Chapter 7
In Front of the Firewall
Everyone, it seems, has their own view about the evolutionary stages of IT. It usually sounds something like this: First came the mainframe era, then the client-server era, then the PC era, then the Internet era, then the service-oriented architecture (SOA) era, then the cloud era . . .
But after speaking recently with Esat Sezer, I decided that you can collapse the history of IT into two major eras. Let's call them “The Era of IT Behind the Firewall” and “The Era of Converged Technologies.”
The first epoch included the Age of the Mainframes and the Age of Distributed Computing. The new era—the one we're experiencing today—is marked by four transformational trends in computing: mobile, cloud, social, and big data.
Esat, as many of you know, is the senior vice president and CIO at Coca-Cola Enterprises, the third-largest Coca-Cola bottler in the world. Its beverage portfolio includes energy drinks, still and sparkling waters, juices, sports drinks, fruit drinks, coffee-based beverages, and teas. The company's markets include the United Kingdom, France, the Netherlands, Norway, and Sweden.
Esat was born, raised, and educated in Istanbul. Before joining Coca-Cola, he held senior IT management posts at Whirlpool, Colgate-Palmolive, and Andersen Consulting in London. I mention his bio because it shows that he's been around the block—and as a result of his experience, he has developed the keen perspective of a truly seasoned global technology executive. I value that perspective, and that's why I'm happy that Esat agreed to share his insights with us.
“For the first time in my career, I see IT moving from the back office to the front lines,” says Esat. “It's great to have lean and streamlined processes, but the days of competing on the basis of efficiency are over. Most everyone has efficient processes now, so they're no longer a competitive advantage. It's not about the ERP system or the billing system or the order-to-cash system anymore. Those systems are important, but you can't compete on them.”
In today's hyper-competitive markets, IT generates value by enabling business growth. That means the CIO has to be linked tightly to the business. The CIO must have excellent relationships with the CEO and the board of directors, and must be able to make the business case for investing in IT.
“The success of the business depends on the success of IT,” says Esat. “Technology is the key enabling function. IT is tied to sales, marketing, distribution, supply chain—everything the business needs to be successful. So the CIO needs to understand the challenges of the business, understand the markets and how the business sells in those markets. The CIO needs to translate technology into business advantages that will differentiate the company from its competitors. CIOs who cannot do that will not be successful—and their companies will not be successful.”
“The success of the business depends on the success of IT.”
Esat advises CIOs to get out from behind the firewall and embrace the challenges of dealing with customers. “That's where the action is—out in front, with the customers,” he says.
The four transformational technology trends of the current epoch—mobile, social, cloud, and big data—are all taking place in front of the firewall. These converging trends are driving a revolution in customer expectations. Today's customers not only want great products—they want great experiences.
Coca-Cola Enterprises is a great example of a company that uses IT to enable its business units to do a better job of interacting with customers—both online and offline. The company has issued mobile devices to 15,000 of its merchandisers to help them get the right mix of products to the right stores ahead of the competition. And the company uses its growing social media clout to launch large-scale marketing campaigns directly from social media platforms such as Facebook, where 25 million consumers have self-identified by “liking” its fan page. The company also leverages its IT capabilities to get the most from its sponsorship of globally watched events such as the World Cup and the Olympics.
It helps that Esat reports directly to the company's CEO, John Brock. “That puts me at the table,” says Esat. “There is no business plan that is not aligned with our technology capabilities. We don't have a separate IT plan—we have an integrated business plan. The integration starts at the top, with the relationship between the CEO and the CIO.”
Sitting at the table is one thing—staying there is something else, says Esat. The CIO must work hard to develop and maintain strong connections to the C-suite and the board of directors. It's not just a matter of the CIO's survival—those relationships are also absolutely critical to the company's health and well-being.
“If the CIO does not have direct links to the CEO and the board, there is no way the company can gain value from the technology transformations taking place. The company will very quickly find itself in the hands of consultants. It will take longer and be more costly for the company to make the technology transformations it needs to be competitive,” says Esat. “The CIO must be connected to the business in order to understand how technology can provide the greatest value and help the business achieve its goals. That's the biggest difference I see among CIOs—some want to be technology leaders and others want to be business leaders. But to succeed, you need to be both.”
“The CIO must be connected to the business in order to understand how technology can provide the greatest value and help the business achieve its goals. That's the biggest difference I see among CIOs—some want to be technology leaders and others want to be business leaders. But to succeed, you need to be both.”
Esat's close relationships with the company's senior management and board have enabled him to create what he describes as a “culture of experimentation.” By continuously experimenting and adopting an array of newer technologies, the company has stayed ahead of the competition.
“We developed a mobility architecture in four months that allows us to communicate with our merchandisers and get products in the stores faster than our competitors. We couldn't have done it without the cloud,” says Esat. “We've also moved all of our e-mail, our employee portals, and some of our development platform into the cloud. We use big data to get real-time feedback from our customers. We use social media to market our products to millions of consumers. We work closely with emerging technology vendors to experiment, learn, and innovate.”
Some of these newer vendors could mature into future strategic partners, says Esat, joining traditional suppliers IBM and Microsoft in a new ecosystem of transformational IT providers.
When you chat with Esat, you can easily sense his passion and energy. He is a true believer in the transformational power of IT leadership.
One of my favorite stories about using the cloud as a test bed for innovation was told to me by Donagh Herlihy, the SVP and CIO at Avon Products. Here is the background: Ranked 226 in the Fortune 500, Avon Products is the world's top direct seller of cosmetics and beauty-related items. I think it's fair to say that Avon's sales model is unique. Its independent sales force includes thousands of sales leaders, who in turn supervise the efforts of over 6 million sales representatives worldwide.
As you can imagine, moving real-time business information among this many people can be a challenge. In 2008, Avon decided that its global sales network needed a single, standardized information and reporting platform. Here's how Donagh describes the challenge:
We knew that the new platform had to be action-oriented, provide immediate value, and be very easy to use. All representatives are independent entrepreneurs and many work part-time, so we couldn't have a system that required a massive training program. The system had to be simple, and it had to be fairly intuitive. It had to be Web-based, so people could use it on their home computers or smart phones.
We wanted an application that would generate a “to-do list” for the sales leaders every morning . . . not a static list, but a list based on where they were in the sales cycle, something that would show them which of their reps had not placed an order in that campaign, or had placed an order under the minimum threshold for generating a commission payment to the leader, who was late paying for an order . . . who was high potential and looked like they could (with the right encouragement and coaching) be promoted into leadership, who had attended a sales training event, and who had missed the event. We wanted to help them coach their reps more effectively and help them do a better job.
Avon studied the challenge diligently and considered several ways of moving forward. After careful consideration, the company narrowed the field of choices to three options. Here is Donagh's recollection of the decision-making process:
We looked at building the application ourselves and hosting it internally, which would have been the traditional Avon way.
We considered working with a traditional software vendor to develop the application. In that case, we could have hosted the application internally or had the vendor host the application.
We also looked at Salesforce.com, which was for us the unconventional choice at the time. It was also the least capital-intensive option.
Eventually, Avon chose Salesforce.com to develop the project. But capital avoidance was not the primary driver behind the company's decision to move into the cloud. Donagh explains:
Speed was the number one consideration. The economics were secondary. Going to the cloud meant we could begin testing the concept in weeks, without putting added stress on our IT organization or on our existing IT infrastructure. We could focus our energy and attention on the application itself, and that really narrowed the scope of the project.
Of course, it was also a very economical choice. But we made the decision based on speed to market. It was important to get the application up and running quickly.
In addition to speed and economy, there was a third consideration: We didn't have to overthink the project. Say, for example, that it hadn't worked in the test market. Then we would have said, “Okay, it's not working, this was a bad idea, let's stop and regroup.” We could have done that, if necessary, because we hadn't invested in a lot of new infrastructure and software licenses, etc.
With the cloud model we were paying a fee per user per month, and if the application did not deliver we could fail quickly, stop the payments. We would have no investments to write off versus a traditional capital-intensive IT development.
The project was successful in its initial tests. The first pilot, in Eastern Europe, was fully developed and deployed in five months. The pilot was followed by successful deployments in markets in Western Europe and in Asia. As I'm writing these words, Avon has rolled out the application to over 25 markets and counting.
“By using a cloud model, we didn't have to worry about scalability, usage patterns, capacity planning, monitoring, or provisioning infrastructure. We inherently got the economics of a shared tenancy model.”
Fine-tuning the application and focusing on the data to meet local business requirements and global operating standards was crucial to the success of the project. Avon didn't have to spend lots of time worrying about the project's infrastructure because the infrastructure was in the cloud.
By using a cloud model, we didn't have to worry about scalability, usage patterns, capacity planning, monitoring, or provisioning infrastructure. We inherently got the economics of a shared tenancy model.
As a consequence, Avon could focus on refining the details that were critical to its sales network. Focusing on those details contributed to the system's overall usability, which led to rapid adoption and usage by the sales leaders.
In retrospect, says Donagh, it seems inevitable that the cloud was the proper choice. But at the time Avon made its decision, the choice wasn't so obvious. After weighing the pros and cons, Avon bet on the cloud—and the bet paid off. The application drives sales revenues in the countries where it is used, due to the increased productivity of the sales leaders and their downline teams. In Donagh's own words, “It's a phenomenal payback, a game changer.”
Dave Smoley is SVP and CIO at Flextronics, a Fortune Global 500 design, manufacture, distribution, and after-market services company. Based in Singapore, Flextronics operates in 30 countries—it is truly a global enterprise.
Complexity can become a challenge for large companies. Smart companies strive for speed and simplicity whenever possible. That's one of the reasons that Dave feels comfortable using cloud technology—it fits nicely with the company's strategic model.
“We're all about keeping it simple,” says Dave. “In a cloud model, the provider is responsible for development, configuration, and support. The traditional model requires a much larger IT organization because you need administrators, project managers, business analysts, and other people to support the software and hardware.”
“Today, the cloud can provide turnkey services and capabilities. You don't have to buy servers. You don't have to care whether an application is running on Java or Visual Basic. You can use any printer or any browser. The cloud simplifies IT. You could even say that it commoditizes IT.”
With four SaaS implementations under his belt, Dave is a cloud veteran. I asked him to describe the company's decision to adopt Workday as its HR solution. Here's a summary of what he told me:
IT is inherently complex. You need hardware, operating systems, drivers, utilities, applications, databases, and networks. Thirty years ago, you wrote your own programs in low-level assembly languages. Over time, the technology became more abstract, more high level, and more integrated. It's been an evolution.
Today, the cloud can provide turnkey services and capabilities. You don't have to buy servers. You don't have to care whether an application is running on Java or Visual Basic. You can use any printer or any browser. The cloud simplifies IT. You could even say that it commoditizes IT.
In IT, our job is solving business problems. Today, we will look first to a cloud solution, second to a traditional solution, and third to a custom-developed application. We will look at all three, but the underlying assumption is that the cloud is the first choice. When someone on my team sends me a recommendation, I expect to see two or three cloud offerings identified in the analysis.
Part of our decision to use Workday was based on my conviction that it was the right thing to do. And part of the decision was based on our corporate culture. As a tech company, we are more open to taking risks. We are also more aligned with the basic value proposition of the cloud—speed, simplicity, and lower costs. So I felt confident about pushing the envelope.
We estimated that using a cloud solution would result in a 30 to 50 percent reduction in total cost of ownership, compared to a package solution from a traditional vendor. On top of that, we looked at usability, and Workday was much more usable than the traditional solutions. Because it was less complex than a traditional solution, we would need fewer IT people in IT and HR to support it.
It also helped that Workday was located down the road from us. Our CEO, Mike McNamara, and I met on a Saturday morning with Workday's co-founders, Dave Duffield and Aneel Bhusri. They are very credible, trustworthy, and sincere guys. Their reputations are impeccable. We came out of the meeting and said, “These are the kind of people you want to be in business with.”
Here's something else: If we had delegated this decision to a committee, it never would have happened. It would've been killed, because Workday is a small company and the IT team is used to dealing with big companies. A committee would have considered this too risky.
We implemented Workday almost completely on our own. In the first year, we had some help from the Workday team. We didn't depend on third-party integration partners. We did most of the implementation by ourselves.
And the result was a savings in the range of 30 percent. We took 80 HR systems and replaced them with one system. I consider it one of the premier accomplishments of my career.
I love this story because it captures so many aspects of the new cloud model—the speed, the simplicity, and the reduced costs. I included a version of this story in my first book, The Transformational CIO, and I really wanted to re-examine it from a cloud perspective in this book. I'm delighted that Dave had the time to retell the story and add more significant details. Thank you, Dave.