Listening to Dell Inc. Global CIO Adriana (Andi) Karaboutis, as I did in a 30-minute interview with her last week, you might be hard-pressed to believe the company's future hangs in the balance. As reported, the $24.4 billion offer to take Dell private, announced last week, is the largest leveraged buyout since the Great Recession. It's intended to speed the progress of the computer company's transformation from PC maker to technology services provider. Founder Michael Dell has skin in the game, and the deal -- already objected to by the company's largest investor as too low-- has brought the odds makers out in force.
The interview had been set up weeks before. Karaboutis, who was promoted to CIO 13 months ago, was scheduled to be in Boston February 8 to speak at the Harvard University Women in Science Symposium. Would I be interested in hearing how Karaboutis is using Dell's own technology to remake the IT organization? Of course I would. Of course, last week also brought news of the leveraged buyout, and here in Boston, a blizzard of historic proportions. So, amid the business and climate maelstroms, we spoke by phone Friday.
The real job of the CIO, done properly, is to understand where the company strategy is going, understand what the company is trying to do and ask, 'How I can help get us there faster?'
Andi Karaboutis, Global CIO, Dell Inc.
In a business transformation as complex and risky as this, I asked Karaboutis if IT is the glue that holds things together or the change agent? "Yes and yes," she said. "We have our transformational objectives and agenda, and we also don't lose focus on operational excellence." That means everything from ensuring "seamless communications" and "good user experiences" for Dell employees to integrating and supporting more than 18 acquisitions Dell's made over the past couple of years, she said. It means "keeping the water running," but at the same time initiating new revenue streams. For example, her team is big on open source, she said. "I am very proud the IT organization just put together a whole open stack cloud environment for our development team that -- together with our product group and our software group -- we're heralding as a great Dell-on-Dell that we can go to market with."
As for all the acquisition integrations that are so critical to Dell's transformation? They're done by the book, literally. "We have a playbook that takes us from Day 0, Day 1, Day 30, Day 90 and final integration to complete," she said, but the rule book differs from one deal to the next. "We go in with fresh eyes to every one of them." And on the home front, IT has found a secure way to let workers not entitled to corporate smartphones use their personal phones for business. The cohort is up to 19,000 employees and growing. Remote workers stay in touch using the corporate social platform (Salesforce's Chatter), which Karaboutis monitors on weekends for intel on how IT's doing. "So, it's both. You need that operational excellence, the glue, and you need the innovations."
Karaboutis is no stranger to big transitions. Prior to Dell, she spent 20 years at Ford Motor Company and General Motors, the latter during both its public and private phase. At Ford, she helped achieve efficiency gains through the use of Six Sigma. She oversaw GM's transformational move to outsource manufacturing and supply chain IT. Is the Dell business transformation on the same scale? "The change is big," she said, and the change of pace is faster. "When you look at product lifecycles [for vehicles] that are 18-24-36 months, it's very different from the product lifecycles in the three-, six-, eight-month range, which is where we are with Dell," she said.
If Dell moves forward as a private company, Karaboutis will be under tremendous pressure to cut costs, said David Rutchik, a partner at Pace Harmon, an outsourcing consulting firm that advises Fortune 500 companies on the complex outsourcing deals that are often part and parcel of business transformation. "Despite the fact that Dell is an IT business, there will be a lot of pressure on the CIO to be as efficient and cost-effective as possible because of the debt service." Leveraged buyouts, by definition, put a lot of debt on the company -- in this case $17 billion, including a hefty chunk of Michael Dell's fortune and a $2 billion loan from Microsoft. "As long as the cash flow is sufficient to service the debt, everything is fine, but it adds incremental pressure to the system and incremental risk," Rutchik said. There's no reason Dell can't make the business transformation from hardware to hardware/software/services company -- IBM being the poster child for this type of turnaround -- "but Dell has to make those investments," he said. "The challenge is usually [that] the CIO is so consumed by all the internal issues around cost and productivity that it's hard to break out of that."
Consider Karaboutis as busted out:
"That is what I'll call 'table stakes.' That's probably the most respectful way I could put it. Clearly, we are working on productivity, efficiency, making sure there is no disruption in the workers' experience. But the real job of the CIO, done properly, is to understand where the company strategy is going, understand what the company is trying to do and ask, 'How I can help get us there faster from a technology perspective, from a process perspective, and from marrying process and technology to create innovations?' The one sole document that I look to at the start of the year is our corporate strategy document. I look at what have we tweaked, where are the pain points, where can I help, how do we create value? And I make sure my entire team knows it. We have Strategy Day, where we sit down once a month to view our strategy in relation to where the company is going. So, that's pretty far away from just efficiency and productivity. It is a much different world from [where] a CIO's focus was five or 10 years ago."
Look for my Q&A with Ms. Karaboutis later this week.
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