Chapter 1: A Day in the Life of a CIO


OVERVIEW

“The last thing one knows—is what to put first.”
Blaise Pascal

“While we ponder when to begin, it becomes too late to do.”
Quintillan

It is Monday morning . . . Bob Dunston, a Fortune 500 Chief Executive Officer (CEO), is pondering alternative strategies to spur growth for the next five years. He knows that organic growth from ongoing operations can be improved through a number of programs focused on increasing operational efficiency and productivity. Specifically, it will be critical to reduce cycle times in manufacturing, lower inventory levels, improve supply chain visibility, and enhance customer satisfaction and loyalty. Dunston hopes that he can achieve these goals without the need to invest in another huge enterprise application project. “The ERP project was tough,” he says to himself. “I’ll retire before I do that again!” Of course, his Information Technology (IT) organization is now consumed with the early phases of an enterprise wide Customer Relationship Management (CRM) project, defining the organization’s CRM strategy and performing preliminary vendor evaluations.

The current Research and Development (R&D) pipeline of new products is a bit thin, and until a strategic initiative revamping R&D takes hold, the company will need to pursue a Merger and Acquisition (M&A) strategy. Realizing the M&A challenges that most companies face, he knows that any acquired company must integrate into the parent organization quickly and efficiently to achieve the synergies of the acquisition. With a desire to leave the acquired company’s R&D and manufacturing operations intact, Dunston knows that it is critical to initially seek financial integration, followed by absorption of the remaining business operations such as information technology, human resources, and other centrally leveraged functions. How can he complete this goal quickly and inexpensively while helping to achieve the intent of his M&A strategy? He ponders this, then he recalls a lunchtime conversation with his Chief Information Officer (CIO), who had explained the potential of some rapidly emerging technologies and standards to help improve their supply chain visibility and reduce inventory, as well as enabling other business initiatives, such as M&A integration and procurement processes. He picks up the phone and punches the CIO’s extension, muttering to himself, “Let’s see if Sedgewick can help with these problems.”

Bill Sedgewick scans his calendar for the week, paying particular attention-to the pending close of the quarter. He knows that the company’s results, although solid, have slowed for the past four quarters. While he is doing the best he can to support the business units with reliable IT solutions, Sedgewick knows that there is untapped potential in the IT organization to drive better business results. When he arrived at the company three years ago, they hadn’t had a CIO for two years. In fact, the previous vice president of IT, who worked for the CFO, was an operations guy who formerly ran the data centers. With the rapid pace of IT change and explosive growth of the Internet, his capabilities had been clearly challenged and the business lost faith in the IT function. The CEO hired Sedgewick to fix that situation, and although Bob Dunston was an old-school manager, he was prepared to listen to new ideas.

The phone rings. Sedgewick answers, pressing the speakerphone button.-“Hi, Bob. What’s up?”

“Bill, what’s your day looking like? I’d like to continue that discussion we were having at lunch the other day about—what were they?—Web services; yes, that was it, right? Web services? I’ve been kicking some ideas around, and I wanted to get your perspective.”

He hears Sedgewick shuffling papers and tapping on his keyboard, the staccato clicking of his keys pouring through the phone line like machine gun bursts. “Bob, I’m slammed this morning, but can we catch up later this afternoon, say around four? Does that work?”

“Yes, Bill, that’s fine. It’s no big deal, but I wanted to finish that discussion-in light of some new ideas I’ve been mulling over. I’ll update you at four, okay?” Dunston says.

“Great, see you then, Bob.” Sedgewick hangs up the phone and sits back in his chair, wondering to himself, “Hmmm, what’s he up to now?”

Later that day, Sedgewick knocks on Dunston’s office door. “Hi, Bob. Are you ready?”

“Bill, yes, come on in. How goes the battle today?” Dunston clears his desk as Sedgewick settles into one of the four chairs surrounding the polished table positioned across the office from the CEO’s modest, yet contemporary desk.

“Well, you know, we’re fighting the good fight. So, what’s up?”

Dunston picks up a legal pad, a pen, and his half-full bottled water and eases into a seat across from Sedgewick. “Bill, I want to get back to that Web services discussion we were having the other day. I want to see if there’s a fit for some of your ideas on Web services to some of the strategies and business initiatives I think we’ll have to embark on over the next two years. Now, you know I’ve talked about using a few strategic acquisitions to beef up our R&D and product pipeline, right?”

“Yes, Bob, and I’ve got a team working on an integration strategy that will allow us to very quickly absorb acquisition targets, first for financial reporting purposes, and then complete integration of all order entry, product and customer master data, fulfillment and logistics processes, as well as other key business processes and functions, too.”

Sedgewick’s face lights up as he explains this point. He is clearly excited about implementing corporate strategy using his information management organization, processes, and capabilities. “We’ll have a draft strategy document to show you early next week.”

Dunston nods vigorously, clearly eager to hear this information from Sedgewick. “Good, I like that. We’re already evaluating M&A targets based on a rigorous profiling methodology, and we should have a short list ready by the end of the month. I want you involved in the due diligence process as we get that short list pulled together.”

“In addition, though, you know we’re under continued pressure to drive productivity and improve operating margins. I’m concerned with our core businesses—their organic growth is slowing and margins are deteriorating, so I’m looking at a number of programs to reverse these trends. Inventory management could be improved. Reducing cycle time in manufacturing is important. Ultimately, I’d like to shift a large percentage of our business to a make-to-order model, much like Dell’s, versus our current inventory-intensive make-to-stock model.”

As Sedgewick rapidly scribbles notes, Dunston continues. “Take inventory-management, for example. We need better visibility across our entire supply-chain to effectively manage inventory. That means tapping into a bunch of different systems in order to expose inventory information—components and stock, work-in-process, and finished goods—at every point in our supply chain. If we can’t see it, we can’t measure it and reduce it. I’d like to get your help to make that program happen. You need to talk with John about this, but let him know we’ve talked and you’re to help drive this initiative.” Sedgewick nodded. John Bentley was the Chief Operating Officer (COO) responsible for manufacturing, R&D, and overall operations for the company. Bentley was fairly receptive to new ideas if they could drive the metrics of the business, so Sedgewick was confident about defining and implementing the processes and systems to help better manage the company’s inventory.

“Anyway, I wanted to pick up our discussion from lunch last week to see if there might be a way to use your ideas about Web services to help implement these initiatives. You were pretty bullish on the whole Web services thing, so let’s continue with that for a bit.” Dunston leaned back in his chair and looked expectantly at Sedgewick, waiting for him to begin.

Sedgewick decides to recap their previous discussion and then apply it to these newly articulated business strategies.

“Bob, you remember how I described what Web services are, right? The definition I like best is one I’ve synthesized from all the trade rags I’ve been reading. Here’s my definition of Web services. Web services are ‘loosely coupled, self-describing services that are accessed programmatically across a distributed network and exchange data [or information with one another] using vendor, platform and language-neutral protocols.’ They are software modules or applications that are designed to be run across Intranets or the Internet using the underlying protocols that the World Wide Web is based upon today.”

Dunston leans in with interest. “So, give me an example, Sedgewick.” “Well,” Sedgewick replies, “think of when you said you wanted to see inventory information—let’s say work-in-process inventory. In order to do that, you would need information from multiple locations from multiple Manufacturing Execution Systems (MES) and multiple Enterprise Resources Planning (ERP) systems, right?”

“Yes, and it’s a pain in the neck to do that, right?” Dunston half asks and half states.

“It is and it isn’t,” replies Sedgewick. “These days, you would typically use tools such as Enterprise Application Integration (EAI) that specialize in tying disparate systems together. There are a bunch of products that do this today, and they vary in what they do and how they do it. They can be expensive, and require adapters or interfaces to tie into back-end systems and extract information in the manner in which it is desired. It depends on the business need that drives the use of the tool.”

Sedgewick continues, “Now, let’s suppose you want to get inventory information from the manufacturing execution systems and ERP systems in three different plants in three different geographies to update an inventory management portal.” Sedgewick stands up and walks to the whiteboard, unwrapping a Snickers bar while he uncaps a dry erase marker. He draws a blue box to represent headquarters and three additional blue boxes to represent the international manufacturing sites. “We have a portal running here at headquarters, and we are populating the portal with real-time inventory updates from the plants. That means we have to gather information from the ERP system at each plant. SAP in this plant, JD Edwards for this plant, and Oracle Applications for this plant. It’s a pretty typical scenario for many organizations.”

Sedgewick pauses, exchanging the blue marker for a red marker. He draws red lines from each of the blue plant boxes, connecting them to the headquarters box. “Now,” Sedgewick continues, assuming the instructional tone of a college professor, “updating the headquarters inventory management portal can take place in a number of ways. For example, there could be a real-time connection from the portal application, over our internal network, tapping directly into each ERP system. Beyond that, we could add logic to push information from the ERP systems, only processing updates if there has been a change, versus pulling all the inventory information and updating the portal application regardless of whether it has changed or not.”

“Solving this problem with EAI software is pretty typical, and it works. The only problem is that these point-to-point interfaces can be cumbersome to maintain, and EAI software can be expensive to purchase, install, and maintain.”

Dunston’s face wrinkles as the word “expensive” enters the conversation, but he doesn’t say anything. Sedgewick, noting the change of expression, quickly responds. “That’s why Web services are such an exciting and timely technology, Bob.”

“Theoretically, Web services can eliminate the integration problem that we would use EAI software for, and it’s ideally suited to loosely coupled interfaces between applications or business processes, much like the inventory portal problem we are discussing.” Sedgwick walks to the whiteboard again. “You see, these red lines represent the connections we would build using the EAI software, and these processes would remain in place to pull inventory data from the targeted ERP systems on a periodic basis, either polling them or being updated as inventory information changes. EAI implementations are fine, but they have some limitations. There are platform and version issues to contend with, such as HP’s Unix, IBM’s Unix, and Sun’s Unix versus Microsoft Windows NT, all versus Linux—the OpenSource version of Unix. Then, you have the application software itself and the task of making sure that the versions of software are the same, or at least can be accessed using the same EAI software and adapters. And, in many cases, the ERP software has been customized such that it really isn’t the standard functionality the vendor originally offered. Web services offer a better way to make applications interoperate using Internet protocols and emerging Web services standards.”

Exchanging the red marker for a green one, Sedgewick draws small green boxes inside each of the blue boxes on the board. “Now, with a Web services approach to this problem, we would build small, modular applications that perform simple computing tasks—for example, retrieving inventory updates from ERP systems.” Pointing to the little green boxes, Sedgewick continues. “Each of these little applications are Web services, written in Java or C/C++—it really doesn’t matter. In addition to the main application functionality, which is simply to get inventory records from the ERP system or database, they have some eXtensible Markup Language (XML) code added to them.”

At the mention of these acronyms, Dunston’s face brightens because he has read about XML and Web services in the Harvard Business Review, so at least he understands some of it. Dunston quipped, “You mean, expensive markup language, don’t you?”

“Yeah, right,” chuckles Sedgewick as he proceeds. “The XML code that I am referring to does two simple things: It has a SOAP protocol layer, which is Simple Object Access Protocol. The SOAP protocol is a messaging standard to format messages between Web services consumers and producers. SOAP specifies the message envelope, the header, and the message body—all in XML. This is how a consumer or user of a Web service and the producer of a Web service communicate via Internet protocols, typically HTTP.”

Dunston furiously scribbles notes as Sedgewick describes these primary Web services standards for messaging. Sedgewick watches Dunston’s facial expression as he continues, making sure that there is no confusion or boredom in his eyes. “The other piece of XML code that is added is known as Web Services Description Language (WSDL). This XML-based standard describes how a Web service is accessed and what its inputs and outputs are. WSDL provides the interface to the Web service so it can be used programmatically by other Web services without ever needing human intervention.”

“What this all means,” says Sedgewick, “is that these software components are designed to work together, over the Internet, or in this specific case over our corporate intranet, to gather inventory information from three different systems and aggregate it in the inventory portal. Using Web services in this way can help us integrate legacy information systems by exposing important business information using standards such as XML, SOAP, and WSDL—as opposed to often expensive EAI tools and proprietary and inflexible integration techniques.”

“Will our integration expenses go down with Web services?” Dunston asks. His inquiry draws a quick grin from Sedgewick.

“It’s conceivable that over time, the effort and expense associated with internal systems integration will be reduced significantly as Web services are used to expose information from proprietary business systems for use by other business applications. Web services could reduce or eliminate the need for EAI tools because Web services are based on standard Internet protocols and XML. As more and more Web services are made available, initially within organizations and eventually publicly via shared Universal Description, Discovery, and Integration (UDDI) registries, the need for specialized integration software will decline.”

Dunston leans back in his chair and folds his hands behind his head. “Okay, Bill, you’ve explained what Web services are—at a high level, I’m assuming—and you’ve said they can reduce the amount we spend integrating systems together within the organization. I understand that. But I can’t imagine that’s where all the benefits of Web services will be realized. There has to be more to it than that.”

Sedgewick, almost anticipating this question, jumps back up to the whiteboard—again with a marker in hand. “You’re right, Bob—there is.”

“We’ve talked about doing some acquisitions to fill the R&D pipeline, right?”

Dunston nods, answering, “Yes, that’s right.” “

So think about the inventory update example I started with. You have these small, distributed applications that we can assemble together, via Web services standards and Internet protocols, to retrieve inventory information from proprietary ERP systems running on distinct hardware and operating systems. This entire process is running over our intranet.”

“Okay, so say we buy a company. What’s the first thing we have to do?”

“Integrate the financials,” Dunston quickly replies. He had orchestrated multiple acquisitions during his career and knew the playbook by heart. “Integrate financials first, then rationalize and consolidate product families and customers into a single view of the business.”

“Right,” replies Sedgewick. “And one potential way to do that is to use Web services to tap into the acquired organization’s financial reporting systems to aggregate their financials and report them back to us here at corporate.”

Dunston nods vigorously. “But wouldn’t that mean using Web services across the internet? Aren’t there security issues still?”

Sedgewick responds with marker in hand, “Well, from an IT perspective, one of the first things we’d do is dismantle the acquired firm’s firewall and bring them onto our private network as soon as the deal closes. So, really this is similar to the internal integration example. Nonetheless, it offers significant benefit in quickly integrating an acquired company into the operations of a parent company, regardless of the IT infrastructure or the application portfolio choices of the acquired firm.”

“The interesting and perhaps most elegant part of this approach is repurposing of the Web services used for the M&A integration for other acquisitions and internal integration needs. That’s a real benefit of Web services—the ability to reuse services because they are open, standardsbased and flexible as opposed to being rigid, monolithic software applications with proprietary interfaces.”

Sedgewick, looking pleased with himself, sits down across from Dunstonand finally puts the marker down on the table as Dunston finished writing a few more notes in his legal pad. “So, based on our discussion, what would you suggest we do to get started here? Are there some things we should begin doing right away, as well as planning for the future?”

Sedgewick promptly replies. “First, I’d like to get some of my core team educated about Web services, and I also suggest we arrange a briefing for all of the executive team as well. That will be important so we’re all speaking the same language about Web services and their potential. Next, we can begin prioritizing the list of business and technology initiatives you’re considering for next year and see where we can drive their completion faster with Web services and realize the business benefits more quickly.”

Dunston tilts his head back and looks up at the ceiling. “What about the M&A integration issue? I’d like to begin working on that process as well—perhaps putting some kind of a specification or architecture together describing how we can use Web services to shorten the integration time of an acquisition.” Sedgewick nodded his agreement.

“Okay, we’ll put together a briefing describing how we might streamline-the systems integration component of the M&A process, what we would need to begin developing a Web services framework to achieve it, and when it can be tested and ready. We can fine-tune it once we begin the due diligence process.”

Satisfied, Dunston finished taking notes. “Good. Let’s fast-track the executive briefing and get your team trained, and I’ll have a standing agenda item every two weeks at our staff meetings to discuss how these Web services initiatives are progressing. Let me know what resources you need.”

The meeting ended, and Sedgewick exited Dunston’s office—bidding him goodbye as he walked out. Both executives are thinking the same thought as they part: “Web services are going to have a significant impact on the way we do business! We’d better make sure that we’re ready to take the Web services initiative before our competitors do.”

Both Dunston and Sedgewick are correct. Web services will have a significant impact on the way they do business in the coming years. Arising from the dust of the dot-com boom and bust, Web services are perhaps what the Internet should have been originally. While we are still studying the business lessons of the first Internet wave, one thing is clear: Technology does not stand still, even though business conditions might be difficult. Once the technological genie escapes from the bottle, the possibilities that are unleashed are endless.

Web services will change the way that organizations locate, research, assemble, test, and deploy software to solve business problems, as well as how they tackle new market opportunities. Web services will have a profound impact on the way in which software companies build, sell, and deliver software to their customers. Web services will enable the traditional IT organization to truly evolve into a strategic business asset, no longer relegated to the status of a support organization. The corporate computing model will change, and the management skills required to navigate these changes will be as much business and strategy as they are technology.




Executive's Guide to Web Services
Executives Guide to Web Services (SOA, Service-Oriented Architecture)
ISBN: 0471266523
EAN: 2147483647
Year: 2003
Pages: 90

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