Firms can pay a high price for cost cutting

Several years ago, I was speaking to British Airways chief information officer Paul Coby about his company’s web site. I had been a fan of online check-in facilities since airlines first introduced them, and had used BA’s system several times before speaking to Coby.

Was I right in thinking, I asked him, that I would get a better choice of seats by turning up at the airport early than I would checking in online the night before? Coby is an affable sort, and admitted I was right, before patiently explaining why some seats needed to be held back. It was telling ­ – or perhaps just good press training – ­ that his initial reaction was to concede it was an issue, and say it needed improving.

After all, while customer facilities such as online check-ins are a boon for many travellers, the airline benefits too, through lower costs, shorter queues in the terminal and speedier boarding. It doesn’t seem so unreasonable, then, that the customer shouldn’t be penalised for using the system ­ – something Coby was prepared to acknowledge.

There doesn’t seem to be quite the same level of understanding over at Ryanair. Last month, the budget airline said it would start charging customers £5 for using its online check-in ­ despite an existing plan to remove all its check-in desks from airports.

I get very irritated when I discover near the end of a transaction that I’m being charged extra for something that I regard as integral to the service or product that I’m purchasing. This is exactly what Ryanair intends to do to customers who prefer to use online check-in facilities.

I might be on my own there ­ – certainly comparing Ryanair’s recent results to BA’s suggests that some people are happy to overlook the carrier’s existing stealth charges.

But I still think people naturally dislike opaque and convoluted prices. It is a point IT leaders would do well to remember.

In recent months, reports predicting debilitating cuts to IT budgets have piled high on my desk. Many of them sit there unread. My appetite for such dismal material has been more than sated. But I nevertheless get the picture: UK business leaders are stripping out costs and expect their IT functions to reduce their own spending, while simultaneously streamlining operations elsewhere.

Speaking very generally, business colleagues tend to be fairly responsive to initiatives that might help them cut costs. Conversely, they tend to be less enthused about being told that IT is scaling back on the delivery of seemingly worthy projects. But managing those expectations is an essential part of building a fruitful relationship with the business.

Sadly, not everyone in IT seems to appreciate this. Speaking to an executive at an electronics manufacturer recently, I was surprised to hear that his boss had come up with a great wheeze to minimise the impact of IT budget cuts.

The plan was to charge business units for the rack space they used in the datacentre. The rationale was that this would focus colleagues’ minds on their use of servers and make them more receptive to the idea of introducing server virtualisation as a way for IT to consolidate the number of servers slurping energy in the datacentre.

I’ve no doubt this was a laudable aim, but it’s indicative of the problems IT faces when charge-back mechanisms are introduced that are not based on business metrics.

Instead of a business-wide server consolidation programme, the firm ended up with some large units virtualising a couple of its servers in discrete clusters, which saved some money, but not that much. Smaller units either refused to give up their servers, or were demanding chapter and verse on when they were actually using virtual machines. End results? Little in the way of savings and a further erosion in the reputation of IT.

What's in a name?

Managing human expectations is a tricky thing. It's an essential part of being able to manage people effectively, but become too obvious about it, and people start feeling as if they're being gamed.

I was thinking about this when I heard about Microsoft's latest plans for the netbook.

Back in March, I met up with Bill Veghte, from Microsoft to hear about Windows 7 from the man in charge with bringing it to market.

At the time, we discussed what Windows 7 would look like on netbooks – the small, low-cost, low-end laptops that were about the only form of PC selling at the time. Windows 7, Veghte, assured me would run beautifully on netbooks.

We had to talk about how that would work for Microsoft, which after Vista, needed Windows 7 to be a big hitter. But netbooks are really designed for full operating systems – their purpose is to provide little more than a keyboard and a web browser. And Microsoft doesn't make as much money from pared down operating systems.

So Microsoft intended to ship two versions of Windows 7 for netbooks: one version that would provide basic functionality; and a more feature-rich version.

At the time, I wondered how Microsoft would convince people that they really wanted a full-featured machine, and not a netbook.

Now I know. It's because netbooks don't exist. That's right according to Steven Guggenheimer, corporate VP at Microsoft, instead of netbooks we should be talking about "low-cost small notebook PCs". Snappy name, non?

He's not the only vendor executive that is snooty about netbooks. Intel's top brass have confidently predicted the demise of the notebook for several months, despite the success of their Atom processor, which is used in many of the devices.

Ultimately, Microsoft and Intel may be right: as easy-to-carry, low cost laptops become capable of running more sophisticated applications than just a web browser, the concept of the netbook might become redundant. But the reason for its success won't.

Users can do an awful lot with netbooks today, and I think they'll be genuinely sceptical of companies telling them otherwise.

The boy who cried pig

There is a remarkably clever bit of kit in our offices that I have to admit has me stumped: I've no idea where it's been set up, nor how it works. But somehow, without fail, it manages to do the sort of long-range weather forecasting that would put the Met Office to shame: it ensures that our fire drills are synchronised beautifully with torrential down pours.

The curses that emanate from the sodden staff, standing in the road waiting for the end of fire drill, will be a familiar sound for anyone involved in major incident planning. After all, few workers welcome interruption for risks which are perceive as mainly theoretical. That said, IT leaders better get used to the sound; complaints are bound to be more common.

After dire warnings about the threat of avian flu, or before that Sars, I can already detect a sense of pandemic fatigue setting in for some. I've been told by one colleague that they'd expended enough energy on the lookout for chickens with coughs to now be worried about pigs with snivels too. And it may indeed transpire that swine flu does not bring the UK to a grinding halt. Let's hope so.

But there are those who take preparations for a flu pandemic extremely seriously. And like it or not, IT leaders should be among that group. No one wants to be alarmist, or raise fears unnecessarily, but the dangers of a deadly flu outbreak should not be dismissed lightly.

And if the worse happens, IT needs to be prepared: workers may have to stay home to reduce the likelihood of spreading infection. Many will reasonably conclude that it's not worth giving the planned responses a trial run – unlike the fire drill. But it is at least worth checking that plans have been made.

Flexible benefits?

The new rules on flexible working could potentially result in a torrent of requests from staff wanting to take advantage of their newly-acquired rights. For the already hard-pressed IT executive, the prospect may be an unwelcome one.

That isn't to deny the benefits of flexible working arrangements, of which there are many. What's more, I think the majority of IT professionals have an innate appreciation of how technology can be used to ensure people are productive away from the office.

The problem for IT leaders is that unless their organisation had the foresight to plan for an increase in the number of staff wanting flexible working, there may not be scope in the IT budget to support those requests.

Most people can probably work for the occasional day away from the office without making any special provisions. But when usually office-bound staff start to work regularly from home, IT has to get involved.

Regular home workers need to access systems, and do so securely. Policies around data protection need to be enforced: Are staff allowed to transfer files on USB sticks? What about encryption? And there are any number of collaboration tools which might be needed to make communicating with colleagues hassle free.

And unfortunately someone, somewhere has to pay for the technology.

Hobson's choice for HP

Silicon Valley is being painted pink, as the world's leading technology companies handout redundancy notices as the global economic slump takes it toll on IT spending. The job cuts are affecting employees in the UK too, but our P45s aren't such a pretty colour.

And there are some other noticeable differences. Take systems and services heavyweight HP as an example. On the back of some pretty disappointing quarterly financials, its US-based staff were greeted today by the imposition of a five per cent pay cut.

The thinking, as explained by HP's chief executive Mark Hurd, is that its better for everyone to take a small hit now, rather than face more job cuts down the line.

Now HP is already in the middle of a three-year plan to cut 24,600 jobs worldwide, following on from its acquisition of EDS. So in some ways, it's perhaps understandable that Hurd is reluctant to announce further redundancies.

But does the wage-cutting plan make sense?

It's worth noting that it's largely US staff who will feel the first impact. European and UK labour laws forbid unilateral imposition of pay cuts. Nevertheless, HP's European managers look set to be asked whether they consent to a pay cut. What happens if they decline?

There is also the question of what impact this will have on staff morale. It's clearly not going to be widely celebrated. But is it worse than the corrosive effect of redundancies? I've a sneaking suspicion that it might be.

And what's more troubling is that it's a choice that could be faced by more business leaders. If – and for the moment it remains a "big if" – the UK were to enter a period of sustained deflation, the annual wage increase (or perhaps today, the annual wage freeze) could be replaced by annual pay cuts, as business leaders look to balance the books.

In such an event, staff morale is likely to take a hammering. Best be prepared to brush up on those motivational skills.

Stopping things turning sour

Satyam – its bucket of woe already overflowing – faced further anguish last week with the revelations that its Oracle deployment at the World Health Organisation is going badly awry.

But it's not the only one to have suffered the slings and arrows of enterprise resource planning deployments.

Take US jeweller Shane & Co. It's 2005 rollout of SAP went so badly off kilter that it was cited as one of two chief factors in the 24 per cent drop in sales that led to it filing for bankruptcy in January this year.

I cite these two cases solely because they've been in the news recently. Over the years ERP horror stories have been legion. Indeed it has become almost accepted that ERP implementations are going to be protracted, painful affairs. So why do organisations persist with them?

Well for one, there aren't exactly an abundance of compelling alternatives. And that creates a dilemma for the IT leader: they are likely to have to guide their organisation through a risky project, where there reputation is on the line. Those stakes are pretty high.

So it might be pertinent to think about how we can go about minimising the risks on that project.

I was recently reading a piece in the Harvard Business Review, looking at why good leaders make bad decisions. I think the conclusions are relevant here.

The report's authors suggest that there are three red flag markers that indicate problems may be ahead. These are: conflicts of interest; attachments to people, places, or things; and the reliance on previous experiences which seem relevant but actually are not.

It's not hard to see how each of these issues can manifest itself during the course of an ERP implementation. But what can be done about it?

The HBR piece proposes three general solutions to flawed decision making: injecting fresh experience or analysis into project teams; introducing further debates or more challenges to the thinking; and finally imposing stronger governance.

None of these steps appear to be that revolutionary. But how often is fresh thinking introduced in to large IT projects? Isn't it more common to rely solely on previous doctrine of how things should be done?

Presidential support

So it's now official, President Obama won his battle to keep his BlackBerry. For some, this is cause for celebration: an indication that we have the first truly tech-savvy world leader, one that recognises the importance of technology.

Personally, I'm not sure I do see it as recognition of IT's value. To my eyes it looks more like another case of the top dog insisting they get their choice of device, regardless of what the tech team think.

Analyst firm Gartner describes the impact this has on IT – it calls it providing concierge support, and is frequently the most time-consuming and costly support activity undertaken.

Of course it's not just US presidents that are afforded this level of service: just look at the number of chief executives that suddenly decided that what they really needed was an iPhone. Sure, it's a sleek and lovely music player/phone, but a business device? Surely not.

Likewise with Obama and his BlackBerry obsession. There seemed to be no shortage of advisors counselling him against keeping his BlackBerry: it was thought to be a potential security risk; there were concerns that his emails would end up as public records, thereby exposing things that were supposed to be secret.

But thanks to his insistence on keeping the device, his security team have had to introduce what's been called "a super-encryption package", and the President has agreed to only use it for "routine and personal messages".

And that for me neatly encapsulates what I don't like about the episode. The point of having a BlackBerry – or any other push-enabled PDA – is so that executives have instant access to mission-critical information.

Of all the criticisms levelled at President Obama's 43 predecessors, lacking access to critical information was pretty far down the list. There are whole entourages of flunkeys, advisors and White House staffers whose job is to keep the President informed of the big issues.

Furthermore, if you're using a BlackBerry for simply accessing "routine and personal messages", then it's become a vanity object.

And it's a vanity object that his IT support will have had to bend over backwards to support. Ok, I'm not sure what's involved in building a "super-encryption package" – and I'm not sure the US secret service is telling – but it's a fairly safe bet that it involved one or two headaches for the IT team.

I don't suppose it will end there – it never does when IT has to deliver concierge support. President Obama hasn't had an email come in for the last five minutes? He'd better get right on that phone to IT and make sure the email system hasn't crashed.

Thown to the tigers

It was like riding a tiger, said Ramalinga Raju, chairman of newly tarnished Indian IT services provider Satyam, not knowing how to get off without being mauled. He was, of course, referring to the massive fraud he was perpetrating at the company – inflating the company's balance sheet with £628m of non-existent revenues – and the difficulties of telling people about it.

Now that the fraud has come to light, Raju will undoubtedly get a mauling. My heart doesn't exactly bleed at the prospect.

(As an aside, I suspect that analyst group Frost & Sullivan is rather regretting the award it recently gave to Raju. It is very mean-spirited of my to point it out, but the press release announcing it just jumped out at me, while I was trawling through Satyam's web site to do some research. And on the basis that I if I didn't point it out someone else would…)

Instead, my thoughts turn to Satyam's customers – and executives at well-respected firms such as Nissan, Sony, Nestle and Caterpillar. It is those customers that are really going to be affected this scandal.

Many IT leaders will have, until very recently, have been comfortable in their contract with Satyam. They would have had little reason to suspect the proverbial was about to hit the fan, and provided they were receiving the quality of service they had contracted for, all would have been tickety-boo.

Today, things look very different. And while Satyam's board has set up a customer out-reach programme to assuage fears, and is looking to assure its workforce, massive uncertainty will remain.

It seems likely that the company will be acquired, but until a deal is wrapped up the company will fester. The highly-skilled workforce could hardly be blamed for looking for a more stable employer – and once the best people go, the company's customers will then suffer some more.

Vacant situations

We're currently recruiting for a writer, which means one of my tasks for the day is to plough through a pile of CVs. On such occasions, I'm reminded of that apocryphal tale of the manager that divides the CV pile in half and bins one lot without so much as a cursory glance, on the basis that "we don't want to employ unlucky people".

Even if such strategies - when faced with a CV mountain high enough to attract snowboarders – can suddenly seem tempting, most of us are reluctant to so wilfully discard potential employees.

But what about pandering to stereotypes? Can that help us whittle down the shortlist?

I was alerted to the story of the recruitment consultant who had been informed not to put forward candidates that play online games on the grounds that such people are were unlikely to be able to give 100 per cent focus on their job because their minds would be elsewhere, and were likely to have poor sleeping patterns.

That seems about as fair chucking out the unlucky types. Because when it comes to deciding which candidates are going to make good employees, prejudices and stereotypes really don't tell you much.

There may be hordes of World of Warcraft players that will stink up your department; throngs of them that really will fall asleep at their desk, or spend all day questing for the sacred battle axe of Flerdangerodo (or whatever it is they do on these games). But others may just have a strong enough personality to be able to split their personal and professional lives, and manage both quite happily.

The thing is, you'll never know unless you meet them. Even then, you probably won't really know – most interview processes are pretty bad at selecting candidates for jobs. But meeting them probably increases the chances of picking a good candidate.

Talent is precious. Picking the right person to add to your team requires careful thought. But if that really is too much effort, I've got more time for those with the chutzpah to wilfully discard half the applicants without a second thought than those that try to justify ill-conceived prejudice.

Getting fired the right way

Sometimes it's just not possible to sugar coat things. For example, I've been closely involved in terminating more people's employment than I care to remember (see, in polite society, there is just no easy way to admit you've worked in HR). Job losses are like that: instantly sympathies lie with the soon-to-jobless; the firer is always the villain (unless you happen to be Alan Sugar, in which case you're feted as a national treasure).

But in a down economy, redundancies are a trauma many managers and workers can expect to face. So what is the right way to go about it?

Well how about this for a start? Silicon Valley gossip blog Valleywag has got hold of instructions apparently issued to Yahoo's management, ahead of a round of cutting that is thought to be taking place as I type.

There's part of me that feels vaguely queasy about a crib sheet being handed out to the managers who are expected to lay off staff: surely anyone senior enough to be conveying the news about redundancy should be sufficiently skilled in man-management not to need a cheat sheet?

But there is also some good advice in those hand outs. One particularly useful bit is the line "explain the exiting process". It doesn't go in to details, but to my mind, it brings up one of the most difficult parts of redundancy.

In this highly-charged atmosphere, managers are expected to tell people that they are losing their job, while minimising the emotional trauma of that particular bombshell.

In the next breath, the manager has to explain to the (now former) member of staff that although their contribution has been valued, it is imperative that they be escorted off site as quickly as possible.

From the business's perspective, this has to be done: giving potentially aggrieved staff access to sensitive business systems is not advisable. But it does tend to drive home the point that despite all those kind words, the person affected is no longer one of the team.