Posted on Friday, February 24, 2006 by contributing Web editor Howard Baldwin.
Better Late Than Never?
InformationWeek posted a story earlier this week noting that the SEC would be meeting Tuesday, February 21, to discuss the possible rollback of Sarbanes-Oxley regulations for companies with revenues under $787 million (no idea where that number came from). Why would CIOs of large enterprises care? Because as Ken Bender, managing director of Software Equity Group noted in a recent Webcast on M&A issues, Sarbox compliance is costing small companies about half a million dollars, diminishing the number of companies available for acquisition. (For more on Bender's thoughts from the Webcast, see How Software Consolidation Will End Up Squeezing You.)
Will Sarbox inadvertently stifle innovation, not from a technical standpoint, but a business one? Too soon to tell. To see the report, visit the Web site for the Advisory Committee on Smaller Public Companies.
More Wireless, Please
According to an InformationWeek article this week, the Technology CEO Council said it will issue a report urging Congress “to order the Bush administration to analyze which airwaves are not being used best, and how they might be re-allocated.” The group, which includes Dell, EMC, Hewlett-Packard, IBM, Intel, and Unisys, said it planned to make similar requests of the Federal Communications Commission and the National Telecommunications and Information Administration, asking them to consider allowing government airwaves that are underutilized to be used for other purposes. According to the article, Motorola CEO Ed Zander said, "Our nation's wireless needs are too often governed by 1970s regulations that hinder economic progress and innovation."
The folks the council really ought to be speaking to are at the Department of Defense; they’re the ones who’ve been most assiduous about hoarding spectrum.
Innovation: Learning From The Best
Knowledge@Wharton has published several articles from its Ben Franklin Forum on Innovation, held late last year at the Wharton School in conjunction with the Boston Consulting Group. In one entitled Ben Franklin Forum on Innovation: What Can You Learn from the World's Top Innovators?, you’ll learn some best practices for harnessing innovation. Example (something I never knew): each year, according to the article, Bill Gates escapes to a hideaway in the San Juan Islands, northwest of Seattle, to ponder what Microsoft should focus on next. He doesn’t go in a vacuum: any Microsoft employee can submit a written proposal for him to read while there, and Gates promises to read them all. (Having sailed and cycled in the San Juans, I have to admire his dedication.)
See also the excerpt from the book Making Innovation Work: How to Manage It, Measure It and Profit from It by Tony Davila, Marc J. Epstein and Robert Shelton (who wrote The Seven Rules Of Innovation in our August 2005 issue).
More On Diversity In The Workplace
As Katherine Spencer Lee noted in her online column, Managing Today's Multigenerational Workforce, this is the first generation of business managers who may be dealing with four generations in their workplace. For another look at diversity issues, see Diversity in Corporate America: Still a Work in Progress, another intriguing Knowledge@Wharton article.
Posted on Thursday, February 16, 2006 by contributing Web editor Howard Baldwin.
A Seat At The Table
A new study released this week by The Hackett Group, part of its Book of Numbers series, reports that only 56% of typical CIOs sit on their company’s management committee. However, based on the group’s own benchmarking, CIOs sit on the management committee at every single one of what it terms “world-class” companies. (The firm rates companies on such facets as IT cost per end-user, percentage of IT projects completed on-time and on-budget, percentage of SLA requirements met, and designates the upper quartile as world-class.)
Generally we’re suspicious of statistical situations where someone finds 100% of anything to be true, but Hackett cites other facets of such premier companies worth noting. For instance, in this upper quartile, CIOs are three times more likely to report directly to the CEO or chairman as they are at the other 75% of companies. A higher percentage of the IT staff has greater business knowledge and advanced degrees. In addition, the report notes, these CIOs employ a centralized (rather than federated) delivery model “to better coordinate enterprise initiatives, reduce complexity, and cut costs.”
The report further notes that SG&A functions which perform the best are best aligned with the business, especially in IT. Hackett will be hosting a conference in Atlanta in May regarding this topic, entitled “Leveraging G&A For Competitive Advantage: From Back Office to the Front of the Line.”
More Sturm and Drang From the Analyst Community
As we noted earlier in the month, InformationWeek offered an insightful look into analyst firms’ credibility, and it’s turned into quite the firestorm. As editor John Foley notes in his own blog, “How dare we?” was the operative phrase spinning back from the analyst firms. See John’s blog for feedback from Gartner’s ombudsman and his analysis of her comments.
When Did Making The World A Better Place Become My Responsibility?
According to a new McKinsey study, most global executives believe that their companies have societal obligations beyond those they have to their shareholders. They further believe that sociopolitical concerns such as environmentalism and offshoring should come under the purview of the CEO—they’re that important. Where executives are less confident, it turns out, is in their belief that current tactics toward these goals—such as lobbying and public relations—are less than effective.
Why is it important that companies figure out a way to improve effectiveness? Because 59% of those surveyed say that citizens will expect that it will be the responsibility of both government and corporations to handle social and political issues. One more thing for your plate.
Posted on Wednesday, February 8, 2006 by contributing Web editor Howard Baldwin.
How Much Complexity Is Too Much?
In a recent advertising mailer, according to the Knowledge@Wharton newsletter, one of the largest U.S. grocery retailers boasted having 300 varieties of beer and 1,800 varieties of wine. It sounds like a great sales pitch, but what impact does all that variety have on costs? And will the customer response be confusion or delight? In a recent survey, the Knowledge@Wharton newsletter in conjunction with George Group Consulting polled 424 executives in more than 30 industry groups (including financial services, business
services, information technology, foods, industrial manufacturing and healthcare) to find out how complexity can impact a company.
The answer: on a number of levels. Results indicate complexity affects everything from sales effectiveness to product quality, from customer satisfaction and profitability. However, both respondents and experts from George Group and Wharton note complexity can have an up-side if it is recognized and managed effectively.
PDAs, We Hardly Knew Ye
You know you’ve been in technology too long when your career spans the lifecycle of a particular technology. Analyst firm IDC reports that while the worldwide market for handheld devices swelled to its largest quarterly shipment volume all year, reaching 2.2 million units during the fourth quarter and growing 37.6% from the previous quarter, shipment volumes actually decreased 18.2% from the same quarter a year ago. For full year 2005, the firm noted in a recent release, shipments of handheld devices reached 7.5 million units, a 16.7% decrease from the 9.1 million units shipped in 2004.
The culprit, of course, is the rise of smart phones, or as IDC calls them “converged mobile devices.” IDC analyst Ramon Llamas predicts that the addition of GPS and multimedia capabilities, as well as WiFi connectivity, handhelds may help the market, led by Palm, Hewlett-Packard, and Dell.
Who Are The Best IT Services Firms?
CMP’s new publication Global Services just came out with its first issue, highlighting the results of its Global Services 100 Survey, in which it ranked IT services firms, infrastructure providers, and other IT services companies. The study, conducted in association with outsourcing advisory firm NeoIT, ranked the Top 100 global offshore service providers, segmenting them based on specialized service offerings, such as Top 10 best performing BPO providers, Top 10 best performing IT Services Firms, Top 10 Human Capital Development Organizations, Top 10 Emerging Global Service Providers, Top 10 Speciality Application Divisions and Top 10 offshore call center firms.
The top 10 for best performing IT Service Firms for 2006
HCL Technologies Limited
Wipro Limited
Satyam Computer Services Ltd
Cognizant Technology Solutions
Mindtree Consulting Pvt Ltd
IBM
TATA Consulting Services
Infosys
Perot Systems Corporation
Patni Computer Systems Ltd
A Key to IT Success: Thinking Like a Software Company?
In a new article, McKinsey consultants Simon P. MacGibbon, Jeffrey R. Schumacher, and Ranjit S. Tinaikar postulate that IT organizations can minimize the risks of customer-facing projects by adopting the approach of software product companies.
"Managing a large IT implementation is challenging for any company, but the risks increase when the end users are external customers and the price of failure is damage to the bottom line," says the article, adding, "No one knows this better than software product companies, such as Microsoft and Oracle, which live or die by how well they introduce products that both meet their customers' needs and keep their cost base competitive. They realize the importance of understanding what customers want, of market research and customer support, and of maximizing value by striking a balance between satisfying buyers and controlling costs."
Thus, you could do a lot worse than thinking like a software company, whose project-management practices are probably better than yours when it comes to developing and executing customer-facing systems. “Too often the IT organization assumes that someone in marketing or sales has done the up-front market research or that budget-busting modifications to the features of systems are customer-driven and absolutely essential,” say the authors. “Such faulty assumptions can have serious consequences.” As an example, they cite a mortgage company that lost as much as 20 percent in potential revenues because its loan origination system couldn't handle the necessary volume during the recent refinancing boom. Rather than deal with a slow, unwieldy system, the article notes, the company's "customers," namely, the real-estate brokers who sold its loans, simply used other lenders.
Geoffrey Moore’s Myths of Innovation
Even while Geoffrey Moore’s new book, Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution is hitting the streets, one of his earlier books, Crossing The Chasm, is celebrating its 15th anniversary and is still resonating, as author Steve W. Martin notes in his appreciation on our Web site.
Moore offers more insights on innovation in the Sand Hill Group’s latest newsletter, listing, in David Letterman-style, the top ten innovation myths, including:
Product life cycles are getting shorter and shorter. (And whose fault is that?)
We need a Chief Innovation Officer. (Like a hole in the head.)
We need to be more like Google. (Not on your life.)
R&D investment is a good indicator of innovation commitment. (No, it is not — look at HP vs. Dell)
Great innovators are usually egotistical mavericks. (Not any more.)
Innovation is inherently disruptive. (Not necessarily.)
It is good to innovate. (No, it is good to differentiate on an attribute that drives customer preference during buying decisions.)
Innovation is hard. (Actually, it is not; what is hard is deploying innovation.)
When innovation dies, it's because the antibodies kill it. (Yes, but not how you think.)
Click here for a recent interview with Moore in Optimize.
Posted on Friday, February 3, 2006 by contributing Web editor Howard Baldwin.
More On Business Process Outsourcing
How much business process outsourcing (BPO) are you doing? London-based research firm NelsonHall focuses on this space and drills down into various areas such as human resources and accounting outsourcing; we recently wrote about its report on BPO trends for 2006. If you’re interested in more insights, check out their current newsletter, BPO Perspectives, available by subscription.
Employee Happiness: The Big Disconnect
Every so often there comes a survey with a hypothesis so obvious that you wonder why they even bothered. Yet, it’s so much fun to see conventional wisdom sustained that you can’t help highlighting it.
The Salary.com Web site, which focuses on compensation solutions, surveyed both employees and HR departments at the same company about two factors: job satisfaction, and why employees stay or leave a job. (Optimize readers have given high marks to the work of employment consultant Leigh Branham’s work on this very topic.) The results read like the sequence in The Newlywed Game where the husband and wife come together to compare answers … badly.
On the subject of employee happiness, HR professionals listed the top 3 factors as:
adequate benefits
friendly co-workers
fair compensation
Employees rated the top 3 factors as:
friendly co-workers
good managers
desirable commute
On the subject of why employees leave, employers rank poor relationships with managers in the top three reasons they think their employees leave, but in fact, only 10 percent of employees want to leave for this reason. In reality, dissatisfied employees cite:
inadequate compensation
no opportunities for advancement
no recognition for their work
Even more interesting, the survey found that roughly one third of employers never make counter-offers, and the ones that do make counter-offers do so infrequently and offer only an average of 8.4 percent. What did the employees say their threshold was for a counter offer? 20%? 25%. No—employees said that a 10 percent to 12 percent raise (“surprisingly low” in salary.com’s estimation) would make up for workplace shortcomings.
You can download the survey results here (registration required).
Speaking Of Disconnects…
The Boston Consulting Group’s latest newsletter contains an intriguing piece entitled The Hotel Clerk. Despite the industry-specific name, it’s a thought-provoking look at why employees don’t always act in the best interests of the company, even when the opportunity presents itself to make a big sale.
Case in point: why do hotel clerks refuse to sell empty rooms to last-minute walk-ins or callers, even though by doing so they can charge top rates for the lodging? Answer: because when someone with a reservation complains about their room, it’s faster to switch that person to an empty room rather than solve the problem. Hence, in order to make his or her life easier, the clerk will hoard a precious resource, even if it hits harder on the bottom line of the hotel.
As BCG vice-president Yves Morieux notes in his conclusion, “Too often, management has been asked to accept compromises between what is possible (the techno-economic side) and what people are willing to do (the “human” side).” Instead, everyone identifies some middle neutral ground that they’ve comfortable with, and that, he says, “is a cop-out. By understanding work force dynamics, you can construct a system to change those dynamics, raise operational effectiveness, and improve satisfaction at work.”
The Problem With Analysts
First, let me say that without industry analysts, the Optimize Web site wouldn’t be as interesting as we hope it is. Without the Q&As from the folks at Forrester, IDC, and Gartner offering their wisdom (and not at $1,995 a pop), it’d be a pretty blah destination. Still, everyone knows that there are times when the analyst firms go with “checkbook analysis” (the equivalent term in publishing is “checkbook journalism,” when someone is paid to give an interview, something newspapers almost always refrain from doing).
In its blog, InformationWeek’s Larry Greenmaier offers an insightful look at the box IT vendors and customers have gotten themselves into regarding analyst firms’ credibility, and the conundrum the industry faces regarding trust. Worth reading.
Getting More From IT
The McKinsey consulting firm did a survey of small European banks and discovered that they get more business value from information technology—including faster, more flexible support of business objectives—than do their other banks of their size, and often at a far lower cost. How did they do it? According to the report (registration required), the answer was no surprise in these days of tight business-IT alignment: “the group combines superior IT management with a tight focus on using IT to help improve business performance.”
The firm surveyed 37 retail and wholesale banks to understand how they managed technology and what were the IT-management practices of the top performers; it examined more than 70 variables—ranging from the management of data centers and application portfolios to IT governance models and outsourcing contract provisions. It found that IT spending varied widely—from 10 to 30 percent of operating costs, or 4 to 18 percent of operating income— but that higher levels of IT spending didn't increase the effectiveness or efficiency of the business.
In fact, the survey determined that “the best performers were separated from the rest by fewer than 20 statistically meaningful variables associated with two factors: the quality of a bank's IT management and the ways the bank uses IT to support the needs of the business. There was no correlation between the performance of a bank and either its size (as measured by revenues or head counts) or its mix of retail and wholesale business.” The indelible conclusion: the way banks manage IT is a crucial factor in their success.
Posted on February 1, 2006 by contributing Web editor Howard Baldwin.
Avoiding Chaos In SOA
In Zapthink’s latest newsletter, it looks at the idea of chaos in service-oriented architecture deployed, in an intriguingly entitled article called SOA Governance and the Butterfly Effect. As analyst Jason Bloomberg notes, "the butterfly effect is a principle of chaos theory that states that small differences in the initial conditions of a system can lead to dramatic variations in the future behavior of that system." As Bloomberg notes, there is nothing as chaotic as IT, so "it should come as no surprise that small variations in the decisions of the business can lead to dramatic, unexpected effects in the world of IT."
He continues, though, that there are two faces to SOA governance, one in which you simply communicate corporate policies and give developers the tools they need to follow those policies. But there’s also a "broader, more strategic definition of SOA governance: IT governance in the context of SOA." Interesting stuff.
For you trivia buffs, the term "butterfly effect" was inspired by a Ray Bradbury story first published in 1952 called "A Sound Of Thunder," though the term was never used in the story, which postulated that the killing of a butterfly in prehistoric times could affect modern history. The term came years later from meteorologist Edward Lorenz in a discussion of
chaos theory, presumably inspired by Bradbury's story.
More on Predictions
Pardon the obsession with crystal balls, but as a journalist, I feel that a logical decision only comes after consulting multiple data points. We’re looked at a variety of predictions recently, including budgets, career news, and business trends.
We promise this will be the last … we think. Here are the
top ten predictions for IT in 2006 from Nucleus Research (registration required). Look for insights about pricing, partners, open source, telecommuting, and SOAs, among other topics. One of the most encouraging — enterprises will start cleaning house of duplicative systems that have sprung up over the years.
