Selling the role of IT to the business can be a headache for
systems managers who lack business skills. What you need are
negotiators and deal makers, writes Helen Beckett
Delivering technology solutions that meet business needs is no
longer enough. The modern IT chief must have a compelling
proposition for every IT investment he recommends and also an eye
for future sales within the organisation to recoup the maximum
return on every pound spent. In short, the business technologist
must become a master of salesmanship, diplomacy and spin.
One neat way of combining all these roles is to think of your
organisation as an internal market that the IT function must serve.
One chief information officer who has adopted this perspective,
with tangible returns, is Ian Marshall of Zurich Financial
Services. He was brought in at a time when the multinational
company was considering outsourcing and so IT services had to be
thought of as a business that could compete effectively on the open
market. To deliver, however, he chose to concentrate on building
his human capital, rather than focusing on attractive pricing
structures.
"We spent two years considering outsourcing. We identified where we
were carrying excess capacity and the skills we had and didn't
have. And during the course of that process we developed this
broker model," he says. "Unless you have the people, it doesn't
matter what the price points [of the internal market] are. It's
people who build the confidence level. Internally, you may have
been viewed as inept, and so you have to establish an IT
brand."
Marshall brought in people from outside to provide the skill sets
that Zurich didn't have internally. He adopted a broker model,
using independent experts with market or market IT specialities and
who also understood business. At Zurich, the three IT brokers talk
to the business units to assess the IT requirements. After an
initial evaluation, rather like a financial broker, they go back to
the customer with a shortlist of solutions within a price bracket.
"Historically it is hard to get this level of intellectual rigour
and independent thought from any internal IT group," explains
Marshall.
"They broker solutions and bring all the parties together. They
have to see whether a proposition stands up. If a broker can
deliver at a lower cost than negotiated with the business, then the
extra funding goes back into IT. We can use it on researching other
products, or developing our own people. The whole rationale of this
model is to become self-funding."
This model delivers immediate savings on manpower. Previously
Zurich had a permanent to contract staff ratio of 80:20. The effect
of the various initiatives has been to beef up the number of
contractors employed in relation to the permanent staff and the
ratio is now more like 60:40 permanent to contractor, which has
reduced payroll costs.
"Once you break up the IT structure, it is possible to identify
what you don't need, and you can concentrate everything into the
hub [skills pool]. If you have the right skill sets that enable you
to deliver to the business, it is possible to be just 40 strong. If
you have ordinary skill sets, you may need 120 staff," explains
Marshall.
At Zurich the savings achieved so far have been pumped back into
the business but the effect is that the business has more to spend
on IT. "You can either take the benefits straight to the bottom
line as a saving or use them as a reinvestment pool," says
Marshall.
The introduction of a generic, architecture has been crucial in the
development of an internal market that frees up capital for extra
IT spend. The component-based architecture allows subsequent reuse
or "resale" of technology and means that projects previously
dismissed as uneconomic suddenly become affordable and even
profitable.
Maintenance becomes cheaper too and the new architecture is
expected to reduce this expenditure from about 90% of total spend
to an estimated 60%.
The architecture breaks down into multiple tiers with a front-end
accessing a central software hub, which connects to a set of
services and a data persistence tier (or database) and legacy
back-office systems. "The beauty of an N-tier model is that it is
variable and it depends where you want to draw the line," says
Charles Brewer, IT broker at Zurich.
Front-end systems consist of three browsers respectively for the
Internet consumer, call centre staff and branch. These were
developed specifically for each channel, though reuse is possible
for some of the workflow aspects. The software hub is a middleware
layer bought from software provider Netik.
Where the big savings have been achieved and the internal market
kicks in is the development and reuse of services by the business.
"What we are not doing is building components that are so unique
that they cannot be reused," says Marshall.
Three core business applications form the backbone at present, a
credit card system, an address look-up and a rating engine. Brewer
says, "Each have at least three users and we expect them to have
many more. So far the costs have been shared in the development of
components, but it is expected that reuse will involve
cross-subsidy between projects."
Building the first set of services that could optimise the
architecture is, however, where the biggest costs were incurred.
"The cost of developing each component in a generic manner is often
too high, so priorities are set and some parts may be hard-coded or
have other compromises made," explains Brewer.
The strategy at Zurich is, therefore, to retrofit the generic
versions after another project has bought them. The generic version
(or reuse of legacy functions) then becomes justified on the
grounds of cost and risk. The beauty of this approach is that
because there are usually several options, the IS team is not
constrained as to the sequence of development of components, "nor
do we have to develop all of them before the model can be used",
Brewer points out.
A list of 20 other reusable components has been built including
windscreen repair, back-office mainframe integration, front-end
quotation and sale software, vehicle look-up and security. Some
customer relationship management (CRM) functions are included and
these will be built up over time.
As Francis Sullivan, IT broker responsible for architecture, points
out, "Business units will say they want to adopt CRM, but as soon
as you say 'the cost to you is £15m', it's a different story. You
try to overcome this impasse with the notion of an internal
market." You have to ensure you create the right components and
that people use them. But there is the aspect of carrot and stick
too, "If you can guarantee X% reusage, then you can have this for
£250,000" is a good way to sell it to business heads, he
says.
Marshall says his virtual job as IS sales director has been made
easier by the enthusiasm with which business applications have been
greeted and the effect of word-of-mouth as business managers
promote the modules they have adopted. If these managers are
involved in the pre-sales work, then they know they can get their
IT cheaper.
However, he remains adamant that raising and maintaining confidence
levels is the key to a healthy internal market, rather than an
overly strong focus on bargain basement prices through reuse. This
is hardly surprising, given that Marshall has borrowed from the
world of financial investment where individual fund managers
underpin key brands. "Brokers provide project leadership; they
provide independent thought and action. Brokers have to cover an
enormous amount of ground emotionally and intellectually. You
cannot ask the same of internal staff. By default everyone would go
back to the old model once a project is completed," he says.
Making any enterprise strategy dependent on a few key individuals
is high risk, and the IT broker model is no less vulnerable than
the fund manager role that it mimics. The team has been training a
few key individuals to perform the role and have found that the
next generation of brokers is predominately young women. "They are
adept at handling the floating model of architecture and building
strong relationships with the business. These are key strengths for
the role of creating the internal sale," says Marshall.
"It's not just having the skills but you have to get the psychology
of handling the customer. This requires an emotional distance,"
adds Sullivan.
Winning the pubic relations battle has been Marshall's main weapon
in keeping IT in-house rather than see it go outside. At Zurich,
business has the freedom to outsource any applications it wishes.
However, experience shows that outsourcing may only be a short-term
fix.
Sullivan recalls some research that was conducted on customer
satisfaction at an international bank. "Every opportunity the
[internal] customers had to walk away, they did so and outsourced
to an external party. They thought we were dreadful. But, every
time they had the opportunity to break the contract with the
outsourcer, they came back in-house."
To understand and break this pattern, the bank created three
customer satisfaction models: internal service, external service
and user expectation. The user model became known as the Star Wars
model: the problem was you couldn't deliver desired levels against
the available budget. "The answer was to redirect funds into public
relations. What we needed to invest in was user perception,"
Sullivan explains.
Marshall points to other informal research, which shows that some
projects delivered late and over-budget are viewed as a success
while those on time and within budget are seen as a failure. "You
have to manage perceptions day-by-day otherwise you're onto a
loser."
Meet Zurich Financial Services' IT brokers
- Francis Sullivan has many years of consulting experience
specialising in IT in the insurance industry. He has worked for
Arthur D Little and Price Waterhouse. Recently he and Charles
Brewer worked on the creation of a technology platform for a
financial supermarket in the Far East integrating old and new
systems to give a highly successful, multi-channel sales front-end.
Sullivan says, "An IT brand equals a product, plus a promise: the
product is the architecture and its components and the promise is
that we'll deliver."
- Charles Brewer has more than 20 years' experience of IT
consulting in the finance sector. Now running his own consultancy,
NaMax, he was previously with Andersen and Price Waterhouse. Much
of his recent work has involved the strategic use of platform
systems to manage and replace legacy systems and to develop
service-based IT environments. "The broker's job is to see whether
a business proposition stands up," says Brewer.
- Alf Chattell is an international consultant specialising in the
development of innovative IT strategies. Prior to founding his own
company in 1997, he worked with several leading management
consultancies. "Zurich has a clear view of the capability it needs
to create distinctive customer value. Its IT strategy is designed
to progressively develop this capability over an extended period of
time," he says.