The CIO as Supply Chain Manager

CIO — Only a few years ago, I visited one of the SAP SAPPHIRE shows. Wandering through the show floor, I arrived at the Accenture booth, where I was kindly offered a giveaway pen. When I tried to use it, I could not make it write. One of the booth attendants came to my rescue and half-jokingly said: "With SAP, even to operate a pen, you need a consultant."

In those days, only a large company could afford sophisticated back-office and front-office automation. Whether it was SAP, Siebel, PeopleSoft or Oracle, a company needed to invest millions of dollars in order to buy the software, hire hordes of expensive consultants, buy expensive hardware to run it and maintain a large staff to support it. But that's not all. It was taking years to implement and IT often missed deadlines and ran over budget in the process. If you were a small company -- just forget about it. You simply could not afford a good ERP or CRM system.

Today, however, it is an entirely different ball game. Companies of any size now have the ability to run all or almost all of their IT operations from the cloud, through outside providers such as Salesforce, NetSuite, Gmail and many others. This is delivering untold flexibility, scale and speed to organizations -- not to mention in many cases, cost savings. But it's true: IT is going through major changes today and the CIO is smack in the middle of it.

With a services-based infrastructure, the CIO and team are increasingly moving from building and integrating technology to managing a vast supply chain of technology partners. IT is now in the business of inspecting, reviewing, and monitoring technology and vendor contracts, ensuring security across all these partners, overseeing integration strategies and above all, managing costs. The jobs of the in-house IT software developer, Big 5 ERP consultants and system administrator are dying on the vine.

CIOs need to prepare for this coming shift by learning the tactics of advanced supply chain management -- perfected by large retailers and major auto companies over the past 100 years. This entails not just managing and overseeing vendor relationships, but ensuring tight control over every facet of the supply chain when it comes to product quality, security, service, content, reliability, performance and a number of other parameters. CIOs and their staff members will need to create business-aligned supply chain processes and metrics, as their infrastructure is increasingly managed and delivered by vendors and partners.

The Perfect Storm

So, how is the advent of cloud computing different from managing outsourcers and hosting firms of the past? One day soon, you may not own or manage a single piece of hardware or software. Companies and people in far-flung places will be storing, managing and maintaining your data and applications. There may be dozens of these partners working for you and many of them will depend on each other. Who's going to make sure all the parts are working well, and working together? The CIO, aka Supply Chain Director.

Take for example a simple e-commerce site that has one provider hosting its DNS services, a second provider hosting the site content and product catalog, a third provider handling the checkout and payment process, and a fourth serving up ads. When suddenly the Website slows down or a process stops working, which of these providers is at fault? Perhaps the problem is related to an unexpected surge in traffic, maybe it's the fault of the Web hosting company that isn't meeting its service-level agreements, or there could be a capacity limit that does not allow for spikes in demand.

The Supply-Chain Process

It doesn't matter who is to blame. The CIO must have a system, processes and the right team to stay on top of pending issues and investigate and resolve them swiftly before they affect customers. The ad hoc monitoring systems and tools of the past, when everything was managed internally, won't likely do in today's world. Now, with so many moving parts outside company walls, CIOs need to set strict parameters for service. This entails defining capacity and service levels, regular monitoring, and strong lines of communications with suppliers. If the supplier changes its infrastructure or its security policies, and you don't know about it, that's a problem. CIOs have to understand the inner workings of key suppliers at the same level as if they were managing the technology internally. Without that transparency, it will be harder and more expensive to troubleshoot and resolve performance or quality problems later.

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