Technology, IT Performance

How a VP of Operations is Dealing With Darwin

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In my last blog, you may remember that I shared my study of Vice Presidents of Operations and the starter KPIs they should be measuring themselves against. This week I would like to add onto this by sharing a discussion this week with an amazing VP of Operations—let’s call him John (“the name has been changed to protect the innocent”). John works for a world class technology company, but to be absolutely clear it is not HP.  

Defining what is core and what is context

Let me start by saying that due to market forces, this John’s company had to take on serious business and IT transformation. This was not only to stay business relevant, but to survive financially. To be an enabler, John went out and defined his IT organization’s core competencies.  

I found this interesting because soon after Geoffrey Moore released “Dealing with Darwin,” I got to hear him talk about this very topic from an IT perspective. Geoffrey discussed how organizations need to determine what is “core” and what is “context.” John is already here. And where something was determined not to be core, he simply outsourced the function.

 The secret to driving IT efficiency

To drive efficiency, John looked hard at capital investment efficiency and something new to me: “asset profitability.” When asked about his objectives going forward, he said it was to driving three things forward:

1) increasing service quality

2) reducing the total cost of operations

3) driving IT Betterment

 IT Betterment was also a new term for me. John told me it involved scrutinizing every dollar spent, being better at everything they do and, most importantly, systematically decommissioning applications that no longer have business relevance and value. From many one on one interviews I’ve had, this part has been difficult for most IT people. I’ll talk about that more in a bit.

From an infrastructure perspective, John has had a game plan and is living by it. First, he is reducing his organization’s physical presence—this means reducing the number of data centers. At HP, we like to call this process datacenter convergence. Second, John is reducing the number of physical servers he has by taking older servers out and virtualizing everything that remains. Third, he is reducing the growth of storage volume by asking what should be stored and whether something that is stored has continuing value. Fourth, he is reducing call volume with improving service.

At this point, I was left asking how do you do both? John said it was amazing but every month they seemed to have a call volume that was equal to the number of employees they have at the company. In contrast to many that would try to push calls to self service, he went after the source of calls in the first place. So what is his secret here? He simply groups calls into categories, and where a category has more than a hundred calls, he tasks his managers to answer two questions. Why is this volume of call happening? And what actions can be taken to reduce this type of call volume by 10% or more. He said it is amazing how much this changes customer satisfaction and call volume in total.

Decommissioning applications takes real cost out

But John and his company did not stopped here in their cost cutting efforts. They are turning their focus to decommissioning applications to take real and significant cost out. So far they have taken out 20% of their older applications. They have a simple rule of application transformation: When you want to put in an application, you need to take out two older applications out. To make this easier, John has also had every application evaluated in a discussion with the business by whether it should be maintained, modernized, replaced, or retired. He told me: “In every review, we ask why someone is asking for money when an application is slated to be retired. We regularly ask the business whether they need this or that anymore. This is how we drive cost reduction and in fact best of breed performance.”

Clearly, I met with an amazing VP of Ops here. John is driving the efficiency to support the corporate strategy, but also enabled the resources to drive further business productivity.  There is a saying about not wasting a good crisis. Clearly, this crisis made John the type of VP of Ops his company needs for today and the future.

Related links:

Feature:  Peak performance demands precision control

Solution page: VP of Operations Editions

 Solution page:  IT performance management

Solution page: Application Transformation

Twitter:@MylesSuer

Tags: Label:  IT strategy

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Discussion
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myles.suer
Myles Suer 129 Points | Sat, 03/24/2012 - 17:21

I really liked your comments. I absolutely agree that IT organizations need to increasingly decide what is core or context. A key element of this is developing cloud and service provider strategies. IT organizations need to know where they are strong and weak--where they have a competitive advantage. A lot of this falls on the shoulders of the VP of Ops. And helping here is the ability to measure success and failure and drive continual improvement.

pcalento
Paul Calento 256 Points | Fri, 03/23/2012 - 19:21

"...where something was determined not to be core, he simply outsourced the function." Too many organizations focus on delivering the non-core, because that's the way its always been done. Perhaps key to the story is that the discussion was not with a CIO, but with a VP of Ops. A great CIO needs to make the same types of hard decisions (like eliminating in-house services when they don't add value) that their ops counterparts make.

--Paul Calento

(note: I work on projects sponsored by EnterpriseCIOForum.com and HP)