Notes and highlights from the Churchill Club Event
CIO Agenda 2010: What the Customer Wants
Thursday, May 7, 2009 @ Santa Clara Marriott
Speakers:
Matt Carey, EVP & CIO, Home Depot; former SVP & CTO, eBay; former SVP & CTO, Wal-Mart
Lars Rabbe, consulting CIO; former CIO, Intuit; former SVP Engineering & CIO, Yahoo
Karenann Terrell, Corporate VP & CIO, Baxter; former VP & CIO, Chrysler Group & Mercedes Benz North America
Moderator:
Peter Solvik, Managing Director, Sigma Partners; former SVP & CIO, Cisco Systems
Disclaimer: These are notes which I took during the session. They are not meant to be word for word what was said by the panelists. I apologize for any errors, misinterpretations that may have been noted and will correct them immediately if you’d care to leave a comment.
1. Recession Impact. Given that the recession began to become evident in the fall of 2008, how did that impact your company’s businesses and IT spending plans for 2009?
- Karenann: Beyond the economy, the election of Obama and the resulting proposed initiatives for healthcare reform probably had the biggest effect on Baxter. Our team acted with a “never squander a crisis mentality.” We anticipated pricing pressure so we did look to pull back areas of spending aggressively in the business. For IT, we determined that we needed to continue to “move forward with operational transformations” specifically by rolling out ERP on a global scale. Our understanding that this was core meant that spending for IT continued up.
- Matt: In the fall, Home Depot started the closure of several stores including our EXPO chain reducing headcount. We are proceeding cautiously in 2009. “Cash is King, or Queen as my CFO likes to say”. We are investing in supply chain remodel and adapting. We are looking to reduce costs. We recently rolled our ERP in Canada. All this allows our employees to spend less time on logistics and more time in front of the customer to offer better service. Overall efficiency is key, with our $1B IT spend, we are not looking for any “big bang projects” rather we want to “hit some singles” and get fast payback.
2. Vendor Consolidation. E.g most recently with Oracle/Sun. Positive or Negative?
- Lars: “I’m in favor of consolidation.” I have to find some way of integrating these technologies anyway, so having it done for me is a good thing. However, many CIOs that I talk to say they need at least 2 vendors to provide alternatives. But overall it is good that we can have more strategic relationships.
- Matt: There is always a concern over the “behavior” of vendors with continued raising of support and maintenance fees. “It’s always a fight.”
- Karenann: “I don’t agree on the benefits of consolidation.” There is an innovation issue when there are fewer smaller companies. In many cases the complexity hasn’t necessarily been reduced. “I would gladly pay more for value, but I just don’t see it”. Continued consolidation definitely squelches innovation
3. Applications. Less customization or more? Build or buy?
- Matt: We look at each requirement individually. Usually if it is strategic, we have more of a build mentality. If it is more contextual (like Payroll) we would look at a package
- Karenann: We try to look beyond just the context of the applications of whether they are HR, finance or others. We are less in favor of building and making things more complex, rather we want a set of common platforms to which we can do customizations. The goal is to get around 50% as vanilla as possibl
- Lars: Another though on this topic is that with SaaS potentially there is less need or ability to customize, so there won’t be a danger of “going wild” as we used to with customizations
4. Open Source. What are your thoughts (e.g. MySQL)?
- Karenann: In healthcare, due to the highly regulated requirements it is generally “not a player.” And if it is open source supported by services then you are paying anyway, so you might as well go pay for the “commercial” software
- Matt: From our view, you need in house skills for these technologies; otherwise the risk assumption is too high. We are not opposed to it, but having the skills is a must
- Lars: When I was at Yahoo we were a big user and a big contributor of open source. Cost was one of the main reasons. So I see greater acceptance in the Valley. However, Fidelity over 15 years ago was considering it, so it really depends on the organization, rather than it fully being limited to a specific industr
5. SaaS (Software as a Service) Your thoughts?
- Karenann: We like the speed, flexibility and capabilities for faster time to market. It is getting a foothold. “We do a ton of thinking about cloud and SaaS”
- Matt: Because of the legacy systems that all CIOs have to worry about, it is a bit of a challenge to leverage. Maturity is another concern.
- Lars: It lowers the entry barriers. However I’d say we’ve always had some form of SaaS (aka ASPs – application service providers) in areas such as HR/Payroll. What is really interesting is the cloud and its ability to allow on demand increase/decrease in capacity/resources
6. Cloud Computing. Good segue for us to talk Cloud – private, internal, public?
- Matt: We are actively pursuing internal cloud/grid. However more standards are needed and continued easier way to consume and pay
- Lars: It is certainly “good for experimentation”. Management tools are not quite there as far as I can see. While at Intuit we looked at internal cloud and how to connect to external.
- Karenann: We already have significant outsourced manage hosted services we rely on. The question is “will they manage our “cloud”? “Clouds are going to be core”. We want to reduce our partnership numbers and will go with innovative options, but as with anything it is a struggle to convert
7. Virtualization . Use just for copies of Dev environment or primetime production?
- Matt: “Production, definitely”. We use it in back office, and while we have had to build some of the management tools ourselves, “It’s primetime”
- Karenann: I think you are mostly referring to virtualization for load balancing, peaking at the server level. At Baxter we also focus on virtualization for the desktop. By that we don’t mean reducing PCs or running a Mac in PC mode. Rather for external collaboration. Allowing access to processes and having control of things that “can come in and go out”.
- Lars: Last year virtualization was all about consolidation. This year it is a focus on “agility”. With the ability to cycle back and forth in different situations being key
8. Microsoft. Do you see their influence increasing or decreasing?
- Karenann: Microsoft gets huge mindshare at Baxter for collaboration. While Google and Cisco have focused a lot in this area, with Microsoft Sharepoint and Exchange, MSOnline and their end-to-end solution marketing, I see Microsoft continuing to be a big player
- Matt: “MS Office in the cloud” has great potential
- Lars: MS Office has and will be around for a long time. Collaboration is important and there are several up coming competing products coming out of the valley
9. Web 2.0. Manage it, prevent it in the workplace? Use it for collaboration, KM? IM, linkedin, Facebook?
- Lars: Looking back at IM (instant messaging) 10 to 15 years ago, some tried to block it, some embraced it. Most companies have to face the fact that these are becoming defacto business tools. Controlling ID management at the front end is going to be key
- Matt: In retail, you want your employees to focus more on engaging with the customers. So Web 2.0 is primarily being looked at as a way to talk to the customers. We are in process with a partner in a pilot leveraging social media
- Karenann: We mostly focus on the tech side of Web 2.0. My view is that with fewer computer science degrees coming out of colleges it is a workforce issue. The upcoming generation is being raised on these technologies, so they expect it as a form of collaboration. Our sales force certainly isn’t thinking Twitter, but it was not so long ago that no one thought banking at your ATM would be widespread. “Anyone that can build collaboration that meets the fabric of the company, meeting the culture to solve problems will have a definite competitive advantage”We hold 5 day conferences where everyone comes in across the globe. “In those 5 days, magic happens. If someone can come up with technology that facilitates day 6 and onwards …”
- Lars (adds): World of Warcraft game is an example of teams who don’t know each other coming together collaboratively to achieve a goal. If we could do that for the enterprise/business …
Questions from the audience (Sorry if I got your company name incorrect. Please leave a comment and I will correct)
10. Q from Examiner.com: What is your stance/security approach with mobile devices?
- Karenann: “We don’t let any mobile device access our infrastructure.” Any mobile device needs “to have a kill switch or be encrypted”. Incidentally we did a test with the iPhone with our sales team and 80% of them turned the phone back in after a few weeks. “We are an IM/e-mail company and a physical QWERTY keyboard is needed”. We use a Canadian company’s products
- Matt: On a related note, I will say that we have been successful opening up public WiFi in our corporate offices for visiting supplier. That has worked out well for us
- Lars: More and more companies are going multi-platform so tighter management is required and definitely with a kill switc
11. Q from KPMG: If someone got a hold of your sensitive data and demanded $10M ransom, would you pay?
- Karenann: Dissecting the different types of “sensitive data”. Data about your health records are governed under HIPAA. BTW, who’s going to store/secure the new “health cloud” (re-Obama initiative)? Credit card/SS # has reputation implications for the company but paying a ransom would be an even bigger PR nightmare. We would not pay.
- Lars: In many cases the FBI would get involved
12. Q from Modius?: What is your viewpoint on green tech/energy consumption?
- Lars: Most of the CIOs I talk to do care! On a positive side we have already seen energy consumption for servers drop 8-9%
- Matt: It’s a big focus for us. We want to do the right thing. Also the cost and efficiency benefits are a plus
- Karenann: “At Baxter sustainability is a core value” It has multiple components from cost savings to increasing shareholder value. Green IT is more of a paper usage/printing focus because it’s more evident that you are killing a tree. When we select managed services we base it on 1) Cost, 2) Sustainability. We want the vendor to have the same agenda and values as we do.
13. Q from Sherman Group?: Follow-on question around collaboration with customers
- Karenann: Baxter doesn’t interact directly with customers. Our “customers” are those “6 guys in a pod in the Mayo clinic; the equivalent of the SV 3 Stanford grads in a garage”. The question is how do you interact and interoperate with them? The simpler you make it the more you’ll get out of it. Internal collaboration and external collaboration are different ‘hows’ but it feels the same
- Matt: Collaboration tools with the supplier are important. We also look at ways we collaborate with our customers and how they want to be collaborated with
- Lars: IBM is a good example of how they implement internal skunk works for collaboration and then they take that out externally to partners and the market
14. Q from Mocafiber?: What’s the best way we can get the attention of CIO’s with our products?
- Karenann: You mean how do you get past the pit bulls at the security desk? There are places to go for the CIOs who are looking for innovation. They all hang around together at the same places or they send their people, it’s not hard to figure out. Most of the others are so busy with their 80-90% legacy that you won’t get their attention.
- Matt: “I’ll tell you that you won’t get in via my Inbox, that’s for sure”
- Karenann (adds): Take the time to explain how it will work in my company and how it is going to be good for us. That means understanding my business. Another thing is that, at least for me, unique innovative marketing does help you get in the door. But it still has to fit with what Baxter is trying to do. We will take the time to integrate it, if it is unique.
- Matt (adds): You must take the time to articulate our problem
15. Q from Microsoft: What do you see as major issues in 2010?
- Matt: Workforce skills with the changing of the guard deferred somewhat with baby boomers staying on longer we must continue to keep existing employees inspired and engaged. They need to be seen as being equal to their business partners and to see their impact. On the hiring side we are bringing in college students as 20% of new hires and we have a strong intern program
- Lars: From this year of exaggerated cost control and sustainability, we’ll see collaboration (eliminating travel), data centers (power management) being focuses
- Karenann: With the tax implications of the Obama administration outside of the country, more companies will have to look at bringing back work into the USA. Baxter has a large group in India. Apart from “staying off the target list” a change in tax rate by a few points has big implications.
- Peter (clarifies): “Right Shoring?”
- Karenann: Just as a bunch of Internets became one, unification of clouds will be next. There are too many identity issues for that not to happen.
Event Close
Thank you to Karen and Marcia for inviting me to this fantastic event! I’m on my way to sign up as a member.