Solving the Cost Versus Innovation Paradox

Whenever I moderate a panel of CIOs, I like to ask them a particular question to which I demand a one-word answer.  “Has the technology renaissance that has taken place over the last two years made your job easier or harder?”  Without missing a beat, every CIO on every panel, always answers the same:  “Harder.”

Today, with technology residing directly in the revenue streams of so many companies, the need for innovation is at all at an all-time high. It is all about the new, new thing.  But here’s the rub: With the economy still in a tenuous place, it is all about cost containment, as well.  

What this means is that the CIO Paradox is not disappearing; it is growing stronger. The contradictory forces that define IT are getting more acute, and CIOs will work harder than ever to perform.

There are so many paradoxes at play, one can get a bit overwhelmed when trying to dissect and solve them.  So, let’s focus in this blog on just one: the cost versus innovation paradox:  “As CIO, you are the steward of cost containment, yet you must also innovate. You must be able to say, “Not on my watch” and “By all means, let’s do it!” all at the same time.  You must simultaneously look down and in and up and out, and so does your staff.

When was the last time you had extra budget for waste and failure? When was the last time you could focus all of your attention on innovation and take your eye off cost management? Pharmaceutical CIO Maurizio Laudisa describes the situation very well: “The cost of artistic creativity is often complexity and error; our delivery mandate can afford neither of those.”

Since the cost versus innovation paradox affects all CIOs, regardless of industry, budget or company size, I’d like to revisit it often in this blog and present techniques that CIOs are using to resolve it.

This week, we feature Paul Cassell, CIO of the US operations of NYSE Euronext, a Euro-American multinational financial services corporation that operates multiple securities exchanges, most notably the New York Stock Exchange.

“I joined NYSE Euronext when it merged with Archipelago Holdings, which was more of a start-up,” says Cassell.  “I wasn’t used to having so many legacy systems to support.”  The legacy situation – and the business imperative to drive costs down — presented not only technical and financial challenges for Cassell, but a political one as well.  “Some of our markets have systems that are ten years old, and others have no legacy systems at all,” he says. This means that some of Cassell’s internal customers enjoy innovation where others do not. “There are internal jealousies that happen within the business community in your own company,” says Cassell.   “One business is happy and another says, ‘You’re giving new products to that business, but we can’t even get a new feature.’”

So, how do you squeeze enough out of your operational costs so that you can deliver innovation that makes everyone happy?  Communication and relationships are, of course, key, but there are many additional approaches.

 “We put together an eclectic group of people who understand business problems and who know that you do not need to build the Taj Mahal when all you need is a pine box,”  says Cassell.  The group contains C++ coders, Java developers, DBAs, former QA testers and people with expertise in market data analytics. “Their role is to drive out costs on the Keep the Lights On side,” says Cassell.

Over the last five years, Cassell estimates that his software automation group has driven out more than $60M in hard operational costs.    One very successful project that Cassell’s team completed in 2006 was a release management automation tool that sped up IT delivery. “We’ve automated the traditionally manual handoffs between development, PMO, QA, operations and production,” says Cassell.  “We’ve connected our code database to our defect tracking database to our QA requirements database.”

This process, says Cassell, has taken out hundreds of hours of planning and emails.  “Now, the developer goes into his playground, spins up a build, and that build is self-tested and sent to our staging area where the release is generated for QA,” says Cassell.  “QA goes through their testing, they click a box, and that goes off to the operations group, who then runs a command and the software self installs on all primary and backup servers.”

Cassell’s advice for running a software automation group?  

It comes back to politics. “When you put together a centralized group in a company with several major lines of business, you will get pushback from the IT people who work directly for the business,” says Cassell.  When you have different businesses running competing technologies, the IT people supporting those technologies will want to protect their own. “The worst possible scenario is when you have IT fighting with IT and convincing their own business leaders that a centralized group is a bad idea and that it will slow IT delivery to their particular business.”

The best way to get around this potential pitfall, says Cassell, is to sell the software automation group concept to the business leaders first and IT second. “You have to do your homework and show the business why the new group will help us deliver technology to them more quickly. Once you have their support, then you can move to IT.  It’s a sell job to both communities.”

By building a software innovation group, Cassell has found a way to get over the cost versus innovation paradox.  In one move, he has both driven costs out of IT operations and found a way to deliver innovative technology faster.   

But that’s not all he has done!   Tune into future blogs for more on what Paul Cassell is up to at NYSE Euronext.

Thanks for reading,

Martha