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With all these changes as a backdrop—and with CIOs facing constant pressure to keep costs at bay—the challenge is to deliver these new capabilities without adding to the complexity and cost of existing infrastructure. Accenture believes that challenge can be met.
Delivering Value through Infrastructure
Some companies are moving aggressively to upgrade their IT infrastructures. Take Sainsbury’s, one of the United Kingdom’s largest grocery retailers.
In 2000, faced with fierce competition and declining operating profits, Sainsbury’s embarked on a radical business transformation program to improve its stores and customer service, its supply chain and, above all, its IT infrastructure. As part of the program, the company sought to reduce the complexity and improve the effectiveness of its IT infrastructure—for both existing and new technologies.
In one of the largest replatforming programs undertaken in the retail world, Sainsbury’s adopted a strategic view of its infrastructure. The program had two main aims: to deliver improved IT service; and to drive down the cost of operations, which would help the company realize immediate cost savings and support its move toward improved revenues and profits.
As a result, IT service levels have been improved dramatically while associated operating costs have been reduced through a program of standardization and consolidation across a range of hardware, database, communications and applications systems. The company’s IT infrastructure, once described as “spaghetti-like,” has been streamlined, producing significant cost savings: Sainsbury’s target of a 50 percent reduction in costs over the seven-year program is well on track.
Improvements to the IT infrastructure have also underpinned Sainsbury’s wholesale replatforming of its core marketing, trading, supply chain, retail, human resources and finance application systems. Today, the company is equipped with state-of-the-art, fully integrated retail application systems. In other words, a well-designed IT infrastructure has enabled innovation at the giant retailer.
A robust infrastructure can deliver real business value and outcomes. Sainsbury’s experience illustrates how infrastructure investment can pay off in improved operations and reduced costs. Emerging technologies promise to deliver even more benefits. Smart shelves that trigger their own restocking and repricing are just around the corner. And soon, customers may be able to access a wealth of information about any product from store-based kiosks or their own handheld shopping PDAs.
Infrastructure enhancement can also enable companies to optimize the use of existing resources. One company, for example, is investing in telematics for the large private rail fleet that transports its products. (For a related article, see “When Products Talk,” Outlook, May 2003.) The solution involves the use of satellite communications; solar power; GPS; and weight, temperature and impact sensors. After seeing a prototype of the technology, this company launched its own tests, which revealed a much larger potential benefit through increased “turns” (journeys from the production facility to the customer and back) on its railcars.
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Organizations that aim to become truly global need an infrastructure that will allow virtual management and smooth information sharing. A well-integrated infrastructure, for example, allows an organization to securely store and move data at will. Storage devices can be operated as nodes in a global network, in sites chosen for their economic benefit, security or promise of redundancy. Data can be tiered, with older, less frequently accessed data stored and managed differently than newer data that is part of the ongoing business process.
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Global Teamwork
An integrated global infrastructure supports global teams, which allows an organization to make the best use of valuable human resources. Projects can be segmented, for example, with different types of functions or operations performed in locations where the talent best meets the need. Or a valuable skill can be shared worldwide.
For example, the CIO of a global manufacturer had an excellent planning organization located in Europe; it was highly skilled at predicting inventory needs but was unable to leverage this talent worldwide. As a result, inventory performance was strong in Europe but too variable in other regions. Today, the CIO is leading an IT infrastructure-enabled reorganization, in which resources, though scarce, are made available to the global organization.
Finally, an organization’s IT infrastructure is the foundation on which it can build—often for a relatively modest investment—innovative new applications and functions.
One example currently under development at Accenture Technology Labs is for digital pen and paper technology. The pens work like ordinary writing instruments but are embedded with electronics that store and time-stamp data, which can be transmitted via the Internet to a central server for further processing, storage and analysis. In the right situation, digital pen and paper technology could be a low-cost alternative to equipping legions of employees with portable computers or PDAs, then training them in a new system. The pen offers enormous potential productivity gains in any paper-intensive industry—provided, of course, that the organization has the infrastructure needed to download the data.
The reality is that most companies’ existing IT infrastructures are not up to the task of supporting high-performance business and delivering value through technology. They are not yet virtualized, standardized or optimized. They are neither flexible and dynamically scalable nor fully automated. And they do not enable information to be readily shared.
In recent years, most IT infrastructures have evolved and grown in a haphazard, piecemeal fashion—either through systems included in mergers and acquisitions or in response to the needs of a specific business unit—rather than as the result of the careful execution of a comprehensive infrastructure strategy. These infrastructures are complex and tend to be underutilized, poorly integrated, inflexible and very expensive to maintain.
Economic considerations have, of course, contributed to the current costly, hard-to-manage state of many IT operations. When budgets are cut, infrastructure is often the first target. Rather than introduce new technologies that could have boosted productivity and created value, many companies have been forced to maintain their existing infrastructures through a series of patches and quick fixes.
As financial pressures ease in a recovering economy, companies can consider strategic IT investments. These should take into account the full portfolio of information technology needs, not simply infrastructure.
Moving Toward Mastery
Mastering core skills and competencies is an essential component of high-performance information technology. What does it mean to achieve mastery in IT infrastructure? Specific requirements vary by industry, but two are clear markers in all situations.
Build to a Master Plan
In the same way a builder needs a blueprint to construct a house, an organization should have a master plan when it sets out to build an IT infrastructure that will meet its strategic needs over multiple financial periods. The master plan identifies the series of small, business-driven initiatives required to achieve the overall transformation results, and it provides the necessary information to support the long-term financial business case.
A strong master plan enables managers to resist pressure from individual departments or business units to include ad hoc components to meet their special IT requirements. In this way, it can save money by avoiding the waste of building something that may not fit together over the long term and that, as a result, may even have to be scrapped.
The master plan also helps ensure that the organization will function well as a whole. Access to the infrastructure’s systems should be as simple as plugging in a laptop—anywhere in the world. Information should be universally available and continually updated. Maintenance should be minimal and possible to perform even from half a world away. Ideally, the infrastructure should be so functional, reliable and easy to use that it is almost taken for granted.
Finally, a master plan can ensure that the organization’s security policies are enacted through controls embedded in the IT infrastructure.
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Prepare for New Waves of Technology
A master plan can also help organizations better understand how and when to invest in new technologies that extend their IT infrastructures. The growing list of new technologies includes Internet protocol convergence and voice-over Internet protocol technology; storage area networks; new security solutions to protect the extended enterprise beyond the firewall; virtualization of the data center; and utility computing.
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For example, although not yet generally available, significant elements of utility computing are not far away. When utility computing arrives, companies will be able to procure IT services much as they do electricity or other utilities. They will be able to tap into the particular infrastructure components and resources they need to manage the peaks and valleys of business demand. They will buy what they need, when and where they need it, choosing from a variety of sources and paying only for what they actually use.
How far away is utility computing? Predictive operations (the ability to address problems, such as capacity overloads, before they happen) and virtualization of the data center (the ability to monitor, control, load-balance and fix remote infrastructure components) are good examples of early elements of utility computing that are available today. Accenture estimates that it will be another three to five years, however, before organizations will be able to fully leverage the opportunity for dynamic provisioning both inside and outside the firewall.
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The dynamic provisioning inherent in utility computing fundamentally changes the economics of IT infrastructure. As the cost of basic services becomes variable rather than fixed, infrastructure becomes less of a cost to be controlled and more of an asset that, properly managed, can be the foundation on which business value is built. Dynamic provisioning holds the promise of greater system flexibility and performance at a much lower cost. These cost savings, in turn, will enable companies to fund new IT initiatives that will lead to new business capabilities.
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Utility computing, however, is not a shrink-wrapped product that an organization can pick up off the shelf. Nor can companies afford to wait until dynamic provisioning becomes pervasive to reap the benefits. Achieving mastery in IT infrastructure requires an organization to move aggressively toward utility computing in three phases.
Phase 1: Consolidate and Standardize
The immediate priority in most organizations will be standardization and consolidation. By minimizing investment in redundant systems and in the resources to keep them operating, an organization reduces the cost of basic IT services. The savings are immediate and can be reinvested creatively.
Consolidation and standardization also save money in the longer term. They enable systems to be changed—new infrastructure added, for example—in remote locations or worldwide without costly field trips by support personnel to manage the installation and transition. In essence, change becomes possible with the flip of a centrally located switch.
Finally, consolidation and standardization are essential conditions for a utility computing environment. The flexibility that comes from utility-style procurement of IT services is feasible only when infrastructure is streamlined; that way, the need for services can be readily met in a variety of ways, from within the organization and from outside suppliers.
Leading organizations have already embarked on this first phase—and are already realizing the immediate economic benefits. For example, over an 18-month period, a large telecommunications company consolidated and standardized its entire global IT enterprise—from the workplace to the underlying network, including data, applications and servers. The effort generated significant cost savings and reduced annual IT expenses by 40 percent—savings that would have been impossible to achieve without some up-front investment. Perhaps more important, consolidation allowed the company to move into the second phase of its infrastructure transformation program.
A large financial services company offers another example. The company, which had been operating on a country-based franchise model, standardized, consolidated and built out a central infrastructure services organization with its own P&L responsibility—and realized savings of nearly 20 percent. With these processes and management functions now in place, the central infrastructure services organization is moving toward a utility-style computing model.
Phase 2: Achieve “Pay-per-use” IT Delivery Inside the Firewall
With its infrastructure consolidated and rationalized, an organization can begin the internal migration to utility computing. Widely available virtualizing software can be layered on top of existing systems, allowing the organization to establish its IT requirements in a far more dynamic way. Server and storage environments that took days to provision can now be set up in a matter of minutes.
In this new environment, the management of data and servers moves from silos to a more centralized function. Dynamic provisioning, combined with centralized monitoring, allows the organization to adopt a metering approach, charging back costs to the business units inside the firewall based on the services they use. This phase is about creating the underlying processes and organizational structures to support a pay-per-use model of infrastructure services.
Phase 3: Complete the Move to a Dynamically Provisioned Infrastructure
Once these internal processes are in place, the third phase of the transformation will evolve naturally. Organizations will be able to tap into computing, storage and networking services from a variety of sources, inside and outside the firewall, and pay only for the type and quantity of services or resources they use.
Reaching this state requires a journey of many months and a master plan that clearly lays out the path. With the emergence of utility computing likely within three to five years, organizations that do not begin the journey very soon are at risk of being left behind, at a competitive disadvantage to those that recognize and master the possibilities inherent in IT infrastructure.
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