PEBBLE BEACH, Calif. -- Former Delta Air Lines CIO Curtis Robb kicked off the 2nd Annual CIO Decisions Conference...
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Wednesday with a warning for information technology executives: "If you wait until your business asks you to manage your costs, it's too late. Your successor will be doing it for you."
Robb's keynote launched the two-day conference, which attracted a sold-out crowd of nearly 200 CIOs to discuss "Building the Integrated Enterprise: IT & Business Realities." The conference is co-sponsored by SearchCIO.com.
Robb left his post earlier this year after five years at the nation's No. 3 airline (behind United and American) and now runs a consulting business that helps companies cut costs. Robb not only modernized IT at Delta but also helped the company save more than $1 billion. Since 2001, Delta has run up $10 billion in losses, more than any airline that has not been in bankruptcy court. With continuing losses, it could still end up there.
Robb challenged the audience of IT executives to operate as if their companies were staring down bankruptcy. "Once you're out of cash, it gets very difficult to know what your IT is going to cost you," he said.
CIOs who want to get a grip before the creditors come knocking need to focus on four things, Robb said. First, and perhaps most important, they need to "get a real connection with the business." Any cost-cutting initiative raises the specter of putting the business at risk. Business and IT both need to be at the table to set a level of risk that makes sense. "We're all in the risk management business."
Secondly, CIOs need to line up their vendors and separate strategic partners from people "who are just taking money," Robb said. Urgency is key. At Delta, with the CFO by his side, Robb extracted $30 million out of hardware and software alone. To negotiate that kind of savings, it is critical that CIOs have firsthand knowledge of all their contracts. "That is not something that you can delegate out." Robb said Delta had more than 200 contracts. Finally, CIOs need to scrutinize every piece of work and measure it against parameters relevant to their businesses, such as demand, service level agreements and business risk.
I need more IT employees, and this will help me put together some justification.
Julie Rouzee, CIO, Integra Telecom
Robb's message resonated with Virginia Lowe, vice president and CIO of Columbian Financial Group in Binghamton, N.Y. "I now have an understanding of the opportunity for contracts -- making sure you have a consistent model. In small companies, vendors come and go all the time. The first thing I'm going to do when I get home is pull them all out and get something done on them," said Lowe.
Ron Maillette, CIO of Pacer International Inc., a third-part transportation logistics company, was less enthusiastic about the content. "For me there was nothing new. He made an assumption that the business side already understands" how IT budgets and priorities are determined. And "in small and midsized companies, that is not always understood," said Maillette.
During Robb's five years at Delta, the company deployed $1.6 billion worth of information technology while cutting operating costs more than 3% every year. The new technology, ranging from an SAP management system to crew scheduling systems, created efficiencies that allowed Robb to save 17% in IT headcount costs, mainly by shifting people to the "jobs they were meant to do," rather than through layoffs (although there were some of those as well).
Julie Rouzee, CIO of Integra Telecom, found the advice useful. With $170 million in revenue and 650 employees, the Portland, Ore.-based telecommunications company is much smaller than Delta, but she found plenty to identify with. "I'm in a similar situation, and his real-life examples are perfect for what I need to present to the business side. I need more IT employees, and this will help me put together some justification," she said.
Asked by an audience member whether the major airlines can even hope to stay in business given what seems to be a deeply flawed business model, Robb dismissed any notion that U.S. transportation will become a loose confederation of little airlines. That said, he conceded: "There is no way that technology can make up for a bad business model. But, you can also really prevent a company from getting a good new business model if the technology can't keep up with it."
Let us know what you think about the story; email Linda Tucci, Senior News Writer.