Australia Post CIO talks enterprise IT transformation

During the Gartner Symposium 2010 in Sydney, a panel discussion was held to discuss how Australia Post and Leaseplan embarked on successful business transformations.

Hosted by Gartner US research vice president, Tina Nunno, the panel consisted of Australia Post CIO, Wayne Saunders, and Leaseplan CEO, Spiro Haralambopoulous.

Tina Nunno (TN): What was the business reason why the organisation needed a transformation?

Wayne Saunders (WS): Volumes were still growing in terms of mail, but profits were declining overseas. There was a cliff edge coming so we needed to respond to that. We had every type of software and had an enormous amount of legacy software. The vision the CEO had was of an integrated enterprise.

Australia Post has a retail, logistics and transport business so there were a number of different businesses that didn’t talk to each other. So in mid 2007 we started a $500 million program ranging from the floor of the data centre to the desktop. An important part of that transformation was in the business and in IT. Once we got the board to approve it. To deliver major programs we didn’t have the capability inherent within the IT organisation.

TN: It sounds if it was quite the challenge, what possessed you to take it on? WS: Before I joined Australia Post, I got a perspective on what was going on. I viewed it as my last major gig and the chance to give something back.

TN: Spiro, what was Leaseplan like when you first arrived? Spiro Haralambopoulous (SH): Leaseplan had a similar story. It was a successful company doing exceptionally well. Going back five years and projecting forward, the `oh shit’ moment was coming in terms of revenue declining. Most of our cost was associated with people so some time in the near future there was a point where we had to restructure.

Certain executives had seen the writing on the wall and had built a vision of the future. But there was no sense of urgency in the business and the legacy platforms were 40 years old. Most of our business had 15 legacy systems.

There were 4000 people interacting with 90,000 drivers by email, telephone and fax. We wanted to put in the first of its kind full service web based leasing platform which was an integrated supply chain.

TN: When you first arrived, what was the challenge you were most concerned about?

SP: When I arrived, getting people to appreciate that we had to embark on a transformation program with some urgency before we hit the `oh shit’ moment as opposed to waiting and having to lay off staff, was a challenge. The second challenge was getting the people to come on board. You had a middle management group who were holding power based their knowledge of the old platform. The other challenge was getting people to have leadership skills, not management skills.

TN: Did you build these leaders? SP: From turnaround experience, the easiest way is to get a gun, shoot people and bring in new ones. I wanted to keep that expertise and bring that people up to the level needed.

TN: What was your biggest challenge, Wayne? WS: Getting people who work in a conservative company to understand that there is a burning platform was a challenge. I had to get dialogue going around the technology we needed because the last implementation was done in 2000 and Australia Post didn’t get a lot of value out of it. The board could see there was an imperative coming and the CEO saw it too but he wasn’t sure how to deal with it.

TN: Wayne, did you have to backfill roles to manage staff? WS: In IT we had to build a whole new capability that understood project management. At the moment we have 900 people in IT. We had a similar number when I joined in 2006 but there were a lot of contractors so we were able to wean off a lot of those contracts. Because we have a strong union and can’t sack people we have to either convince people they should move on or find a way to move them to another part of the organisation.

TN: Did you have to demonstrate benefits and if so have you been able to show an ROI? WS: We had to demonstrate benefits. It’s one thing to start IT projects that work but the business has to have joint ownership for those programs to work. One of the initial challenges was flagfall. This is a concept where if you start building technology that division pays for it even if it is going to be shared by all the different parts of the business. That $33 million investment had to be demonstrated as beneficial before sign off.

SH: The only hurdle for us was building a global platform but the business benefits had to be demonstrated on a local level. We were held to account because the corporation looks for savings in budgets and forward projections.

Next page: The top three critical success factors

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TN: What were the top three critical success factors? SH: Having the buy in all the way through the organisation was critical because we were not only transforming the IT landscape but the way we did business. What made us successful for the last 20 years wasn’t going to help in the next 20 years.

WS: The number one factor was the CEO commitment to the program, without his support we couldn’t carry this through. I was allowed to re-build the IT team and getting the capability right to manage these programs. The third was presenting the transformation program in simple pictures so they could understand what we were doing.

TN: During the cause of the transformation, what surprised you most? WS: We drew up a business plan for the board three and a half years ago. We were able to demonstrate that we had delivered everything we said we would.

SH: For myself, the surprising piece was the change management and the re-engineering which improved the hire cycle times by 50 per cent and grew the business by 40 per cent.

TN: If you could go back in time and do it all again, is there anything you would do differently? SH: One of the things we would have done differently is taking the software provider and put their staff into our business to understand leasing. They thought they understood leasing but when it came to implementation that wasn’t the case.

TN: What’s the next big thing in your transformation program? SH: We have a strategic agenda to roll the Web-based leasing platform out through Asia. We have some other segments to address so it’s about adding value for the shareholders.

TN: Post may be a fundamentally different business in the future, what impact will have that on your transformation program? WS: We are now being asked to digitise the business. We’ve built the core infrastructure so we can now think about leveraging that investment. There is a foundation there that we can start building a digital platform. We need to refocus from operations to customers because we don’t know our customers. One million people come into our post offices every day and we don’t know who those people are.

TN: As a CIO, what made you successful during this transformation? WS: You never lose sight of the vision, whether it’s your IT team or a board you have to communicate what the vision is and what the value is to the organisation.

TN: What are your personal views on Cloud computing? WS: At this stage it hasn’t played a role to now. My view is that the core business process wouldn’t be put into the Cloud. What I see with Cloud computing is a convergence of hardware and software. We’ve taken out over 400 servers in our network over the last two years which has saved power costs.

SH: The SAP landscape will remain as it is but I’m hoping business applications such as GPS would be put into the Cloud.

TN: If you had one piece of advice for leading large scale change, what would it be? SH: If I’m looking at IT professionals in this room, if you are embarking on change, you need to have an executive buy in other wise don’t touch it.

WS: Make sure everything is set up for success otherwise you are set up for failure.