The Business Value of the CIO and IT
Goals for Effective Management, and Near-Future Challenges

Recently CIO Greg Valdez sat down with AuctionIQ’s CEO Brad Buxton as part of AIQ’s ongoing Executive Thought Leadership series. For over a decade, the two have worked together on numerous Fortune 500 company projects with significant growth and savings outcomes.

With 30 years of executive leadership experience in technology, Greg covers a wide range of topics with applicable knowledge based on his wealth of experience. Part One focuses on the business value of the CIO and IT, key goals for effective IT management and near-future challenges.


How does Information Technologies add value?

Brad Buxton: It’s great to see you again Greg. You have had many successes over the years and I’ve been lucky enough to have been involved with some of them. Over the last several projects and companies you’ve been with, together we’ve saved over $125 Million in supplier expenses. I’d like to give our readers a look behind the curtain a bit to help them understand your mindset and how you consistently achieve such tremendous results for your companies. Perhaps you could touch on some of the biggest wins, biggest changes or turnarounds you’ve delivered in the past, and the kinds of successes companies you engage with should expect you to produce in the future?

Greg Valdez: Let’s start with the context of what created the opportunities, and the main ingredients that lead to success.

Information technologies has provided businesses with unique opportunities over the last 60 years, to reinvent how people work together, how processes are assembled, and how the productivity of people working together can radically change. Let’s discuss an example. In the early 90’s we defined customer service as people usually servicing their customer face-to-face. Lots of people in close proximity to their customer and usually in defined service hours (think bank branch services). Since the mid-90’s you have seen the advent of customer “self-service” enabled by information technologies change the speed, adaptability, and productivity of this function.

Today, most people expect their banking service to be available 7×24 and with more capability than one person can usually bring to one interaction. The teams I have been a part of decided to tap into the productivity of information technologies. We were figuring out the new recipe, and then delivering it in the areas of logistics, oil & gas, telecommunications, financial services, education, and hi-tech. Initially this was done by implementing enterprise-wide process integration and automation, followed by advanced business intelligence, followed by rapid global business change such as expedited M&A, and now by enabling widespread, mobile end user computing.

The Recipe

The teams I have been a part of focused on three main drivers: an aligned, synergized relationship with our business partners, insightfully working across business units to find the most effective use of information technologies, and to run the service business of IT as efficiently and effectively as possible.

The first is the most important. When people are aligned and attuned into each other’s thinking and goals, and then they mix this with commitment to achieve the goal, anything is possible. When we are talking about teams, we are not just talking about the IT team. The team must include your business partners including vendors. When the team is focused on blending their diverse capabilities to achieve a goal, versus individual interests, interaction and creativity take on new dimensions. As IT teams came to realize they are a service business accountable to bring value to the business, they moved from having confusing and frustrating relationships to becoming trusted advisers.

If you think about it, IT people have automated the detailed transactions, processes and workflow of the business with their code and systems. They hold the information needed to make decisions in these systems. IT people in many cases possess the detailed knowledge of what the business transactions are doing, how they are flowing through systems and processes, and what kind of status they are in. In effect, IT teams know some parts of the business better than the functional area teams. IT is no longer about managing technology. IT is now an integral business processing and decision making function. Being a business-informed, value-adding advisor is what is required of IT professionals today; in addition to just managing normal IT functions.

The Results

The teams I have had the privilege to be a part of have implemented enterprise wide automation, completed massive company mergers, expanded their capabilities globally, re-engineered their business processes with 3X improvements, redefined customer and vendor interactions, invented data warehousing and business intelligence, defined ecommerce and achieved $100’s of millions in revenue results.

Brad Buxton: That can be very difficult. I’ve worked in environments that were not receptive to transformation. I imagine there is a lot of dysfunction there to for you to improve.
Greg Valdez: Yes, there can be dysfunction and frustration, but let’s see the silver lining in the cloud. It’s an opportunity for people to re-invent the situation. It’s an opportunity to listen to the customer, to change how you interact with them, to change the organizational structure to be customer-aligned, and then, to get something done.
Brad Buxton: Of all the things in your career, can you pick out the one that gives you the most personal satisfaction?
Greg Valdez: Yes, it’s the events where I am able to open up new doors for someone who really wanted to excel. We run into people in our careers that are very bright, hardworking, and they need help with new perspectives and experiences. When you give them those opportunities, they just blossom into being able to deliver two or three times, ten times the productivity of a normal person. So it’s been those opportunities where I’ve been able to work with somebody in the United States, Australia, or India, and we’ve found a way to help them radically improve their impact to a business.

Where is the future value-add of IT?

Brad Buxton: When you think about the future, what kinds of benefits do you plan to produce for future companies? Where do you think your next big impacts and investments will be?
Greg Valdez: It’s really about how IT will focus more and more on business impact—meaning not just being a cost or support center, but becoming integral to the value chain of every business unit. A current business pressure is having the ability to know and understand your external customers and provide products and services in such a way that they are individualized for each one of those customers—IT needs to figure out how to deliver that for the business.
That can go all the way from how we take big data (including all data from every customer interaction), and turn that into manageable information that can be tailored to sync with what our products deliver, to how we find the next best sales opportunities and how those opportunities can best be handled.
So how do we accomplish this? How can it be done faster, better, and cheaper? Should it be through things like E-commerce and self-service, or a high-touch customer interaction?
Behind the scenes, there are improvements we can make to figure out how to manage the technology and the infrastructure of the technology, to provide these services.
The first step is to get the relationships of the players working right as we discussed – otherwise these improvements may not happen.

Integrating IT as an Enabling Function

Greg Valdez: Let’s take sales force automation (SFA) as an example. IT needs to be surveying the landscape to see what is the very best answer for their company’s situation. Once IT understands the landscape it then needs to build credibility within its business to recommend changes, and then act on them in partnership with the business. Initially, SFA solutions were very expensive, lengthy systems to deploy which sales people were ultimately frustrated with.
As Software as a Service (SaaS) solutions became available, some IT shops didn’t see them coming and/or resisted the evolution due to their past investments. When these shops focused on their past investments versus listening to what the customer needed and then acting on an emerging solution, they were seen as disconnected from their customer’s needs. As a result, too many Sales organizations went their own way and implemented the new solutions on their own. We see some of this occurring again with new Marketing functionality that is going SaaS based. IT is a service organization adding value to their business customers. Sometimes the weight of our past investments, and how we define our relationship with the business can impede our deployment of new technologies.
IT’s mantra should be “Let me understand your needs, and then let me find the most effective way to get that service available to you on a global basis.”

IT’s role: simplifying the complexity

Brad Buxton: Managing the business relationship, technology; catching emerging changes; managing IT financials, and then getting all the teams on the same page is extremely complex, how do we simplify this?

Greg Valdez: Yes, it’s IT’s job to address the complexity head on so that the user does not need to be too concerned with it. We know, that when we look at the human body, what to expect from the circulatory system: the heart is at the center pumping and making blood flow and it has to interact with the lungs to refresh the blood. We know what its purpose and its functions are, and how to manage it and how to interact with it. Then when we look at something like the nervous system, it seems very different in what it does, how it works, and how you manage it. However once we start to understand the pieces and how they interface and integrate together, we can start to simplify it and get it managed well.

The core problem is that we have to address how we interface all these capabilities. IT is like a complex system. In the same way that we expect our doctors to act as trusted advisers when it comes to the health of our bodies, we look to IT professionals to diagnose problems and provide solutions we can count on. For example, in comparing the physiology of the two – How do we interface a heart with the lungs and the food source? How do we interface the nervous system with the brain? It seems complex right? But those systems are very standardized in a human being, and it’s well understood how they interact. However, when you look at an IT system, the lack of standardization and solid architectures makes things more difficult to diagnose and treat.

As a result, one of the issues still plaguing our ability to simplify is a lack of standardization. We have it in some places, but on emerging aspects it can take 3-5 years to develop. Oftentimes, business cannot wait that long because they need the resulting services sooner than the standardization can occur. Think for example about what happened when we, as an industry, all agreed on a USB plug. Suddenly, all kinds of data could move freely and all kinds of devices could be used interchangeably. Think about Bluetooth. We can now interface your driving experience in a safe way with all kinds of applications to get you there faster; tell you about traffic congestion, and let you do things hands free so you’re doing it in a safer mode.

All of these are standardizations (interfaces) that we have to figure out and put in place – they’re not all as standardized as a USB plug and a Bluetooth. But once we get there, things are going to happen faster.

Brad Buxton: Sounds like you’re a big advocate of standardization to the extent it can be done.

Greg Valdez: The deeper you go in the infrastructure, the more you want to standardize. The closer you get to the customer, the more you want individual flexibility. We are seeing this today with big data and end user computing. At the core infrastructures of network and security, we need standardization to enable end-user functionality. Think of this as the core information or computing utility. When we standardized aspects of electricity and water utilities, powerful creativity in end user use was enabled. Take information security for example. At every interaction we have to be able to say, “I know Brad Buxton. I know where he’s authorized to be and what features he’s paid for” and I need to do that across all kinds of environments and platforms. That identity management is still a standard we’re all working on.
But it’s coming, and it will happen.

Future Enterprise IT Cost and Investments

Brad Buxton: When looking ahead, what do you think will be the big IT enterprise investments?
Greg Valdez: Large investments like sales force and ERP automation are largely in place. The next rewarding investments are going to be where product and customer come together: smarter marketing systems, big data, search, automated and interactive personal assistant (Siri/Watson evolved), end user computing everywhere, and video and social networks. When you’re building these systems, you are putting services and products closer to the customer in the way customer wants to see them and needs them. IT’s whole investment in E-commerce, social networks, big data, mobile computing, and self-service capabilities will continue to warrant more investment because of the payoff in productivity.
There’s going to have to be a stronger investment around information security. How do I know who you are, what you are authorized to access and act on, and how do I stop cyber-attacks from happening?
Brad Buxton: What services do you think are going to be replaced because they’re no longer necessary, for example, like frame relay being replaced by MPLS?
Greg Valdez: We know things like “old-voice” were sunsetted by data networks. If you were in IT, you saw a lot of turmoil between an old-voice network person and a data network person–for the most part, that is over now. We’re just about to see more noise between the information security professional and the network professional because those two have to come together in a very tight manner to make information security work right.
Another sunsetting dynamic will be that businesses will need less technology people, and more solution delivery people. “Knowing the technology” is your apprenticeship work, but the real world work is “how do I interact with the business in a way that’s synergistic, that brings insight, that understands what the business needs to have done, and how do I then assemble it very quickly.” “How can we move from learning as-we-go to predictive and adaptive learning capabilities?

Solution Delivery

Brad Buxton: So you’re basically going from purely technical skills to analytical skills.
Greg Valdez: Beyond analytical. We must add interpersonal, project management, learning and business skills. If you think about it, in the early days of IT, you had people learning how to wire boards to get useful capabilities. We have eclipsed that to the point that if I’m a small or medium business, I’m going to work with Amazon and put a sales force automation solution together with an ordering solution and billing solution, and I’m going to do almost all that in the cloud today. IT is about orchestrating that. Businesses are going to be very interested in saying, “Can you show me how to do this fast, keep it together, and then give me the information I need on the backend to drive effective decisions?”

Decade Trends and the Cloud

Brad Buxton: In the ‘80s, everybody was talking about voicemail, in the ‘90s it was frame relay and cable services, in the 2000’s, it was MPLS, video conferencing, and on-demand network-delivered services. Now it’s cloud services. We’re noticing that a lot of services are being purchased as subscription models.
Have you found things like cloud e-mail, cloud exchange server, cloud storage, Amazon, cloud PBXs, or other kinds of services procured by your organizations?
Greg Valdez: All of IT’s technologies can move to the cloud. But let’s move from the technology push to the business case. What is the total cost of ownership over a 3-7 year time frame? Does the business case for the subscription-based pricing you signed up for in the beginning still hold together in the 3-7 year time frame? Did the need for better, faster and cheaper in the beginning still ring true in years 3-7? IT enablement says we must consider solutions that are better, faster and cheaper. It would be hard to show a model where the right sales force automation solution is in the cloud if it can’t be better and faster over that time frame. But, did your negotiations and vendor management ensure the cost model is right? Rather than just buying it as proposed by the vendor, I expect a company like AIQ can help me create a lasting result because the solution has an inherently economical cost model.
As we have discussed, IT is about enabling the business as a trusted advisor. We need to understand, simplify and educate on these Cloud solutions. In this Cloud evolution, a simple model for evaluation is where does it fit on the “better, faster, cheaper” scale? Certain solutions have definitely achieved better and faster. We need to address the cheaper, the total cost of ownership. IT shops need to build their service model with the view that all of their applications, information databases, network, servers, computing power, and security is coming from an orchestration of Cloud services.

Cost of Services

Brad Buxton: It’s good to hear that leading IT executives like yourself understand the necessity of getting the cost model right by driving costs down. Many technically oriented personnel seem to ignore the cost metric. Ultimately, we believe cutting cost is how many of our clients fund the investment in their new technology.
For example, we help cut the cost by looking at licensing and subscriptions as something that can be optimized just as well as any other component. Early on we realized that wireless phones were really manipulations of subscription models. Pricing for content delivery and web conferencing are also variations of subscription and licensing models. So we’ve developed a pretty significant practice in looking at subscriptions and optimizing them to save money. The way the Suppliers put together their subscription pricing structures are highly manipulative. Unless you can perfectly produce a prediction of your demands and exactly understand your consumption versus available licenses, by design, you’ll either pay for service you don’t use or you’ll pay too much per unit.
So I think that’s a big area. That’s part of why we’re so interested in it, and I think what you said is everything is moving there. So I see that as a big opportunity for the Enterprise, especially since you recognize costs have to come down.
Greg Valdez: Brad, your companies have been a partner in helping IT shops simplify and work through the complexity of some of these very complex services, vendors and their related contracts. Expanding the role of your company along these lines can be very important for IT shops, and vendors to help them find a winning balance.
Brad Buxton: In the early days of wireless, service was very expensive, and clients worried about what the costs would be and how many people were on the plan and so forth. But today, we’re driving costs down very close to the point that data network connectivity will be free everywhere we go. It has gotten to a level of efficiency that everybody can afford to add it for free as part of the cost of their product. Enterprises that don’t understand their ability to drive their cost towards zero are really conceding a critical strategic capability. If they are paying for a service that we could help them get for free, they are at a huge competitive disadvantage – particularly if their competition is not charging for something because they DID cut their cost.
For example, if I’m Starbucks and I have the premium of my product (i.e., high margin) or my costs under control, then I can offer wireless free to all my customers in the stores. This is an example of a service that could not be offered if you were still paying for services your competition is getting for free. So instead of leading the market, you have a cost disadvantage that forces you to trail your competition.
This all supports the point where if you drive the per-unit cost of an underlying service low enough, it creates a strategic advantage because then you can embed it at no additional customer facing cost into your product. Is that what you’re talking about?
Greg Valdez: Yes and mobile computing is where we are going to do that next. The opportunity now is when you leave a modern metropolitan area and go to some parts of the world where none of this infrastructure is in place, you almost can’t function. This is a curable problem.

Transformative IT and the People Factor

Brad Buxton: We help you produce a low-cost network and infrastructure. Because of the very low cost, you can bury it in the service, rather than charging your customers separately for it. Because the cost of the network is no longer an issue, people can focus on the applications and services they need. They then can simply subscribe for services they need from their providers. It simplifies the decision for the consumer, reduces the complexity, and hence the friction of the transaction. That’s the transformation.
Greg Valdez: The word [computer] application means computer software designed to allow you to perform a specific task, we call it a service. Because that’s all an application is. It’s a service to deliver a particular functionality. But you know this whole conversation would be amiss Brad, if we just stayed focused on the technology. Businesses have got to have a way that they can interpersonally interact in challenging ways to say, “Where am I? Let’s challenge ourselves to do better or go further with IT”. Let’s try to push the envelope, but still manage the risk of it. Even in our journey together, part of our great success was a willingness to say, “Well that’s different.” Let’s try that and see what we could break through, and then it evolved to say, “Well, if I can do it with that service, why can’t I do it with these?” and then go and do it.

Summary

Transformative IT leadership requires a fundamental understanding of how people collaborate to support business needs through the judicious application of technology at the right time and at the right cost and investment level.
Join us for Part 2 of this interview series with Greg Valdez and Brad Buxton for an in-depth discussion on IT interactions with Finance, cost savings as growth drivers, and how to manage globally complex networks.

Mr. Valdez has over 30 years of business process and information technology experience as an executive for change-management and business transformation. He has worked in the financial services, high-tech, oil & gas, education, and logistics industries.

The teams he has been a part of have built revenue generation projects upward of $600MM and delivered hundreds of millions of cost savings in global projects.

Mr. Valdez has served as CIO of CA Technologies, BMC Software, VERITAS (Symantec) and CTO at Associates First Capital.

Accolades

ExecRank “Top CIO Rankings”– 2012
InformationWeek 500 — 2011

Contact Greg by email at: gregvaldezemail@gmail.com

With 30 years of experience, Brad Buxton provides visionary leadership, support and advocacy to his clients. The results are enduring, and they speak for themselves.

Brad performs continuous development of best practices learned from hundreds of Clients including C-level executives of Fortune 500 customers.

By applying these experiences with a technological, financial, design, and process approach, Brad produces significantly larger gains in profit, speeds time to delivery, and creates competitive advantage for AIQ clients.

Contact Brad by email at:
Brad@AuctionIQ.com