You’ve done plenty of business and IT planning for your new company, taken a scythe to the short-listed suppliers. Sorry, but you need to make a few more decisions about strategy. In the second of a two-part series, we listen in on the debate.
When Gen-i chief executive Garth Biggs was asked to help start-up pay-TV operation Sky in the late 1980s, the company comprised one PC and three members of staff.
Biggs, Sky TV’s fourth employee, found no systems in place and no business. His task was to figure out what technology Sky needed to operate effectively and efficiently.
He discussed with his very few colleagues what information systems they would need to create a viable business. The team decided to look at similar businesses around the world, visiting Sky TV in London and television stations in Jakarta, Johannesburg and the US.
The touring team was in response asked how the New Zealand business would work, what information systems it was seeking and what applications it would run its business on.
For Sky, it decided to define itself by technology and working its systems around its most vital application.
“It’s really hard to find a subscriber manage-ment system, but no matter what platform you choose, you will find a payroll or financial system,” says Biggs.
A subscriber management system was found, but it ran on IBM’s proprietary AS/400 platform. It was picked up.
“Nobody ever gets fired for choosing IBM,” quips Biggs.
The company bought the rest of its applications to run on the AS/400. “We bought the key application to define the environment and then it was quite easy to find the common applications to run on the same platform.”
Biggs admits having a core application define the business set Sky TV apart, but he says this method also saves on development costs, though the company’s system is likely to have altered greatly in the past decade as Sky has grown to serve a claimed 442,000 customers.
Typically the business defines the systems. Most companies will have already asked the vital questions about technology.
Gen-i’s GM of service management, Leigh Jackson, offers a few for starters: What platform will you want to run your business on? Mainstream or open source? What do you want your IT infrastructure to do? When talking about infrastructure, does this include telephones, and if so are they fixed or portable? What about faxes? Productivity tools such as word processors, email and web browsers and specific business applications to run the business then need to be considered. Will e-commerce play a part in the future? Do you want to employ IT staff or will you bring in people as needed? Do you want to lease equipment or buy? After you sort these out, you have to think about issues like connectivity, security and how IT might adapt to company growth.
These questions, which consultants variously call road maps, discovery phases, enterprise architecture plans and strategy development, or more simply by one, vision, mission and objectives, have to be decided before you can go much further.
Delivering the basics
IBM Global Services service management general manager Gary Elmes says any new system will need to deliver the organisation’s core transactional applications to both internal and external users; allow for the creation, storage and control of unstructured data (word processing, spreadsheets and the like); and support communication between staff and with customers, suppliers and other partners outside the company — providing at least voice and email. It should also provide a platform for a company’s now-essential web presence.
Such systems vary with the business, says Elmes; so, for example, a legal practice will be more concerned about data storage, while a firm with telesales staff will need sophisticated voice requirements.
IBM notes that service levels matter, such as sufficient reliability for the business, with the cost of potential failure determining the spend here. They should be resilient enough to cope with external disasters, scalable to cope with company growth, and secure against predictable external threats such as viruses.
Swee Lee, senior manager of Bearing Point, formerly KPMG Consulting, was involved in an internet start-up in Australia six years ago. GapBusters employed mystery shoppers to measure customer service at the point of sale.
The business had a tight budget, but bought branded Japanese equipment for stability and parts availability. Swee says these were deemed to have cost too much, so in time GapBusters started using locally assembled equipment. The firm grew from about nine staff to 70 and grew from nothing to a major player in the market in less than three years.
“We were able to do data analysis using data warehouse technology and collect data very efficiently using the internet and a call centre, when our competition were using hand-filled forms and dot-matrix reports,” Lee says.
He advises businesses to see IT as offering a competitive advantage and a crucial part of their business capability.
Open or closed?
Auckland-based consultant Ian Howard says about 30% to 40% of IT projects fail because they are not successfully implemented and no one has taken ownership of them.
Rather than letting consultants determine choices, which will lead to project failure, he says, the company must take responsibility and made the final decision to avoid buck-passing and blame-throwing.
“I have seen the wrong technology work. Successful IT projects are not about technology, they are about ownership,” Howard says.
Other consultants and vendors agree over ownership, but also stress the importance of technology.
Damian Barr, a director at Cap Gemini Ernst & Young, says systems architecture should be standards-based rather than proprietary because of the ease of integration.
The argument may end up between tried-and-proven and expensive, or open standards---based and cheaper.
Howard notes the importance of standards higher up the food chain. Oracle, he says, has such standardised application systems it can do global accounts in a few days, while other firms with a range of regional and country-level standards could take far longer. Using Oracle for financials, say, Informix for databases, another for customer management and other small Access databases will create problems, says Howard. To overcome this, either put in a layer that allows consolidated reporting across a range of databases or rationalise your databases to one, he suggests.
Vendor choices such as these, Howard says, help with the decision concerning the operating system, and there are three “power-ful” choices: Microsoft, Unix and its derivative Linux, and the IBM proprietary environment. For “regulation stuff” like financials and office applications, Howard raises Microsoft Windows as standard. Others see merit in commercial or open source alternatives.
For databases and servers, Microsoft’s Windows 2000 and SQL Server may be fine for smaller organisations of 100 users, though Unix is usually better for large corporates, Howard says. “In my view, it gets challenging to run a large commercial application in a Microsoft database environment.”
IBM, however, and others such as Simpl Group IS manager Paul Burnet, recommend Linux on desktops and servers be investigated. “Linux scales across computing devices from a watch to a mainframe, it gives you choices about where to buy your support, it is extremely well supported by middleware vendors and it is as solid as a rock,” says Gary Elmes, IBM Global Services GM of service management. IBM has reportedly put $US2 billion into Linux development. “Other things are not always equal, of course — if the application you need only runs on Windows, then so be it.”
In or out?
Outsourcing and ASPs should be investigated, says Barr, but this is a decision with no right or wrong answer and depends on your business.
Lee recommends outsourcing for start-ups so that they can concentrate on their business.
Keeping work inhouse means you fully control your IT asset base capability, Barr says, but IT has nothing to do with the company’s core competency and the ancillary service has to be maintained. While outsourcing allows a business to concentrate on its core competency, you divest some control of your business assets over time, lose intellectual property and may find it hard to get out of arrangements once you enter them, he says.
Consider outsourcing, says Southfresh founder Toby Warren, in all its forms. He developed a “champion” within his financial software supplier, someone to represent Southfresh within the e-marketplace as the software was being developed.
“After the program was written and commissioned, we were able to lease 20% of his time to act as our contracted IT manager. We had all the smarts without the cost,” Warren says. Its order entry application, which was recently sold to Foodstuffs, was hosted by Unisys.
“We chose to outsource that because we were completely unable to provide the infrastructure bandwidth and security, let alone the engineering and the hardware. And it was much more cost-effective to host that application externally,” Warren says.
“We did a lot of outsourcing because we were able to get higher calibre people than we could otherwise have afforded to. We needed them full time for a period and then we no longer needed them full time,” Warren says.
IBM’s Elmes notes three ownership/outsourcing possibilities.
An organisation can buy the necessary capabilities as a “utility service”, not owning any of the infrastructure assets and having no responsibility for running the infrastructure. The necessary capabilities are provided by a service provider and the organisation gets a monthly bill.
A “facilities management” approach sees a firm building its own infrastructure but contracts a service provider to run it. The organisation has more control over its infrastructure destiny, but need not burden itself with expensive technical staff on the payroll. Or the business can buy and run its own infrastructure, not dependent on any provider, but must carry the burden of assets on its balance sheet and IT staff on the payroll.
Elmes says a healthy cashflow but lack of initial investment capital would suggest the “utility service” approach. “A business model that depends on timely deployment of sophisticated technology requiring scarce skills might suggest a facilities-management philosophy. Notice that these are not all-or-nothing choices. An organisation may outsource part of its infrastructure — say its core application — while keeping another — say, its call centre — inhouse.”
As for outsourcing applications, Gen-i’s Jackson says there are many ASP offerings on the market. These services have real value, he says, provided the company is not looking to integrate them into its core business. For standard payroll, sales and email, ASP could be fine. But for integration with custom-made software, the complexities raised may make ASP services too costly, he says.
“I have looked at the ASP services, the standard ones, from esolutions, Clear and Unisys, and in their own right they are all very good,” Jackson says.
IBM’s Elmes also suggests building a quality network, one that’s reliable and able to change with the business and newer technologies. Make it secure and able to cope with disasters, he says.
Concerning specific technologies, Elmes recommends the use of thin client technologies wherever practicable. “Fat desktops can become a nightmare to manage and are driven quickly to obsolescence by the ever-more complex applications we wish to use. Keep the complexity in the server room,” he says.
Gen-i’s Jackson sees thin clients as a step towards browser-based applications, adding that for firms wanting to centralise management to a single location thin clients makes sense, as they make systems easier to maintain. But it depends on how large your organisation is, he says. Get too complex and thin clients may not work. Howard says while they are fine for most commercial applications, thin clients are not suitable for businesses using CAD or anything with a large graphical content.
Elmes recommends storage be consolidated, using either NAS or SAN technologies.
“The payback is not always obvious when you have just a few servers, but the task of managing directly-attached storage can very quickly get out of hand,” he says.
Simpl Group’s Paul Burnet notes: “You will always need more storage than you think.”
Both Simpl Group and IBM also call for your new medium-sized firm to plan for gigabit networks, to use wireless networks where appropriate and to use voice over IP to minimise internal phone costs.
“This technology is definitely ready for prime time and builds on the network and server technology that you will have in place for your data applications anyway. Traditional PABX technologies quickly become outrageously expensive to buy and maintain, and can cut you off from some technology choices you may want to make not too far out — such as “teleweb” contact centres,” Elmes says.
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