ITV, the IT Vision for a strategic turnaround

The last five years have been bruising for national broadcaster ITV. From its slick glass headquarters on London’s Gray’s Inn Road, the nation’s first advertising-funded channel has taken direct hits from new multi-channel rivals, punches from regulators, kicks from the internet and has suffered the internal pains of a merger.

So as you step into its futuristic building, you can’t help thinking you are visiting an old-timer, down on its luck and possibly heading for a KO. Will its senior- management be running hither and thither in a perpetual state of panic? Not Richard Cross, group technology director of ITV.

Sitting in the studio for Channel 4 news, which is produced by ITV’s news provider ITN, conversation quickly turns to the recent Competition Commission judgement regarding the Kangaroo online service. The Commission decided that it is damaging for the three main terrestrial broadcasters – BBC, ITV and Channel 4 – to work together and offer the same online catch-up service. Based on the highly popular BBC iPlayer software console, Kangaroo would have given British customers a common platform on which to view television content.

“We wanted to have one place for the best of UK television, and to promote content sales,” Cross says, adding that the decision is “disruptive” for the public and that similar models to Kangaroo exist in the US without hindering competition.

The closer collaboration between the licence fee-funded BBC and commercial alternative ITV is far from over. Cross said the two are working on a new set-top box, dubbed Canvas, which will bring together all the BBC and ITV content with a BT broadband connection, describing it as an integration of the Freesat satellite service and broadband experience. “What consumers really want is a single box that has high-definition, personal video recording and broadband,” he argues.

Although broadband is a major business opportunity for ITV, the internet has generally been a challenge for broadcasters. It has taken away an uncomfortable amount of the advertising revenue that they survived on, and at the same time, has become a key competitor for people’s attention. Among younger audiences at least, the internet is winning.

Cross explains that for each programme ITV produces, the challenge is to assess whether its particular audience would watch the programme online, or whether they want additional information. “Our focus has been trying to differentiate, by having high-quality content. People -expect quality from the ITV brand.” ITV produces 3000 hours of original content a year and Cross and his team are using the 50-year ITV archive to exploit online opportunities. Despite challenging the ITV business model, the internet and the pace of PC development (thanks to Moore’s Law) is of great benefit to a CIO in the broadcast world. “A very interesting area of my job is trying to drive broadcasting into a more traditional IT area,” he says.

The result has been a widespread organisational change of the ITV business: where there used to be separate IT and engineering divisions, today the two are merged under the catch-all term of ‘technology’. Cross admits this was a cultural challenge, as they were very different groups. Cross is now responsible for a team of 500 technology experts, a total that is much smaller since the merger of Granada and Carlton that paved the way for a single ITV company.

“We’re moving away from specific systems to off-the-shelf packages and we have been able to reduce the number of networks we support,” he says. “Broadcasting has been enabled to ‘de-tech’ to a degree and we’ve been able to make it work in a very standardised environment, using standards like Flash.”

As a group technology director, Cross has not only outsourced some of the more typical IT operations, but also parts of broadcasting. One of these recently caused a flurry of headlines in the tabloids. Transmission of all ITV content to your TV set is now handled by the French technology giant Thomson, which manufactures cameras and household technology and owns Technicolor, the company that during a recent Liverpool FA Cup derby switched to a late ad break during a nil-nil deadlock, only for Everton to score while viewers enjoyed an advert for Tic-Tacs. Cross doesn’t hesitate to put his hand up and say that the corporation should be held to account for the missed goal. “We have to maintain high standards,” he says and makes no attempt to pass the buck to Thomson.

Since the arrival of Michael Grade as ITV chairman, there has been a great deal of focus on Grade’s turnaround programme, a plan to increase revenues for the broadcaster, while remaining a large-scale content producer. Technology, of course, has a major part to play, not only in the introduction of mainstream technology into broadcasting outlined earlier, but in business-wide efficiencies.

“I am just starting a new restructuring programme to re-orientate the technology division, so that we can outsource some of the more ‘commodity’ services and be more innovative. I want this to be a business change group,” Cross says.

ITV has already outsourced application, desktop and network support as well as broadcast transmission and is rigorously assessing what else would be better served by an outsourcer.

“One of the things that is very certain is that we have to be very agile as a company and as a technology group. We have to push the business. All of this is partly a response to the current environment and the business needs to be an innovator.”

Cross explains that the pace of technological development and lowering costs mean that fewer processes need to be kept in-house. “As some of the technology gets more simple and standardised, it becomes an opportunity to get more people to look if we can outsource. I want us to be internal consultants. This goes down well with the business. If you ask them if they want more people [from technology] to spend more time with them, they love the idea.”

Cross is frank about the needs of the turnaround strategy. “ITV1 has been in decline because of digital TV. The turn-around strategy is to create new revenues and to grow the business five-fold.

“The key thing was to find growth through more efficiency: as IT, we are part of both, we drive efficiencies through IT and drive revenue through technology such as the web and mobile. The latest restructure I am starting is to move us to the next level and really help drive business innovation. On the efficiency side, we have already done a lot to get more production done on PCs rather than in edit suites. An example of innovation is the way we are using artificial intelligence to predict audiences and to place the right advertisements in front of them. We have also been digitising our archive and adding data to it so that it can be syndicated to other platforms such as BT, Virgin Media, iTunes and Amazon.

“There is a lot of pressure on media companies to take risks and move ahead with things that they have been thinking of, but have not got to,” Cross says of the wealth of content types and platforms available online today. “Turnaround is focused around content and content -exploitation, and we are still one of the -biggest content providers in Europe.”

Up-front and honest

Turnaround strategiesinevitably mean streamlining and therefore redundancies, a prickly issue in the current economic -climate. The merger of Carlton and Granada saw the combined headcount drop and the latest strategy will see -further reductions across all areas of the corporation. Cross will have to shed staff around the country in his latest transformation programme.

“We have been very honest with people. We did a roadshow around the country to let them ask questions. The COO has been the sponsor and now people can understand what we are doing. You must be honest with people and tell them what is going on and make decisions quickly. Uncertainty is the worst thing. People told us to make the outcomes quickly.”

The transformation programmes since the merger exemplify the pace of change in broadcasting. “There is never a dull moment, it is changing so quickly,” he says.

Cross became group technology officer of the single ITV after a penalty shoot-out between himself, as IT leader of Carlton, and his opposite number at Granada. The pair decided to co-operate from the beginning to ensure their teams and the company survived the merger, and let the senior powers decide who would become their tech head. Sitting in Cross’s fourth-floor office and spending time with him, you are aware that there is a no-nonsense friendliness about him. Nothing is overt; but, equally, nothing is hidden. He is comfortable being frank, doesn’t hide behind politics, but chooses his words carefully in a manner that will get results without thumping tables.

He’s been in broadcasting for a decade now, but doesn’t see it as his sole niche. Pondering what the next role would have to offer, he says: “It would need to be more involved in business change and operations rather than just keeping IT running. There’s lots to learn from the media. You have to be very agile, adaptive and reliant; and used to retaining customers.”

Cross first became a CIO in 1996, joining logistics company Exel after a career as a consultant. “When you are a consultant you provide lots of advice, but [clients] may not follow it,” he points out. He decided he wanted to be part of the action, doing the things he was advising companies to do and to be responsible for a P&L.

“Exel had very low margins,” he says. “There was not a lot to spend on technology, but I learnt how to do a lot with little and be very customer focused and deliver good service.”

His first trip into media land came in January 1999, joining NDS, a part of Rupert Murdoch’s News International empire of newspapers and digital TV channels. NDS is a technology and services provider to digital broadcasters, with Sky being a principal customer. His three-year stint was the perfect training ground to move into network broadcasting in 2001, joining Carlton Communications as CTO. Carlton was the London and south-east network of ITV, back when the channel was an amalgamation of regional hubs such as Tyne Tees, Yorkshire TV and Anglia. His three years as CTO left him well placed to become the group technology director of the single ITV, a position he has now held for five years.

Seeing through the merger of Carlton and Granada and managing the tight budgets of a logistics supplier will seem like small beer to the challenge of being a senior manager for a struggling ITV. The channel was in difficulties literally moments from the merger being agreed and the arrival of Michael Grade was seen as a beacon of light, but even Grade’s deft media abilities have been put to the test at ITV. Revenues were falling before the -recession began to take hold on world markets, and the transformation programme has already had to extend some of its online revenue targets.

Missed opportunities With revenues down, ITV was unable to respond to one of the biggest historic events of recent years, the live inauguration of Barack Obama as US president; it lost 7.5 million viewers to the BBC. Equally, media commentators have pointed out that when Karen Matthews was convicted of abducting her daughter in a high-profile case that caught the public imagination, ITV was unable to put together a programme reflecting this, while the BBC did, and again won the audience share.

It is in programme-making that ITV has always been the staunch rival to the BBC, and a strong ITV was the powerful -opposition party that brought the best out of the Corporation. Now though, ITV has had to make scheduling and production cuts to its foundation shows like The Bill, and is becoming increasingly reliant on family entertainment hits like The X Factor, Dancing on Ice and Britain’s Got Talent. However, media analysts claim these programmes cost the broadcaster £1m an hour, even if they do win sizeable audience share. Football is also expensive, costing the channel £70m a year until 2012, according to The Guardian.

Grade has brought in The Boston Consulting Group to advise on how to make significant savings. These savings are essential to the organisation’s survival, as it has to pay a bond of £250m this year and another of €500m (£447m) by 2011. There is also a pension deficit of £221m to be paid by June of this year. Considering how pension deficits have punctured all sorts of other companies in the past, it is a worrying set of figures.

In broadcasting, everything is about timing. Each interview, show, advertisement, scheduled broadcast and goal must fall at exactly the right time. When you work within broadcasting you are perpetually tied to the clock face that appears before each programme airs – and time is something probably every CIO feels they could do more of. It is early days for the internet and broadcasting. ITV’s catch-up serviceand the BBC’s iPlayer are already beginning to change media usage behaviour and will no doubt set off a chain reaction of radical changes to the online and media landscape.

As the recession bites, ITV is in a race to capture what revenues remain available and to become ruthlessly efficient. It must regain the hearts of TV viewers and advertisers alike. Looking at what Cross has achieved in recent years there is little doubt he is the right man for the job, just as if Michael Grade cannot turn a channel round, probably no one can. But is there enough time? As we ask one last question and capture one more picture in the swish HQ, Cross has to cut the interview short – politely of course – and head off to another meeting. His time is precious.

Paging the Oracle

ITV, as with many of the largest firms in the UK, is an Oracle house, yet that doesn’t always make for a happy house.

“We made a big strategic decision to implement Oracle for HR, payroll and back-office functions,” says Richard Cross, group technology director with ITV. “We don’t feel we get the engagement from them.”

Cross is not alone in thinking this and has had some high-level discussions with other major users in areas such as construction and transportation about the level of service they get from the US software giant.

Oracle has been on an aggressive acquisition spree adding the likes of BEA and PeopleSoft to its range of products. Cross and other CIOs welcome the ability to rationalise the number of vendors they deal with, but feel that CIOs need to be briefed on Oracle’s intentions when acquiring to ensure they are buying in technology and services that will not be hurt by mergers and acquisitions.

“It’s right that they should have a business that grows and is successful, but I’m not sure I see them as a listening business. I want to elevate the relationship to be a partnership, rather than a supplier relationship. Oracle pays a bit of lip-service to listening to customers. Yet it is in their own interests to have some big customers working hand-in-hand with them.” Cross speaks from bitter experience. “We’d planned to do a big business intelligence/data warehouse implementation based around the toolset they had at the time and then they picked up an acquisition – which was great, but they dropped the original tools pretty abruptly. We need to know what products they will buy or drop.”

CIO has heard from several quarters that the US focus of the major vendors is a stumbling block. “Oracle is a very sales-led organisation, and it comes down from Larry [Ellison]. He is keen on selling, hitting business targets,” says Cross.

Microsoft comes in for praise from Cross. He says he has better relationships with the company, and puts this down to the operating system behemoth having a strong media sector focus.

Richard Cross: CV

1984-88: Management consultant, Accenture

1988-89: Projects director, Bermuda Business Machines

1989-96: Managing consultant, Ernst & Young

1996-98: CIO, Exel Logistics

1999-2001: Vice president, Interactive TV, News Corporation (NDS)

2002-03: CTO, Carlton Communications

2004-present: Group technology director (CIO/CTO), ITV plc