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While many businesses struggle to make the most of their technology assets, Cisco is overcoming this challenge by embracing the idea of IT-as-a-Service (ITaaS) -- focusing their thinking not on technology but on business impact. Cisco CIO Rebecca Jacoby outlines the company's efforts in this CIO Update exclusive.
by Rebecca Jacoby of Cisco
As one of the world’s largest providers of networking technology and services, Cisco’s success is dependent on two key factors: innovation and operational excellence. My organization, IT, is a key component in our strategy and execution. To succeed, we had to start thinking like our line of business leaders and provide IT products and services that consistently meet the needs of our internal consumers, business partners and customers.
A few years ago, we made a decision to focus very heavily on transforming IT from a largely technology-centric provider to a world-class provider of services. We knew this transformation meant changing virtually every aspect of IT, from the way we defined our services and processes to our organizational model, roles and responsibilities. It would also change the way our businesses works with IT.
Changing the way we work with our business executives meant that we needed to fundamentally change the conversations we were having. Instead of talking about technologies, we needed to talk about value and business trade-offs in a common language. We discovered that the primary types of trade-offs and questions that must be included in these discussions included scope, source and architecture, cost, quality, time to capability, and risk.
Once we defined our vision, our strategy and the conversations we wanted to have, we had to come up with a plan for executing this services transformation. We developed our plan in the form of a playbook with six main chapters, five of which defined distinct but interrelated deliverables needed for transformation. The sixth chapter defines Cisco’s approach to change management and organizational adoption.
The six chapters of services-orientated IT
Ch. 1: Services taxonomy - The concept of a services taxonomy at its most basic is a common language about what IT provides. The word "services" means something different to everyone you ask. We needed to define a taxonomy that was consistent with ITIL but specific to our needs, without overcomplicating things and becoming a barrier to its adoption.
This step took almost an entire year to complete, but gave us a deeper look into exactly what services we offer. Altogether, we defined more than 300 services to fit into seven clear categories, including application development services, operational services, governed and functional business services, foundational services, and infrastructure services.
What this taxonomy provides us is an understanding of the relationships and dependencies of IT services to business services. It reconciles who is served and what business impact does it have. We can even articulate what is involved in a specific transaction, such as booking an order.
Without this taxonomy, our next chapter of the playbook would be impossible.
Ch. 2: Services profit and loss - The term P&L is a familiar one in accounting and finance circles. At Cisco, IT is not chartered to create a profit by charging back more than we spend. In fact, we do not do formal chargeback. However, we needed to get the whole organization to the full trade-off conversation. We found that by focusing on cost and value, these concepts provided the backbone of how you have this conversation and how you can organize around it.
We first focused on our methodology for costing services and capabilities. This is how we ended up getting deeply involved with technology business management (TBM). We realized we needed a business management system for IT, one that could meet our needs for costing, support a top-down planning process, and give us deeper insights into services demand and quality. We also learned that cost and value are two different things.
Certainly, you don’t want to spend more providing a service than the value you’re delivering, but cost and value are two different concepts. This is something we continue to work on, but we found that it is difficult to judge the business value of discrete technologies and IT services. Instead, you need to be able to assess the cost of services in the context of the business capability that it provides.
Ch. 3: Services roles - No transformation could be successful without restructuring the organization. We had to change up our ownership model and alter responsibilities. We had to create new roles, define how people are held accountable, and clarify what they need to deliver in the organization. In fact, this is probably where we had the greatest degree of transformation within our organization.
We found that service owner, service manager and account manager were three roles that did not exist but were critical for our success. The impact on roles and responsibilities is certainly not limited to just these roles. Nearly every role, especially manager and up, was impacted by this change. Most importantly, we wanted to make the transformation pervasive throughout our organization and the business. To make this happen through IT, we educated everyone in my organization on these new concepts, such as the value conversations and the trade-offs that we have to make. We even built and offered informal classroom and Web-based training.
Ch. 4: Fiscal year roadshow deck - Like many companies do when they launch a product, we launched our transformation by doing an internal roadshow. The goal was to both sell the transformation and educate our customers on how to work with us in this new paradigm. It also became part of our annual planning process with the business.
The roadshow deck contained many elements that were important parts of the conversation, including our prior year actuals and our next year plan mapped to our IT services framework, our annual roadmap for technologies and services, and so forth. Our roadshow deck evolved over time as we presented it and learned from those conversations. However, our transformation, which depended on changing the conversations we were having with our business constituents, would not have been possible without it.
Ch. 5: Services funding - We intentionally put funding as the last of the five main chapters of our playbook. Ordinarily, funding is often the first thing that IT leaders worry about -- and they spend a lot of time trying to justify their budget. With funding, this is where we came upon the "bill of IT" of "for IT" concept, which supports a showback process.
In other words, as the business units consume IT, they receive a bill from Jacoby’s organization that illustrates the cost of what they consumed. However, the bill is never actually paid. No real or funny money is transferred from the business units to IT. However, it does drive a discussions internally between IT and their business partners about their consumption and related value, which further drives joint decisions about services, costs, etc.
Finally, with effective service costing in place, we have been able to evolve from a baseline budgeting process (i.e., one that started with last year’s actual spend and made adjustments based on various assumptions) to a zero-based (bottoms-up) budgeting process. We’re now able to work with the business to determine demand and then build our budget based on the investments we have to make to meet the demand.
Ch. 6: Our new conversations - Having a new way of communicating with our business executives, in a language that they naturally understand, has proven invaluable to address this challenge. Today, when we receive a request, we can talk about the relative cost of one option versus another. While we do not perform formal chargeback at Cisco (i.e., business line P&Ls aren’t charged for most IT services they consume), we have found that when business leaders understand the cost and value trade-offs, they make the right decisions for the business.
Our new way of conversing has reduced a lot of friction in the decision making process, which occurs when decisions are based on opinions and conjecture. It also leaves a lot of room for distorting the truth. Once you shine the light of cost, quality and value on an issue, decisions can be made quickly and with confidence. This is instrumental in our ability to shift spending from run-the-business to change-the-business investments; in turn helping us execute on our business strategy.
As IT struggles to adjust to these economic times, I would encourage other CIOs looking at an IT services transformation to think about their own “playbook” to help guide their organization through the process. While the steps may not be the same, the end goal is a leaner, more aligned IT department.
For more information on implementing a services transformation, consider joining the Technology Business Management Council. Comprised of more than 200 CIOs and senior IT executives from leading enterprises, the council focuses on an overall theme of running IT like a business. You can learn more about the council at JoinTBMCouncil.com.
Rebecca Jacoby is senior vice president and CIO at Cisco, and co-chair of the CIO Technology Business Management Council. She has more than 14 years of experience at Cisco in a variety of operations and IT leadership roles. Jacoby is responsible for making the Cisco IT group a strategic business partner and for producing significant business value for Cisco in the form of financial performance, customer satisfaction and loyalty, market share, and productivity.
Previously at Cisco, Jacoby was vice president for Customer Service and Operational Systems and played a key leadership role on the Business Process Operations Council, which governs the transformation agenda at Cisco. Before that she was director of manufacturing for the Access business unit prior to establishing the central manufacturing planning function in 1997 and assuming responsibility for manufacturing IT in 1999. Jacoby joined Cisco as senior manufacturing operations manager.
Prior to joining Cisco, Jacoby held a variety of planning and operations positions at UB Networks, Inc. and Amdahl Corporation. Jacoby has a bachelor’s degree in economics from the University of the Pacific and a masters in business administration from Santa Clara University. In 1996, she was recognized with the YWCA Tribute to Women and Industry (TWIN) award.