CIO —
By Janaki Akella, Kishore Kanakamedala and Roger Roberts
CIOs continue to be under pressure to effectively utilize technology to enable businesses while containing costs, but IT’s ever-increasing portion of total capital expenditures shows what a pipe dream this is. Nonetheless, the challenge is slowly but surely being addressed by service-oriented architecture (SOA) and lean principles-two of the best management tools in a long time to control IT costs and make IT more effective.
A recent McKinsey & Company survey of 72 CIOs and other senior IT executives from North American companies with annual revenues of at least $500 million confirmed two trends we have seen in our consulting work. First, nearly two-thirds of respondents plan to migrate to SOA in 2007. SOA is already bringing organizations major benefits: large reductions in development time, lower maintenance and other operating costs, and greater flexibility to change business processes. For example, one global financial services firm has saved about 12,000 person-days in system-development time after adopting SOA and providing developers with a set of services from which they can write applications.
CIOs’ embrace of SOA is not a surprise. The burgeoning costs of IT are substantially fueled by the rising cost of software, particularly custom systems and customized commercial packages. SOA enables companies to reuse software, update and replace it more easily, and organize themselves more modularly and efficiently. Perhaps even more important, SOA lets companies establish much deeper electronic connections with suppliers and customers, way beyond the "store-and-forward" information format of electronic data interchange. With these benefits in mind, nearly half the CIOs surveyed were implementing SOA to integrate their systems with those of their external trading partners.
The second trend our survey revealed was the use of lean manufacturing principles (a methodology for improving processes) in data centers. Twenty-eight percent of the companies had applied or decided to apply lean practices to improve their data center operations. Originally developed by automotive giant Toyota Motor Co. 30 years ago to streamline its factories, lean techniques have been adopted in a number of service industries over the past decade. CIOs are increasingly using lean approaches to rein in rising data center costs. The typical large company’s data center has hundreds of millions of dollars in raised floors, server farms, mainframe computers, networking equipment and storage devices. The "glass house" is a voracious consumer of power and employs hundreds of highly skilled technicians to run it around the clock. We’ve seen lean principles reduce data center waste and boost labor productivity as much as 40 percent in some processes. In fact, leading offshore IT service vendors such as Wipro have already generated significant improvements in quality and cost through lean approaches.
