IT STRATEGY : Making the Most of IT – Best Value IT

Auckland University Business School lecturer Daniel Vidal says there are generally three starting points for companies in New Zealand when considering IT strategy:
1. Those which have no IT strategy and take reactive approach.
2. Those which have some form of IT strategy which simply supports the corporate strategy.
3. Those which treat IT as key driver of business strategy focused on new revenue streams or new products.
Vidal says he has not found one New Zealand company (outside maybe the top 20) which approaches technology from this third perspective.
“Not too many companies know how to put together an IT strategy. Even those companies that do conduct planning process miss the vital component of looking at technology from business perspective. It’s rare to find IT strategies that are drivers of business strategy,” Vidal says.
In New Zealand hundreds of companies are involved in developing breakthrough ideas.
“It is the flip side of this when it comes to IT in company context, things are not that entrepreneurial or breakthrough. I have seen some positive signals but nothing extraordinary,” Vidal says.
One company which has successfully integrated IT and business strategy is Meridian Energy. Moving into new building on Wellington’s waterfront in October provided the perfect opportunity to rethink how the company did IT. Supplying laptop to all staff instead of desktop computers and replacing desktop phones with cellphone and soft-phone technology might seem simple solution, but it’s worked.
Meridian Energy CIO Rob Bolton says the company’s telephone system was almost obsolete and needed to be replaced, which helped him see the opportunity.
Staff are able to move around freely, taking their laptop into meetings or “quiet areas” to work. They can automatically connect to wireless network. Less paper is being used as the portability reduces the need for printing.
“When making the decision to move to new building, the CEO was keen to ensure technology was innovative and right out there,” Bolton says.
Although the strategy uses technologies that have been employed before, the way they have been integrated into the business system is unique, Bolton believes.
“We have gone out and done something new. We have pushed the boundaries. These are things people get nervy about but it is matter of taking calculated risks.
“Not everything is working perfectly but we are working hard to make it work. People have been prepared to accept problems and issues we have had because it is new technology and they are excited by it.”
The company has achieved green building five-star rating from the Energy Efficiency Conservation Authority.
Bolton describes Meridian as “highly innovative company”. While it is reluctant to change its technologies and critical systems that generate and distribute power to New Zealand consumers, it wanted to be innovative in its approach to office IT.
Energy efficiency was important in the decision-making process.
“We are renewable energy company. It is important we demonstrate to others and provide leadership for others to follow,” Bolton says.
Business New Zealand CEO Phil O’Reilly believes companies are slow to embrace new technologies. He blames this on the complex language of IT which seems to frighten CEOs who don’t have the technical expertise and need to seek advice from specialists.
“Many business owners get worried about IT because it feels very complex. It’s very much foreign language. Many, because of that, take very risk averse approach. The last thing they want is to be on the leading edge,” O’Reilly says.
Most will stick with tried and true solutions because they’ve seen others get their fingers burned and they don’t want it to happen to them. To make IT work properly CEOs need to invest the time to understand technologies that are being offered in the context of their business. Being in business is about taking measured risk and that includes IT.
“If you are not prepared to take the risks and learn about making [IT] investment, you can guarantee your competitors are and they will,” O’Reilly says.
Having trusted adviser who can understand the business is crucial to making the right decisions about IT.
The Icehouse Business Growth Centre has taken this advice. One of The
Icehouse’s corporate sponsors, Gen-i offered one of that company’s up-and-coming IT specialists on secondment to help create an IT strategy in line with the company’s business strategy.
Gen-i’s Matt House told The Icehouse team he would not make any changes in the first four months because he wanted to get it right.
Without House, The Icehouse team could have fallen into the trap of buying new technology just because it looked good or had some quirky functions.
“It has been really interesting experience,” The Icehouse CEO Andy Hamilton says. “It was huge decision at the time and we were not sure we knew what we were in for and we trusted them. It made big difference to us.”
Factors in decision making about IT are similar to other business decisions – cost versus benefit. However, IBM NZ’s system and technology group manager Andrew Fox suggests there are some new factors he’s seen clients introducing in the last year or so.
Environmental factors such as energy efficiency are being considered more often – something IBM has noticed with its clients, one of which is Meridian Energy, for the first time in the past year.
Virtualisation, where fewer servers are used to perform the same amount of work as many previously did, is recently introduced technology in some companies. Requiring less physical space is another attractive benefit of virtualisation.
Legislation such as the recently introduced Unsolicited Electronic Messages Act and the soon to be passed Public Records Act may also impact on IT decisions.
PGG Wrightson CIO Bruce Tinsley admits to preferring the “wait and see” approach to IT decision making, ensuring others have tried new technology before his company joins in. However, he says his business wants to be the leader of the second wave of people adopting new technologies.
“I am not risk averse because when I make decision to take it on, I want it tomorrow. But I want to go in with my eyes open,” he says.
“My philosophy is not to implement technology unless it is for business reason not ‘Oh, here is new technology, let’s put it in’.”
Tinsley agrees with the proposition of aligning IT strategy with business strategy.
“That is something I am hoping to introduce at PGG Wrightson,” he says.
The impact IT has on the business, cost and the long-term sustainability of technology are the major factors Tinsley considers in IT decisions.
The Warehouse CIO Owen McCall says the company has historically been one to “jump right in” with new technology. He uses the implementation of data warehousing in the 1990s as an example. The systems available at the time did not suit the needs of The Warehouse so the company built its own.
“That was big technology to take risk on,” McCall says.
However McCall admits the company is not leader in everything. Often it waits until its technology is almost obsolete before replacing it but when that happens, the new technology is likely to be leading edge.
The company, in September, introduced Jade software to modernise its Enterprise Resource Planning system, switching off Legacy, arguably the most mission critical of all its systems.
McCall says the savings realised will amount to millions of dollars each year.
Two factors in the IT decision-making process at The Warehouse are the organisation’s ability to effectively use the technology in way that adds value to the business and the ability of the IT department to deliver it effectively. McCall says it’s important to ensure the systems are reliable and do their job before introducing new technology.
“To drive value for the wider business we have got to do first things first,” he says.
Generally IT is seen as support