Choosing Technology Over Nuts and Bolts
Picture this Information Technology (IT) department of a transoceanic shipping company: Hundreds of programmers sitting in front of computer screens. Managers training employees on outdated systems in use for 20 years. Phone calls from business unit heads wondering why legacy work is delaying project deadlines.
This was Sea-Land in 1992, when I became CIO. Yet it could describe IT departments in today's shipping industry. It's a common scenario in any industry that has grown by nuts and bolts, not technology. While Sea-Land wasn't the only company to experience these problems, it was one of the first to do something about it.
In 1992, Sea-Land's IT department had swollen to 425 employees; 60 percent were programmers performing legacy work. Worse, the IT department was separate from the company's business units. This hurt effective communication, leaving department heads feeling that IT was not the service it should be.
I began making changes, such as outsourcing and streamlining technology infrastructure, including the data center and network. In 1994, Sea-Land's New Jersey headquarters moved to Charlotte, N.C., allowing me to completely reengineer the department's application and development functions. The end result reduced the operational IT budget by 15 percent, and established IT as an integral service to the Sea-Land business units.
My strategy was based on three critical success factors for delivering IT value. I recommend them to any CIO facing the challenge of managing IT:
1: Solidify IT relationships with the internal business community. In the old model, all IT staff worked in one department. The new model integrated and co-mingled IT professionals with each business unit. We implemented design and development methodologies that actively engaged business owners throughout project development, allowing them to assume accountability for project success. Soon, business units became the biggest supporters of new IT systems—unheard of at Sea-Land. Sadly, it remains unheard of among many shippers.
2: Develop a responsive internal IT organization. My strategy was to separate technical and business analysis functions in IT. I used several tactics to achieve this:
- Outsource legacy systems. Although Sea-Land did limited IT outsourcing, I began outsourcing all legacy systems support and maintenance offshore because our partners in the Philippines and India provided legacy support far more efficiently. Software Ventures International (SVI), the Philippines' largest offshore IT provider, adapted an Offshore Development Model that places a team of professionals on site to co-ordinate efforts between Sea-Land and their Philippine-based programmers. Programming in the Philippines costs up to 40 percent less than in the United States. Because English is spoken in the Philippines, cost savings were immediate. Outsourcing also helped reduce the IT department from 425 in New Jersey to 120 in Charlotte.
- Keep your IT staff current. HR functions were overhauled to better integrate career development, employee evaluations, and training tools into the department's performance. Without tedious legacy work, the IT staff could focus on developing new technology and systems.
- Keep your IT staff in the IT business. Formerly, IT professionals managed all phases of the contractor selection process. In the new model, Sea-Land created a department to manage rate negotiation and administrative aspects of contract work—to companies such as SVI, or to individuals. This "firewall" between IT staff and outsourcing partners ensured that partners are chosen strictly for program expertise.
3: Establish a clear and simple set of technology standards. Maximize efficiency by keeping operating systems, networks, hardware, infrastructure software and software on the same system to the extent possible.
I remained CIO of CSX Lines after Sea-Land was sold last year. But these strategies continue to deliver value. SVI managed our Y2K compliance needs as a simple adjunct to maintenance activities. While shipping companies spent up to $1.50 per line of code on Y2K, we spent 33 cents!
The key to growth in the ever-changing shipping industry will be choosing streamlined and simplified technology over nuts and bolts. With access to emerging technologies, IT departments can provide the service they should.