The demonstration is about to begin. From the right side of an elongated L-shaped table, a chipper middle-age man adjusts the monitor on a laptop computer. He begins maneuvering a mouse and launches into an enthusiastic, if low-key, presentation. Twenty men and women lined up around the table turn their eyes to a large projection screen, on which a colorful page materializes.

First come words, then pictures and, at the top, framed in bright yellow, a familiar logo and slogan: SEPTA. Serious About Change.

It's the January 1999 meeting of the board of directors of the Southeastern Pennsylvania Transportation Authority, and the first chance most in the room have had to view the organisation's new Web site. For the board, it's a minor item on the agenda. But for Septa CIO Ralph Menzano, the next 10 minutes are critical. These people must approve every expenditure over $25,000. He and the IT organisation he has revamped could come off looking like heroes or hacks.

Menzano fidgets as he looks on from the gallery section of the hall, which is filled with a few dozen Septa staffers plus members of the press and general public. He hopes the presenter, Septa General Manager John K. "Jack" Leary, doesn't bobble the technology he's cheerfully clicking through. Leary is hailed throughout Philadelphia as the man who saved Septa. Under his watch it recovered from a decade of deficits to a three-year budget surplus. But by his own admission he's a computer novice. And who can say when a network connection might bug up? Later Menzano likens the experience to watching a celebrated astronaut climb behind the controls of a new space shuttle. On live TV. From the point of view of the engineer who designed the console. "Live technology demos are risky business," he says. "Any number of things could go wrong." This time, all goes well. The lights come up and several members of the board, local civic leaders intent on representing the interests of their constituencies, take turns voicing their approval. One likes the fact that the site will allow RFPs to reach a wide variety of bidders. Another is keen on its ability to deliver travel advisories. A third likes the potential to find new workers and publicly announce job openings.

Menzano sits back and basks in the moment. And why not? This is one small step for Septa, one giant leap for Septa IT. A year and a half before, the division lay in disarray. In fact, it tottered on the edge of extinction-or, at least, death by outsourcing. Today it's recognized throughout the enterprise as an integral source of innovation and one of the prime propellers of Septa's dramatic turnaround.

Conducting Business

Septa, the sixth-largest public transportation operator in the United States, moves a million riders a day around metropolitan Philadelphia on buses, trolleys, subways and trains. Its combined operating and capital budgets are over $1 billion, and expenses not covered by ticket sales must be made up by federal, state and local subsidies. Before Leary's arrival in 1997, Septa was a perennial loser of riders.

Much of the problem stemmed from urban sprawl, as businesses followed residents to the suburbs en masse, but the rest of the story lay in an ungainly organisational structure. Septa was inefficient in the way only a lumbering governmental body can be; for example, close to 30 individuals reported directly to the previous GM. Consequently, it was ill-equipped to deal with slow but massive change like that brought on by shifting demographics.

Septa's drain on public funds, combined with its high visibility, made it an easy target for local press and politicians. Its bad reputation ensured that more than 9,100 employees reported to work each day feeling less than proud of what they were contributing to-a deeply entrenched government bureaucracy that couldn't die the spectacular death of a private corporation but seemed reluctant to pull itself out of its downward spiral. The low point came when a local investigative-news crew used a hidden camera to film bus mechanics sleeping on the job.

The negativity mirrored what was going on internally. As for MIS, as it was called until Menzano's arrival, it was a standout in a culture of fractured fiefdoms. Its 58 staff members were scattered throughout Septa's eight operating divisions and interacted with one another only incidentally.

Stovepipe systems abounded. By Menzano's reckoning, "the concept of teamwork hadn't found a foothold." Septa had just 2,400 or so regular computer users, but many had, with the help of "their" MIS people, built their own customised systems on their own budgets without regard for what others were building. By one count there were 195 systems running on 23 platforms. An acting MIS director had come to limit his role to mainframe support-an understandable position given the fact that he and his predecessors reported to a succession of senior managers who frequently asked at the board of directors' behest, "Haven't we spent enough on computers?" Things got so bad for the MIS staff, recalls Bruce McKenzie, a 17-year manager of computing services, that "you would get on the elevator and someone from another department would offer his condolences." With little meaningful work and grim prospects for the future, he and his kind came to be seen as casualties. McKenzie helped write the outsourcing RFP and hoped for an outsider to come in, hire most MIS staffers and turn things around. Yet he wasn't surprised when the invitation failed to scare up a single serious bid. "I guess companies knew they'd need to jump through all kinds of bureaucratic hoops, and for not a particularly lucrative account," he says.

Enough Is Enough

By 1995 the board of directors decided things had gone too far. That year it commissioned an independent study to take an unblinking look at Septa's problems. It came back strongly advising a new strategic business plan. This led to recruiting Leary, who promptly hired Phoenix Management Services, a turnaround consultancy based in Chadds Ford, Pa., to recommend specific steps to recovery. When Phoenix urged dramatically stepped-up spending on IT, Leary raised a few eyebrows by connecting the two seemingly unrelated study recommendations: He persuaded the board to create a new position, assistant GM of strategic business and ridership development, and placed MIS directly under it.

The man he brought in to fill the slot, Bernard Cohen, a veteran of the transit authorities in New York City and Boston, made hiring Septa's first CIO one of his top priorities. "We knew we needed someone who wasn't afraid to tell us just how far behind the curve we were," says Cohen. "And it had to be someone who could explain the issues in such a way that our board could understand them." It would be a bonus if that individual also had the energy, not to mention the wherewithal, to tackle those issues. "This industry hasn't kept up with technology," adds Cohen. "We still run electrically charged trains down tracks.

We still have conductors who go through trains and punch tickets, and you watch the confetti fall on the floor. We need to move forward." A CIO Is Born It was a twist of unfortunate fate that brought Ralph Menzano into Cohen's office for a job interview in early 1997. Menzano had been working as a vice president in charge of IT for the commercial real estate division of The Chase Manhattan Bank in New York City when his father, who lived an hour away in Philadelphia, fell terminally ill. A move to Septa would allow Ralph to help his family handle the crisis. Coincidentally, the elder Menzano was a retired 40-year veteran of the Reading Railroad, a laborer who had instilled in his son a love for the lore of trains.

As for career considerations, the situation was a tempting opportunity wrapped inside a set of daunting challenges. Menzano would have to take a substantial pay cut, but he would have the chance to rebuild a crumbled IT organisation according to the vision he'd acquired through more than 20 years of experience.

"To take something that is completely disjointed and dysfunctional and do everything you can to turn it into a vital part of a business striving to revitalise itself is really a lot of fun," he says. That was the right attitude to take if he was to survive the transition from the high-flying world of Manhattan banking to the staid realm of governmental service.

Menzano's energy, ideas and enthusiasm for the transportation business made him the candidate of choice among Cohen and other members of a CIO selection committee, which Cohen led. Menzano assumed his post in the summer of 1997. His first official act of business was to change the name of his department from MIS to IT-a small but symbolic gesture that heralded his plan to alter the function's identity within the enterprise. Next he began to centralize the IT organisation so that all 45 IT staffers, no matter where their office, reported to an IT manager rather than the head of a business unit. (He was about halfway to that goal as of press time.) And he set up one-on-one meetings with every IT staffer and business manager as well as a representative from each IT-related vendor and consultant under contract with Septa. In all, he spoke with about 100 individuals during his first five months.

All the chatting produced several benefits. First, Menzano got a chance to test his secretary's mettle on scheduling. "I drove her crazy," he says. "She really proved herself." Second, he memorized the name of every person in his department. Third, he gained the confidence of business managers so that they'd trust their projects to his leadership. He used much of their input to write a detailed five-year IT plan, which he aligned with Septa's own five-year strategic plan that stressed increasing ridership and improving efficiency across the enterprise.

Down the Tracks

The IT plan Menzano devised emphasized partnering with business units, ensuring that costs get in line with industry averages and fostering responsiveness through a team approach to customer service. It created action plans for all 195 systems and whittled down scores of to-do items suggested in the introductory conversations to an application portfolio plan of 12 priorities, such as materials-management stabilization, train-dispatching automation and Y2K compliance.

To enable the technology infrastructure to support this complex mix of broad visions and discrete aims, Menzano called for decreasing reliance on the mainframe by establishing client/server computing as the strategic architecture, enhancing and integrating the WAN and LAN, standardizing databases and PCs, and setting up e-mail and Internet services throughout the enterprise.

Menzano divided the IT department into three subdivisions and staffed them about equally with his full-time employees. A computing services group now handles operations, security and database services; a dedicated network-services staff looks after the WAN and LAN, the Internet and e-mail; and project services personnel take charge of change, providing project leadership, user training and project cost management. Consultants and vendors supporting various initiatives round out the count of IT pros stationed somewhere in Septa to right around 100.

As for funding in a tightly controlled fiscal environment, Menzano and his partners timed their requests carefully. The board proved an easy sell for business managers on many of the applications projects; by the time Menzano told the board how much capital they'd need to pull off each project, the board had already bought in. "It didn't hurt that our methodology has a built-in requirement for ROI analysis for every single project," says Menzano.

Then, too, there were innovative solutions like leasing rather than buying PCs (which they have since purchased) and renting space to a vendor so that its monthly rent payments more than offset the cost of the project in which it was involved.

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6 digital transformation success stories