You know why it happens: Old technology builds up as departments move to the next new thing. Mergers and acquisitions bring someone else's IT to your doorstep, adding layers to your layers. Shadow IT runs parallel to sanctioned IT. CIOs fail to set or enforce standards. And all along, consolidation and integration projects that cost money lose the struggle for funding to customer-facing projects that promise to make money.
You also know this is no good. Such baggage takes money and time to maintain, says Frank Wander, founder of the IT Excellence Institute and former CIO of Guardian Life Insurance. "The costs to keep complexity running crowd out investment dollars," Wander says. "That affects agility." A grim cycle.
Simplicity, on the other hand, promises clarity, speed and flexibility, not to mention lower costs in IT and other areas of the company, says Kevin Humphries, senior vice president of IT at FedEx. Humphries opened a brand-new datacentre that will be the US$39 billion company's main technology facility. Simplification underpins the entire project, including virtualising servers, shrinking the number of applications and re-thinking the cooling systems, Humphries says. It was engineered to be one-third the size of the one it will replace. "The largest theme we're working on in IT right now is complexity reduction."
At McDonald's, software undergoes CIO David Weick's simplicity test: If he can, with no training, sit down and make it do what it's supposed to do, then it is good software.
So important is simplicity to General Electric that CIO Charlene Begley has made it one of four strategic imperatives for IT. She knows how insidious complexity can be, even in the most disciplined organisation. In her 24 years at the giant conglomerate, Begley has been CEO of four of its six current divisions, including the $8.6 billion Home and Business Solutions unit, which she runs today. Former GE chairman and CEO Jack Welch famously urged his leaders to clean out their attics occasionally. It's that time again. Begley wants to reduce the number of GE datacentres by half and the number of ERP systems by 85 percent by 2016.
"Simplification is now prioritised. It's funded. It's not scoped down," she says.
But it is difficult to achieve at GE, FedEx, McDonald's or anywhere else. Together, CIOs and business leaders must figure out what needs to go, what needs to change and how to finance and staff the project. Then they must develop plans to stop complexity from snaking its way back in.
It's an ongoing battle, but one that could be worth millions to win.
Complexity is slow, expensive and not secure. If systems are difficult to use, employees get flummoxed, wasting work time searching for functions or waiting for help. Multiply that lost time by thousands of employees, and entire companies slow down. When a new business opportunity or a chance to beat a competitor comes along, you can't move fast enough or don't have the funds to invest. (See "CIOs Seeking System Interfaces That Are 'Apple-Simple'.")
J.C. Penney's new COO Michael Kramer complained to Wall Street recently that he discovered the company runs 492 applications, 88 percent of which are custom. He thinks it should be running about 100 apps, total. "It's a mess," he said. The troubled retailer, which lost $152 million last year on sales of $17 billion, plans to simplify IT as part of a massive transformation project. "When you want to make a change in the business, it takes a lot of un-layering and putting back on," Kramer said. "That costs money."
According to The Hackett Group, typical companies run more than twice as many datacentres as world-class companies, which Hackett defines as those with IT groups in the top 25 percent for both efficiency and effectiveness. Typical companies also run an average of 39 applications for every 1,000 end users, compared to just 20 at high-performing companies. As a result, the best-run IT groups deliver services 15 percent more cheaply than typical companies.
"Less complexity has material benefits to the business, not just a positive effect on IT spending," says Rich Pople, global IT practice leader at The Hackett Group.
For example, vigilantly guarding against complexity paid off for some high performers when the recession hit in 2009, Pople says. During that dark time, typical companies cut IT costs by an average of 6 percent, mainly by stopping new projects and slashing end-user support.
Elite companies, however, reduced IT spending more--by 9 percent--mainly by retiring legacy systems and simplifying their technology environments. At the same time, they kept application development going, introducing new features for employees and customers and watching low-performing competitors tread water on last year's capabilities, he says. "These companies were in a better position to grow."
Despite the crunch, typical companies have so much old, complex IT that they can't think about cutting the staff or systems that keep it going. Pople calls that "entitlement spending" because, like federal programs such as Social Security and Medicaid, it's difficult to make drastic changes. Letting IT entitlements grow, he says, affects finance and procurement, making these functions more expensive to run than necessary.
Chief flexibility officer: The next CIO role?
The world is changing so quickly, and every company's business model has to change as well, says V.C. Gopalratnam, vice president, IT at Cisco. 'You really have to build an organisation that is as flexible as hell.'
Rob Fyfe receives CIO Lifetime Contribution Award
Cited for 'his approach to innovation and his courage and leadership in supporting technology based initiatives' as CIO and CEO at Air New Zealand.
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