The CIO Agenda 2006
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The discussion didn't focus on 'building a new IT,' as the title suggested, but rather on aligning and integrating business and IT. Spratt noted the shift away from IT is as a utilty, measured by cost, to more a business within the business at McKesson, assisting units within the $80 billion vendor of information systems for the healthcare market to deploy technology to help drive the top line. He's looking at per unit costs for IT, such as for deploying telephony services to an employee or supporting a server, and driving it down to create additional capital for reinvestment. "We need to price services competitively," Spratt said.
Spratt also said that the likelihood of an IT project failing is directly related to the IT connection with a business partner. IT is an enabler--the change management function around that and engagement in changing a process or solving problem is an indicator if it will succeed, he said.
Outsourcing is one avenue toward competitive pricing. Bechtel's Ramleth said that he hasn't found economies of scale externally for his business, other than some offshore programming. Labor arbitrage can be done inside or outside of a company, Raabe said.
Ramleth brought up the challenges of protecting intellectual property(IP), including work processes and supporting applications for Bechtel's engineering and construction business, across cultures and nations, which may have differing views on IP rights.
Some lively discussion revolved around handling vendor relationships. "The biggest problem is ankle biting," Spratt said. "There is a tremendous amount of gnawing at the base of our organization," he added, referring to vendors who try to sell into his organization via local offices. As a result, competing standards crop up with the company. Spratt is addressing the low level penetration problem by opening up more to vendors about McKesson's strategic plan.
Spratt is also in favor of the ongoing industry consolidation. Too many companies are spending money doing the same R&D, he said. "You run the risk of lock-in to a loser in war or predatory pricing," he said. He advised having good contracts, which reminded me of what Motorola's CIO Toby Redshaw had to say about negotiating vendor contracts:
"The real trick is having a hard core deal team that understands the IT environment, but is a genetic cross of pit bulls and piranhas and is better at sales than the people [vendors] who show up."
Ramleth identified the "Salesforce.com model" as having a lot of value. "It gets selected by people with a pain point, rather than top down," he said. In particular, he admired the continous development cycle and self-teaching aspects (you don't need a manual for Salesforce.com or Yahoo, but you do for SAP, he said) of many of the hosted application services. "We could never do that...we would be bogged down...we have to learn to be more agile and responsive to the business." Software applications have to become more viral, intuitive and easier to deploy, Ramleth added.