As posted by: Wall Street JournalThe secret to running a successful information-technology department is knowing how your company makes money, not running counter to the corporate culture and never falling in love with technology.
That's according to Peter Whatnell, chief information officer at Sunoco Inc. Mr. Whatnell has been in charge of technology for the oil company since 2001. He also was recently elected president of the Society for Information Management, a professional organization for technology executives.
Mr. Whatnell spoke to The Wall Street Journal about how the economic downturn is affecting IT departments and the way businesses use technology, and how IT can keep itself relevant. Here are edited excerpts of that conversation.
THE WALL STREET JOURNAL: How is the economy affecting the information-technology world?
MR. WHATNELL: It's having a huge impact. Basically you've had to throw away any plan you've put together prior to the end of August and start over again. It's caught a lot of people by surprise and now we have to quickly adjust our plans for next year [because much less money is available for new projects], not just for the state of the overall economy but for our individual companies' outlook.
WSJ: How does this downturn compare to the tech bubble earlier in the decade?
MR. WHATNELL: The tech meltdown was narrowly defined in terms of it was just that part of the market. This time, the general economy is in disarray. It's not just a national event, but a global one. At the same time, it is a much more complicated situation than what happened in the past.
It's a cliche to say that the rate of change in IT has never been greater -- every year for the past 15 years people have said that. Which doesn't make it untrue, of course. But the changes are now really at the core of what service IT provides. It is not just outsourcing, but the expectations of the business community in terms of their exposure to easy-to-use, cheap-to-acquire consumer technology in their personal lives [such as iPhones and free online email accounts like Yahoo Mail]. They expect to see that replicated in their commercial lives. And IT departments -- perhaps for good reasons -- have been slow to react.
WSJ: What are the good reasons?
MR. WHATNELL: You have security issues and support issues and compatibility issues. It adds complexity. That's not a reason for not seriously considering things. And one of the things I would say, to quote another cliche, is never waste a good crisis. The coming 12 months are going to force organizations like mine and others to consider nontraditional ways of delivering IT.
WSJ: What are some examples of nontraditional IT?
MR. WHATNELL: [The traditional approach would be] putting a PC on someone's desktop, giving them the Microsoft Office suite and a few other applications. That costs several hundred dollars to provide. And [when the alternative is to] buy that from a Web-based provider for $50 a year, you have to seriously look at that.
Cheaper Alternatives
WSJ: You've said that you would consider moving to a cheaper alternative such as Google's email system if you could get 90% of the functionality for 10% of the cost. Why?
MR. WHATNELL: It is not such an unreasonable assertion to make if you talk to people about the products they use and how much they use them. Most people use spreadsheets and word processing and PowerPoint. But most people just scratch the surface of what is available in these applications. When it comes to spreadsheets, they use addition, subtraction and maybe long division. The number of people who use functions and other complicated features is a much smaller part of the population. It's a very important part of the population, because generally speaking people who need the more advanced functionality are the people who are most important to your business. Frankly [moving to a cheaper but less functional system] would be a pure cost play.
WSJ: How do you decide which projects make the cut when you're tightening your budget?
MR. WHATNELL: They tend to be those things that save money rather than those that make money. It's not that you don't want to make money. It's that cost-saving projects tend to be easier to measure and are more predictable because you are not dependent on the vagaries of how a customer is going to behave to a new product or how a distributor is going to react to a new channel. I think that is the reality of working [in] tough times.
WSJ: What is a project that you are cutting?
MR. WHATNELL: We have a standard refresh rate for equipment: every four years for desktops; every three years for laptops. We stopped doing that in May and we won't resurrect that plan again probably until the spring of 2010.
[Refreshing computers] improved our reliability and our ability to have standardized rollouts. It was only when we were trying to tighten our belts earlier this year that we asked ourselves, "What would happen if we didn't get new PCs for 15 months? And was anyone actually complaining that they couldn't deliver a product, that they couldn't get cash to a bank, that they couldn't execute a trade because their computer was too old?" Of course not.
Changing Work Habits
WSJ: How big a factor is asking people to change the way they work in an IT project?
MR. WHATNELL: We try to introduce technology that will make the company more successful, but a lot of times to achieve that success people have to change the way that they work. It's a consequence rather than an objective. We have three measures when we are looking to approve a project: First, what does this project do to support the company's strategy. The second is what is the business case. And the third is around risk. One of the components we look at under risk is organizational change. The more change that a project would introduce, the more risky we consider the project. That doesn't mean that you don't do it, but the attention you give to the change-management activities has to be far higher.
WSJ: How important is it to network with colleagues in the industry?
MR. WHATNELL: I think it is critical. It's where a lot of ideas come from. It doesn't even have to be your industry. You could hear someone from a health system talking about how they use mobile devices to enable doctors to access medical information and you think, "I could use that same approach to help engineers who are working on a refinery site."
WSJ: Are you forthcoming when you talk to colleagues or are you worried about protecting competitive secrets?
MR. WHATNELL: I think there is a realization now that competitiveness does not derive from the raw technology. The competitive advantage doesn't come from having the same set of Lego bricks that everyone else has access to. It comes from taking that set of Lego bricks and understanding how they can be put together to understand specific issues that your business is facing in your industry. And how you put them together will be very different from someone else in a different company, even though they are a competitor.
The source of competitive advantage is knowing how IT can help your business. You should to be able to ask any CIO: Are you able to describe in three minutes or less how your company makes money? To me that's where it starts. And the answer isn't "we're in retail" or "we're in the insurance business" or "we're an oil company," because everyone is in retail or the insurance business or is an oil company.
The Biggest Challenge
WSJ: What is your biggest challenge and how are you using technology to do something about it?
MR. WHATNELL: The biggest challenge for us is that we are a commodity business in a mature industry. So the challenge is how we can, over the next 15 months, focus on our core activities so that we can be the low-cost provider in our industry. At a time when people are looking to reduce and to cut, how can we create an environment where the business wants to listen to IT about what we can do to cut expenses, to reduce their cycle time and improve their agility. Rather than just have them say, "You have to cut as well." We have an obligation to look at ourselves to find all the places where we can take cost out of the organization. The instinct in challenging times is to cut, cut, cut. But what is much more challenging is doing that and then leaving yourself in a position to talk to the business about how we can help.
WSJ: How do you do that?
MR. WHATNELL: It is going to depend on a lot of things. One is the standing of the IT department within the company. If IT has established credibility, then they are in a far better position to contribute. I do think also that we as an industry are in a better position to have that conversation than we were in 1998 or 2001 [when IT was more focused on technology than the business's needs]....But if you haven't earned that credibility up until now, then I think it may be too late.
