Strategies for Dealing With IT Complexity

Every innovation, every business process improvement, comes with an IT complexity tax that must be paid by CIOs in time, money and sweat. Here are strategies to mitigate the increasing complexity of IT as it enables new business.

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In ING’s approach, complexity factors are fundamental to the joint business-IT decision-making process, not only alerting business to the price to be paid for its requests, but also helping IT avoid overcomplicating what it delivers.

Third Cure: Default to Simplicity

“It’s harder to do simple, but it’s better to do simple,” says Accenture’s Modruson, because the more difficult task of simplifying the design up front results in easier implementation down the road.

In 2005, Motorola’s Morrison says, she had 60 customer data models. That made application and business process integration extremely difficult. Then the business requested an accounts receivable project, and Morrison used it as a driver to simplify those 60 data models. “We established a global common customer master data model; we didn’t make it optional. All projects now use it as a blueprint,” she says. “The result is we now work on one customer master; we modify and maintain one, as opposed to a mountain of them. It’s just a massive reduction in work and overhead, and an improvement in agility.”

It’s easy to end up with unnecessary complexity due to technological and business-process diversity, notes Fifth Third Bancorp CIO Raymond Dury. “Each additional technology wasn’t a tipping point; it was just one more thing. But at some point you realize you’ve reached a tipping point where simplifying is a benefit.”

“Mature companies need disciplined teams and change controls to minimize the risk [of increasing complexity]. That’s why they’ve failed in the past; they don’t look at the lifecycle,” says Wal-Mart’s Ford. “All of a sudden, they hit the wall.”

But driving to simplicity can be tricky. It’s hard to get resources to revamp older systems or to pay for the initial architectural efforts. And the work can take years. “It can’t take too long; otherwise people will seek exceptions. So you need to get resources fast,” Morrison warns. Some of those resources need to come from your internal savings, some in the form of business investments. Internal savings typically come from two areas: efficiencies and vendor management.

CIOs can achieve efficiencies—and reduce IT complexity along with costs—through a variety of complementary tactics, including disciplined data management, employing change-control techniques to their application development and integration efforts, using Six Sigma techniques for post-deployment defect management, increasing automation, deploying cost-savings technologies such as virtualization, outsourcing some technologies, “ruthlessly” standardizing (using Accenture’s Modruson’s adverb), consolidating duplicate technologies and retiring older systems. “When you do things rationally, you can actually cut the budget,” says Special Olympics’ Mendes, as he discovered when, as CIO of PBS a few years ago, he cut the interconnection asked from the federal government from $177 million to $120 million while, he says, introducing new technology that substantially improved services.

The key area to focus on internally is your data architecture, says Motorola’s Morrison. “If you focus on master data—customer, pricing, bills of materials and so on—and get those very defined, the number of applications you have will become less of a complexity problem,” she maintains. That’s because much of the integration effort across applications involves managing all the point-to-point data transformations when applications interact. Having a consistent data architecture eliminates much of that effort by allowing one to use repeatable processes at the integration layer. That results in both immediate and long-term savings that can help the CIO make other efficiency and simplification investments.

Two approaches to achieving savings and simplification—technology consolidation and retirement—can be tricky, notes Peter Ruggerello, VP of applications development of pharmaceutical distributor AmerisourceBergen, because there are often undocumented dependencies between what you want to keep and what you want to get rid of. A classic example is that “a customer order entry system is being retired and you find that a job to receive EDI [electronic data interchange] orders was using the same subsystem to validate data received before it was passed on to a new process in the back-end order-entry systems,” he says.

That’s no reason to shy away from getting rid of technologies that are no longer needed, but it does require mapping dependencies—and keeping the map updated—so you can remove the older technologies more efficiently when the time comes, Ruggerello suggests.

Accenture spent quite a bit of effort when in 2004 it replaced 450 financial applications with a single SAP ERP instance, and migrated 277 of its 280 business applications to a single platform. More recently, the consultancy undertook the same consolidation effort with its recruiting systems, replacing 46 with one. “Today, we have a theory of one: We have just one of anything,” Modruson says.

“Even though it was hard to get there, what we have today is a lot better,” says Modruson. The cost of IT as a percentage of net revenue has been cut in half, he notes, with a “significant” portion coming from reduced complexity.

Paradoxically, achieving savings through consolidation isn’t achieved merely by consolidating. “You can take 30 inefficient data centers and create three inefficient data centers from them,” warns ING’s Vincent. “What takes the most time [to do it right] is figuring out what your target is. Only with that in place can you optimize the operations,” he says. It’s the Goldilocks principle of determining what’s just right, being just as simple as you need to be.

The easily appreciated benefits of consolidation include reducing license costs (by reducing the number of licenses you need) and personnel (by having fewer data center managers). But these savings are finite. Once you achieve them, you’re done. You can accomplish more by, for example, moving to different types of servers or adopting new approaches such as virtualization. But these require thinking first about what the future needs of your organization are likely to be and how changes to your processes might anticipate them, or at least not get in the way, Vincent says.

Savings through vendor management typically come as a result of consolidation, Fifth Third’s Dury notes. The basic equation, he says, is simple: “If you’ll share these efficiencies with us, you’ll get more of our business.” Savings—and simplifications—can also come from educating your vendors about your architecture, says ING’s Vincent, “so they don’t bring incompatible products to the table.” Another way to use your vendors to reduce complexity is to challenge each one to identify two existing products that you can eliminate by buying their one, says Gartner’s McDonald.

Such internal improvements cannot be undertaken just for IT’s sake. The real goal remains serving business’s changing needs by having a responsive, flexible technology base.

Fourth Cure: Continuous Improvement Required

It can be tempting to try to buy your way out of complexity by outsourcing as much of your IT as you can get away with or by adopting big-ticket platforms from any one of a hundred vendors that will swear they can solve all your problems.

“We went ERP in 2000. It simplified our landscape by getting rid of legacy systems. We cleared out the old and brought in the new,” recalls Anthony Bosco, CIO of engineering and facilities management firm Day & Zimmermann. Bosco believes that having a fairly closed technology system or platform encourages simplicity because it discourages the addition of single-point technologies.

However, enterprises have multiple needs, which means they will need multiple systems. And when adding technologies is necessary, you get added complexity, Bosco concedes, especially where they duplicate some of each other’s processes. “It worked for a while,” he adds, but the complexity started creeping back as the business’s new needs required new technologies not anticipated by the ERP developers. “The ERP systems of today are the legacy of tomorrow,” Bosco sums up. He’s handling this conundrum by tying each platform to a specific set of business needs, such as ERP for financial management and e-commerce for online transactions. He enforces a disciplined set of links among them to prevent complexity caused by use of duplicate processes.

A seductively easy fix for complexity is to hand over your technology to someone else. That’s a bad idea, says Bernard “Bud” Mathaisel, CIO of software outsourcing provider Achievo. When a company is stable, says Mathaisel, it’s more efficient and costs less to manage well-designed key infrastructure, such as data centers, in-house. Outsourcing makes sense when a company is in transition, such as during a merger, or in a period of high growth, and you don’t have the human or management resources available. “That’s worth the premium cost,” he says.

Outsourcing, unfortunately, may not reduce complexity so much as shift it, notes John Baschab, president of management services at consultancy Technisource: “Outsourcing turns a technical challenge into a management one.”

And outsourcing per se won’t fix overly complex subsystems. Sounding an ironic note, Ramesh Dorairaj, head of application management services at Mindtree Consulting, says that “offshoring merely arbitrages inefficiency at a lower cost.”

Some organizations follow a cyclical approach to dealing with complexity. Every five years or so, they embark on a simplification effort to reset the technology base to something that can be used as a platform for future growth. In theory, this can work, especially for industries that have boom-and-bust cycles; the bust times are when you can make the investments for the next boom period. But this approach has three flaws, says Daryl Plummer, chief of research for emerging trends and process management at Gartner. One is that enterprises rarely invest when times are tight. Two is that it requires a large shift in skills and priorities that’s hard for people to handle. Three is that waiting lets the problem fester, leading to workarounds by impatient users that will contribute to complexity down the road.

“Occasionally, the window for big-project change does exist—maybe 5 percent of the time,” says Mathaisel. “Take advantage of it when you can. But 95 percent of the time you’re really talking about incremental change. You do what you can today and deal with the rest on a later cycle.”

There’s also bigger risk for large-scale retrofits embarked on during down times, warns Wal-Mart’s Ford. It’s precisely during the tough times that the business comes to IT for help. So counting on simplifying your technology environment then is probably not realistic.

The best approach is to make the work of simplification ongoing, says Dow’s Murrell. “Look in every area to see what’s redundant,” he recommends. That doesn’t necessarily mean doing anything to simplify the technology cans you’ve opened. “You may make a decision to leave the worms in there due to the cost or the delay to value,” Murrell says. But you should document what could have been simplified and why you didn’t make the effort, so the next time that particular can is opened it’ll be easier to determine if that’s the right time to get rid of the worms.

Ultimately, says TD Banknorth’s Petrey, you need to reduce complexity in the legacy technology you’re not retiring. “If you don’t,” he says ominously, “the consequences to your business will come at a point not of your choosing.

“It’s not a sexy thing to do,” he continues, “and the business doesn’t see the value in it, but if you let it go, you’ll end up with complexity and fragility.” Not a good combination.

Staging simplification efforts over time is a critical strategy for success, argues ING’s Vincent: “Take bite-sized, digestible chunks; otherwise, you’ll choke. Replace a brick at a time, not a whole building.”

The Highest Complexity Factor: Your Job

It may seem as if the complexity burden has become too great to bear. But CIOs have been there before, says Accenture’s Modruson, and not only have they survived, they’ve thrived: “In the 1980s, everyone stitched together networks from multiple technologies. Things have gotten better as technology complexities have collapsed.”

For example, CIOs used to worry about what network technology to choose; now it’s all IP-based and no longer something on which CIOs need to focus. Similarly, server technologies have collapsed into a few well-known quantities that CIOs can rely on. “These are standard platforms I don’t have to worry about,” says Special Olympics’ Mendes. “I can target business value instead.”

“A decade ago, we moved to new technologies quickly because the old ones weren’t so good. But now we can be more measured because what is now the old stuff does work,” Modruson says.

What’s changed is that the complexity has migrated. As parts of the IT environment became standardized, such as networks, other issues replaced it, such as securing porous enterprise boundaries and managing massive data sets in a world where budgeting for downtime for maintenance and backup is simply not acceptable to the business. And emerging process-management approaches such as service-oriented architecture that promise to reduce the complexity of application integration and development introduce complexities elsewhere, such as in change management and testing, notes TD Banknorth’s Petrey.

A more fundamental shift has been away from a focus on infrastructure technologies to technologies that deliver business processes. The IT infrastructure continues to pose its own complexity challenges, but it’s now just table stakes—part of the CIO job—and why business needs CIOs who are both business- and process-oriented.

CIOs must play at several levels simultaneously, addressing both business and IT needs, keeping the systems running while ensuring that their technology strategy supports business operations, promotes innovation and provides competitive advantage in a changing environment, says Michael Farber, a vice president at consultancy Booz Allen Hamilton. “It’s a 3-D chess board,” he notes.

At most companies, “the CIO ends up at the tail end of things,” stuck with complexities caused by others, says Dave Zink, client executive at consultancy EquaTerra and former CIO of CBS. “But when companies have elevated the CIO to the right level, they are less likely to have complexity.”

Assuming they have a CIO who can play a mean game of 3-D chess.

Galen Gruman can be reached at ggruman@zangogroup.com.

Copyright © 2007 IDG Communications, Inc.

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