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From tech supplier to IT service provider, a CIO makes the 'big switch'

To address gaps between business expectations and IT delivery, CIO Gary Watkins came up with a model to make his IT team the company's IT service provider of choice.

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Saying your IT organization should function as a full-fledged partner to the business doesn't make it so. Gary...

Watkins, CIO of IT Shared Services at KAR Auction Services Inc., a Fortune 1000 global provider of used vehicle auction services in Carmel, Ind., has engineered a plan that aims to walk the talk. Part philosophy, part technology blueprint, part talent development manifesto -- the three-towered framework has a big goal: to turn Watkins' 130-person IT staff from a technology supply organization for KAR's 12,000 employees into a business-savvy IT service provider.

"We call it the big switch," Watkins said. 

For Watkins, who joined KAR in 2003 and became CIO in January 2013, the need for an IT transformation plan had its beginnings a few years ago when he saw that consumer adoption of cloud computing, mobile devices, social networking -- and the consequent explosion of data -- was radically changing enterprise IT delivery.

"IT is not just an enabler of certain processes but part of the delivery of every product and service we offer," Watkins said. Indeed, the company itself was undergoing a transformation, Watkins said. KAR no longer wanted to be a car auction company that uses technology but "a technology company that sells cars," he said.

IT had not kept up with the vision. "With the convergence of these technologies, business demand skyrocketed and created a wide gap between business expectations and IT delivery. Something had to switch," Watkins said.

Tower 1: A new IT business model

The unmet business demand did not just reflect poorly on KAR IT; it also resulted in rampant shadow IT

Gary Watkins, CIO of IT Shared Services at KAR Auction Services Inc.
Gary Watkins

"We saw the business seeking out other options, and that led to added complexity, increased business risk and other negatives that come with the positives of innovation and agility," Watkins said. "We had to figure out how to match the positives and control the negatives."

The IT organization needed to be the go-to IT service provider for the KAR group of companies, Watkins decided -- application delivery is handled separately by teams embedded in each of the business units. "We spent a lot of time talking about the shift from technology supplier to IT service provider," Watkins said, ultimately agreeing on four key elements of the new IT mind-set:

  • IT is service-driven: "Are we giving the consumer and the customer the service they expect -- not what they are asking for, but what they expect? It is our job to seek it out," Watkins said.
  • IT is demand-driven: "If the business needs it, we need to figure out how to give it to them," Watkins said. This is in distinction to the supplier model, which typically answers requests based on available resources.
  • IT operates as a profit-and-loss center: "The new IT organization sees itself as a business within a business," Watkins said. His IT organization has adopted a "showback model" that lays out the cost of IT services to the different businesses in the KAR group of companies.
  • IT is a broker and a builder: Any technology Watkins' team doesn't build is brokered by IT. That requires the organization to work closely with the business to identify needs, suggest vendors, analyze total cost of ownership and reduce redundancy.

With this new business-responsive model, the IT organization has seen shadow IT "diminish significantly," Watkins said. "It's not gone, but we are certainly making progress."

Tower 2: Enabling technology for an IT service provider

We need our staff to be agents of change. The status quo doesn't get it done. ... We have to bridge siloes between IT and operations, between one IT team and another IT team, and between being a technology provider and being a service organization.
Gary WatkinsCIO of IT Shared Services at KAR Auction Services

The new IT business model is underpinned by four technology tenets, or "pillars," as Watkins calls them:

  • Cloud-first mentality: "We are evaluating each and every single service we provide to determine if it should be -- and why it can't be -- in the cloud," Watkins said, adding that the menu of options includes public, hybrid and private cloud. "We're aggressively going after using cloud for disaster recovery."
  • End-to-end automation: "This best practice is not to reduce headcount but to eliminate human error and give back efficiency," Watkins said. "We look at everything we do every day and ask the question, 'Why can't we automate this?'"
  • Technology standardization: "We had to standardize in order to automate," said Watkins, who described the effort to standardize as "ruthless." This can be difficult at a company like KAR that aggressively acquires businesses, which, in turn, come with their own IT systems. One tactic has been to bolster the enterprise architecture function in IT and stick to this rule: "We don't pay for infrastructure that just sits idle."
  • Service the customer where they're at: This uses the first three pillars to give business users self-service technology capabilities through dashboards and other mechanisms, so that "they can pull the levers when they need them," Watkins said.

Tower 3: IT service provider skills

"We call this our DNA tower, and it also involves four pillars," Watkins said.

  • Front-office capability: "We really want our engineers and our staff to understand the business outcome of what they provide," Watkins said. He encourages his team to think like small-business owners and continuously weigh the results of their decisions. "We need to know why we make the decisions we make," he said.
  • Service accountability: Transitioning from a technology organization to a service organization can feel like an abstraction to employees. "Technology, you can touch and feel, but service is an abstract and overused word. So we have to drive some accountability around that," Watkins said, offering up an example of what "we don't want to be" -- namely, the cable company that passes a customer from agent to agent. "Customers want the cable company to take the call and own the problem -- and that is how we want to be."
  • Staff training and new hires: IT training focuses on technology breadth, Watkins said. "Historically, technologists have been very siloed and asked to go very deep. These skills are critical to a technology organization, but we need people to sit across those towers with a broader set of knowledge and understanding of the business," Watkins said. Couple this breadth of understanding with front-office capabilities and service accountability, and "now we are building engineers who can really transform IT and help the organization reach the next level of maturity," he said.
  • Operational excellence: This is the foundation for transformational change, Watkins said. "We can understand why we are doing what we do, we can take accountability for a problem and have breadth of technology knowledge, but if the services are up only 20% of the time, it doesn't matter," he said.

Change is hard

Watkins said the third tower is his promise to IT employees that the organization will educate them, so they can make this big switch to IT service provider.

"We need our staff to be agents of change. The status quo doesn't get it done. We have to look at things differently. We have to be problem solvers. We have to bridge siloes between IT and operations, between one IT team and another IT team, and between being a technology provider and being a service organization," he said.

Watkins cautioned, however, that the reinvented IT business model is still "relatively new," and not everyone is on board.

"Some are, quite frankly, rejecting the idea. The attitude is, 'Hey, I'm a network guy and couldn't care less about the rest of this [expletive]'," Watkins said. 

"Others can't get there fast enough. They are drinking from a fire hose, and we really believe that they are the ones who are emerging as leaders of our IT organization," he said.

Let me know what you think of this story -- email me or find me on Twitter @ltucci.

Next Steps

CIOs from Staples and Charles Schwab explain why CIOs should forget about managing IT demand and think instead about demand shaping, and a CFO says IT employees could be better off at an IT service provider.

This was last published in August 2015

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