As recession deepens, IT transformation best tackled in chunks

Transformative IT will enable companies to emerge from the recession ready to compete, gurus say. But big projects, it seems, are best taken in chunks these days.

In 2005, CUNA Mutual Group began a massive effort to transform business processes to boost profitability. The Madison,

Wis.-based organization provides insurance and other financial services to credit unions and their members. The move was not wildly popular with many of the organization's 4,700 employees. CUNA, after all, was a giant in the credit union insurance industry, with 95% market share.

"I had a lot of people say, 'Why -- and why don't you go back to California?'" said CEO Jeff Post, who with CUNA CIO Rick Roy spoke about the IT transformation project at the recent Fusion 2009 CEO-CIO Symposium in Madison, Wis.

In fact, change was a four-letter word at the 75-year-old provider, known locally as the country club of Madison, said Post, former CEO of the Novato, Calif.-based Fireman's Fund and a Wisconsin native brought in to lead the transformation. But change was needed. CUNA's approximately $3 billion in annual revenue was spread across 52 product lines. Return on equity was about half what it needed to be, and CUNA's vaunted market share was slipping at the largest credit unions. The provider needed to reduce the cost of how it did business, Post said, a transformation that "at the end of the day [was] about technology." He pulled Roy out of IT to oversee operations and services for the duration of the project.

Three years later -- and light years from the smug corporate culture of 2005 -- CUNA Mutual has doubled profitability, driven an additional $700 million in benefits to customers and made the insurance provider, formed in the Great Depression to persuade Americans to save again, a more agile enterprise. As it turned out, the IT transformation came just in time.

"If we hadn't done it, CUNA probably wouldn't be here," Post said. In the current economic climate, "capital is king."

Think short-term IT projects with quick cash returns

In tough times, tough-minded CIOs and their bosses should be thinking about transformative information technology. Not newfangled technology, mind you, or nice-to-have gadgets, but IT architecture and governance that will prepare your organization to emerge as a lean, clean, well-oiled IT business machine when the recession ends. That was one of the themes of the Fusion 2009 conference, where CIOs and CEOs meet annually for serious discussions about the challenges of making IT a partner of the business.

But the coda of the two IT-enabled corporate transformations featured at the conference -- CUNA's marathon effort to boost profitability and a massive business process and IT re-engineering project at Rockwell Automation Inc. -- suggest that if you didn't start transforming a few years ago, you're probably not going to start now.

In this climate, it seems big multiyear, IT-driven changes (of your own making, anyway) might best be tackled in chunks, one short-term project at a time.

CUNA IT has a new rule, said CIO Roy: "If you have a project of more than six months, you've got a lot of explaining to do."

Rather than talk about ROI -- year-five benefits ring hollow in an economy this volatile -- you're better off focusing on projects that can add cash.

That advice was underscored by data presented at the conference by Jorge Lopez, vice president and distinguished analyst at Stamford, Conn.-based consultancy Gartner Inc. Lopez spoke about the top concerns for CEOs in 2009.

According to Gartner's latest survey of more than 1,000 CEOs, cutting operating costs was cited by 68% of respondents as their top concern. The survey also showed that CEOs harbor a love/hate view of IT's value in the economic crash: IT ties with product enhancement as the company function "most prized" by 48% of CEOs for surviving this recession.

But 60% of CEOs also said that IT is one of the top constraints of change, after corporate culture. Any IT projects should be cast in terms of how much money will accrue to the top or bottom line. And if IT has any notions about working on innovative stuff, Lopez's advice was to "hide it" -- "move it to skunkworks and keep it secret."

IT transformation includes embracing global processes -- and skills of IT staff

Indeed, it is hard to imagine taking on (or financing) the kind of fundamental organizational change still under way at Rockwell Automation, an industrial automation company that makes products like motor starters, signaling devices and factory management software. With annual sales of $5 billion, 20,000 employees and business in 80 countries, Rockwell aims to be a low-cost, quality supplier and needed to move away from regional- and country-centric business processes.

If you have a project of more than six months, you've got a lot of explaining to do.

Rick Roy, CIO, CUNA Mutual Group

As narrated by CIO Mike Jackson, the five-year IT transformation project now nearing completion is ambitious, both in scope -- the replacement of 700 legacy systems to create global processes -- and the employment conditions set by Jackson: to minimize outside consultants and maximize the IT skills of its 600 staffers.

"We wanted to be in on the project," Jackson said, "and we wanted to embed the transformation in the company."

The staffing strategy included forming an internal IT and business group selected to launch the project. Another IT group is keeping the legacy systems going during the transition; as the project progresses, more IT staffers are transitioning to the new systems.

Moreover, Jackson made good on a promise to find jobs for the 20 or so qualified people on the 35-year-old systems who opted not to be retrained on the new systems. Jackson found a partner company in the Milwaukee area with other customers for these systems, who agreed to take on these IT people at their current salaries and commensurate benefits, assuming good performance.

"It's been a great success story: They're here, and when those systems die, they'll move on and be working on other projects."

The hidden potholes of the IT transformation effort

Whether that kind of accommodation could be baked into a big project today is doubtful. But one aspect of Jackson's journey might help CIOs as their IT departments strive to do more with less.

As Rockwell moved aggressively to cut costs as the implementation progressed, IT morale eroded. "We had a real wake-up call," he said. Enthusiasm for the project was going down fast, faster than at the company at large.

"It was a lot of fear -- fear about the future of IT, fear about their own futures. There was also a lot of change fatigue. Three years grinding away, taking resources away, the legacy systems are still here, and the nature of the work -- there was no development anymore, no innovative work."

Jackson's response was to "go back to basics."

"Lo and behold, it was about managing people well," he said. The department started doing more career planning; Jackson himself serves as a mentor. There are lunches every week. He also looked into workload balancing, and demand and service levels. And most important, he made sure employees were in the loop.

"We clarified the future of IT and communicated where we are and where we are going," he said.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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