February 2009

Continuing To Innovate In A Down Economy: Despite slimmer budgets, CIOs find ways to innovate.

CIOs are clearly feeling pressure to batten down the hatches. According to a report issued in the fall of 2008 by McKinsey & Company, 42 percent of businesses reported that their priority for IT during the coming year was cost cutting. It also described IT's need to better serve the business and the challenge of concurrently improving business process efficiency and driving innovation. Certainly, finding ways to ride out the economic storm has become top of mind for CIOs.

At the same time, forward-thinking IT and business leaders are persisting in their efforts to innovate and to pursue growth opportunities. "Clearly, the dominant mindset is how to reduce costs," says Lem Lasher, Chief Innovation Officer at CSC Corp. "But in this kind of economy, with unpredictable patterns of behavior in the market, innovation is more important than ever. You can only cut costs so far."

What has changed most, according to Lasher, is "the locus of innovation in the tech sector." While there continue to be "rich opportunities for innovation," the landscape where most companies are developing new ideas has shifted from the enterprise side to the consumer side, he says. This is the year enterprises can demonstrate financial benefits from social networks and other emerging technologies, for instance.

At the U.S. Department of Transportation (DOT)), Dan Mintz used Web 2.0 technologies to drive low-cost innovation. Just as in the private sector, federal agencies need to advance their mission in these tough economic times. With tight budgets, "we have to be innovative," Mintz said. Mintz was CIO until the new government administration took office in January.

Virtual Training

One innovative trial program Mintz introduced was to use Second Life as a training platform for bus inspectors at the Federal Motor Carrier Safety Administration. Second Life saves money and provides efficient training, Mintz explained. In the virtual-world environment, "you can turn the bus upside down and look at it. In the real world, you can't do that," Mintz said.

The DOT was also set to launch a wiki so that research universities can collaborate with each other and the agency. The program — called the Research in Innovation Transportation Administration — will make available all geospatial information associated with transportation, including all physical data about railroads, highways and bridges throughout the U.S.

Best of all, while the wiki will be a boost to the agency, it's not a big investment. Much of the activity required to gather and collect all the data for the project "is done by peer participation, including other federal agencies and state governments and universities," Mintz said.

For many larger, global businesses, IT budget constraints pose greater challenges. With a slightly lower budget this year, Thor Geir Ramleth, Senior Vice President and CIO at Bechtel Corp., has to plan projects wisely. The privately held construction giant has headquarters in San Francisco and IT operations in Frederick, Md.

Desktop and server virtualization leading to the reuse of machines at Bechtel cuts costs and increases utilization, Ramleth says. Overall, server utilization is up an average of 2.3 percent worldwide to the 60 percent to 70 percent range, he says. "That kind of impact not only gives you a cost benefit, but it also affords a lot more agility so IT can work more dynamically with the needs of the business."Consolidation of data centers also reduces power consumption, he adds.

Global Pressures

Globally, about 59 percent of enterprises will keep IT budgets flat — or slightly lower — in 2009 compared to last year, according to a survey of 590 CIOs and technology leaders by London-based Datamonitor Ltd., conducted late last year. Regionally, the hardest hit by the technology-spending pullback will be the United Kingdom, where 28 percent of companies expect to cut IT budgets, versus 24 percent that expect to do so in Australia, and 16 percent in the U.S.

In addition to virtualization and consolidation, Bechtel's IT department is experimenting with its approach to goal setting and business alignment. Each business unit now creates a short "vision strategy and plan" document, spelling out ways to achieve these goals over a three-year span. Ramleth then uses these documents as the basis of IT's vision and deployment for the same time frame.

Before this process was implemented, "we never felt we had that alignment," he says. "The plan for IT was too short-term and reactive. Now, we not only get alignment, but also the flexibility to align our costs with what really matters to the business units," Ramleth explains.

Service Options

In cases where whole industries shift and change, IT has to adapt quickly, too. The New York Times, like other publishers worldwide, must find new ways to grow online at the lowest cost. The Times is using Amazon Web Services to help introduce new services for online readers, says Derek Gottfrid, Senior Software Architect and Product Technologist at NYTimes.com.

In 2006 and 2007, Gottfrid began using Amazon's Elastic Compute Cloud (EC2) and its Simple Storage Service (S3) for economical storage of The Times' archive of 11 million articles published from 1851 to 1980. The PDF archives were then made available to readers over The Times' Web site.

Today, despite the financial pressures, Gottfrid says he's continuing to use cloud computing to innovate without large capital outlays. For example, during the November U.S. presidential election, The Times used Amazon's infrastructure to provide interactive graphics, as well as special maps showing the geographic sources behind campaign finances. "We were able to provide an API [application programming interface] for campaign finances, so that folks could build their own applications on top of The New York Times platform," Gottfrid says.

The Times also used Web services to build a search API so that online readers could find newspaper articles from 1981 to the present. "Basically, we are allowing people access to our extensive metadata through search," Gottfrid explains. "Moving to the cloud allows us to expose this data and the articles to the outside world at a much lower cost than if we used a traditional hosted data center to provide the infrastructure," he adds.

IT leaders like Gottfrid are using the downturn as an opportunity "to make recommendations for projects to drive top-line growth, while clearing out all the non-value-added things they're dealing with," says John Plansky, a Partner in the financial services practice at consulting firm Booz & Company in New York. "It's an opportunity for CIOs to find top-line business initiatives that IT can drive."

To do more innovation and strategic planning, Plansky says, CIOs should consider hiring a chief technology officer to handle issues such as system availability and response times, as well as a chief operating officer to take responsibility for IT process, productivity and service issues, including ITIL® and SLAs.

Team Player

For Jay Wessel, Vice President of Technology at the Boston Celtics professional basketball team franchise, the need to be nimble and to play under pressure is part of his job description. Beyond keeping systems running 24 x 7, he is responsible for finding new and innovative methods to improve IT services for the National Basketball Association championship team's customers — staff, coaches and season ticket holders.

Last year, he moved all e-mail services to an outside provider, which resulted in faster mail processing and improved network speed. This season, Wessel worked with ticket-services provider Ticketmaster to enable its prime customers to manage their tickets online. "Now, a season ticket holder who finds he can't go to today's game can e-mail his tickets to someone else," he says. Additionally, he's considering electronic tickets that don't require printing at all. This would tie the ticket-purchase process to the team's database and also make it more efficient for customers at game time.

Wessel also migrated the team's entire desktop video-scouting platform last summer. "The old system was very powerful but very complex, buggy and difficult to use," he says. The new platform is faster and more user friendly, which encourages use. Cost-saving is always kept in mind. Says Wessel: "We are innovating when it makes sense. I also find I'm developing things myself, which I might otherwise have someone else do."

Even with economic concerns, every IT organization has to find ways to initiate new connections with customers and business partners — and to stay in the game. Optimism helps, too. The New York Times' Gottfrid keeps seeing new possibilities for IT-enabled innovation: "Budgets are tight, but we still have high ambitions and great dreams."

Doug Bartholomew is a freelance business and technology writer based in San Francisco.

ITIL® is a Registered TradeMark, and a Registered Community TradeMark of the Office of Government Commerce, and is registered in the U.S. Patent and Trademark Office.

Ask the Experts

Thor Geir Ramleth, Senior Vice President and CIO, Bechtel Group Inc.
tramleth@smartenterpriseexchange.com

Thor Geir Ramleth leads the Global Information, Systems and Technology organization. Prior to rejoining Bechtel in January 2002, Ramleth held leadership in a variety of IT companies, where he defined strategy and marketing and secured multiple forms of financial resources.

Previously, Ramleth served as Chairman and CEO of DigiPlex S.A., based in Zurich, which owned and operated large communications and networking facilities throughout Europe. He also served as President and CEO of Genuity, a Bechtel Enterprises company formed to deliver Internet and data services. Additionally, Ramleth has held management positions with Oracle, PageMart and PacTel Personal Communications.

Lemuel Lasher, Group President of Global Business Solutions and Services and Chief Innovation Officer of CSC
llasher@smartenterpriseexchange.com

Lemuel Lasher is responsible for the company's regional Consulting and Systems Integration business in the Americas, Europe and Asia. The group also oversees two global practices: Business Consulting & Solutions, and Technology Consulting. As Chief Innovation Officer, Lasher's responsibilities include managing leading edge technologies, research, collective intelligence and knowledge management. Previously, Lasher held numerous executive positions within CSC's European Group.

Before joining CSC, he was Vice President for Integrated Software Resources Inc., a software consulting and engineering firm. He has also held executive positions At DecaGroup Inc., Aitta Inc., Investment Seminars Inc., and Elan Vital Inc.

Daniel Mintz, Former CIO, U.S. Dept. of Transportation
dmintz@smartenterpriseexchange.com

Until January, Daniel G. Mintz was Chief Information Officer for the U.S. Department of Transportation (DOT). He served as a principal advisor on matters involving information resources and information services management as well as IT leadership issues. Previously, Mintz was the Director for Government Compliance Programs at Sun Microsystems, where he was responsible for security, legal and regulatory compliance for Sun's U.S. Government business.

Over a 30-year career, Mintz held senior positions leading product marketing efforts, managing the implementation of software development, and performing technical consulting. He served as a delegate to the White House Conference on Aging in 2005, focusing on how technology can support improved medical delivery and the special needs of senior citizens. He earlier served as a member of the State of Maryland Advisory Panel on Electronic Commerce.

Derek Gottfrid, Senior Software Architect and Product Technologist, The New York Times
dgottfrid@smartenterpriseexchange.com

Derek Gottfrid is a Senior Software Architect and Product Technologist at The New York Times, where he leads the development of TimesPeople—a social layer of interaction with NYTimes.com. He also created Times Machine, a collection of digital archives built on Hadoop and Amazon Web Services, and he built the search engine that powers the NYTimes.com article search API. Other projects include a database connection-pooling layer. Gottfrid is a frequent contributor to the Open blog at The Times and is an advocate of open source code.

Jay Wessel, Vice President of Technology, Boston Celtics
jwessel@smartenterpriseexchange.com

Jay Wessel is responsible for strategy, implementation and management of technology for the Boston Celtics, including IT, broadcast and event technology, data/voice communications and audio/video. He has implemented redundant real-time systems for use during Celtics basketball games and back-office operations. In 2001, on loan from the Celtics to TNT, he managed back-end statistics and data flow for the basketball portion of the Goodwill Games in Brisbane, Australia.