is crucial if business-technology managers are ever to get control of spending for routine maintenance and operations. It's up to business-technology managers to drive the IT cost-cutting agenda, or else frustration with IT's 80-20 rule causes problems."When a company is looking to cut costs, they go after areas they don't understand," Brown says, "and many don't understand technology."

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