cxo 13

www.cxo.eu.com • Q3 2009

HANDCUFFS AND HARD DRIVESOn the beat with Met Police CIO Ailsa Beaton

PAGE 84

LOYALTY BEYOND REASONSaatchi & Saatchi's Simon Francis

reveals how to get ahead in advertising PAGE 32

SPECIAL REPORT: SIX OF THE BESTThe superbrands beating the economic gloom

PAGE 38

Why Sir Richard Branson hopes to boldly go where no other entrepreneur

has gone before PAGE 26

SPACEODYSSEY

COVER CXO EU13:july08 13/8/09 09:28

Mercedes Ad IFC-1.indd 2Mercedes Ad IFC-1.indd 2 12/8/09 16:04:5312/8/09 16:04:53

www.cxo.eu.com • Q3 2009

HANDCUFFS AND HARD DRIVESOn the beat with Met Police CIO Ailsa Beaton

PAGE 84

LOYALTY BEYOND REASONSaatchi & Saatchi's Simon Francis

reveals how to get ahead in advertising PAGE 32

SPECIAL REPORT: SIX OF THE BESTThe superbrands beating the economic gloom

PAGE 38

Why Sir Richard Branson hopes to boldly go where no other entrepreneur

has gone before PAGE 26

SPACEODYSSEY

COVER CXO EU13:july08 13/8/09 09:28 Page 1

Mercedes Ad IFC-1.indd 3Mercedes Ad IFC-1.indd 3 12/8/09 16:04:5912/8/09 16:04:59

ITS AD1 P 2-3.indd 2ITS AD1 P 2-3.indd 2 12/8/09 15:59:4012/8/09 15:59:40

ITS AD1 P 2-3.indd 3ITS AD1 P 2-3.indd 3 12/8/09 15:59:4112/8/09 15:59:41

Novell Ad P4.indd 1Novell Ad P4.indd 1 13/8/09 08:18:0113/8/09 08:18:01

Do you have €140,000 to spare?Because that’s just about all youneed to become one of the firstspace tourists to board VirginGalactic’s historic flights to space.

When I began researching Sir RichardBranson’s most daring venture yet for thismonth’s cover story, the first thing that struck mewas the simplicity of it all. Joining the VirginGalactic adventure is a little like making a hotelreservation; you just log onto the website, clickon book, fill in your details and wait for some-body to get back in touch. The aim of VirginGalactic is to make space accessible and judgingby the criteria for budding astronauts, it has cer-tainly lived up to its promise. Just three days oftraining is required for those who want to takepart and although health checks are compulso-ry, they are designed to ensure most people areeligible. But this inclusivity is not driven by al-

seemingly risky business ventures Branson haslaunched, is that it isn’t today that matters, buttomorrow. His success has been built on the abil-ity to foresee what the next big money makerswill be. Currently, in the UK alone, 50,000 peo-ple work in space tourism ventures. That num-ber is set to grow as scientists seek to look outsidethe Earth’s atmosphere for energy, communica-tions and transport solutions. Today VirginGalactic is Europe’s only commercial space op-erator but if it stays that way it could find itselfrocketing to new heights as the leader of theEuropean space industry.

Diana Milne, Editor

truism on Branson’s part. He sees this as a high-ly lucrative business opportunity with potentialway beyond just flying tourists to space. When Iinterviewed Virgin Galactic president WillWhitehorn he told me that the company believesthe space launch system and spacecraft it is de-veloping could be used to carry out scientific re-search, such as investigating how to producesolar power or store computer servers in space.He says that although initially space tourism willprovide for the bulk of the company’s revenue,scientific research could eventually account forover 50 percent. It’s a good thing Branson and histeam aren’t relying solely on space tourists to getthis project off the ground because although 300people have so far bought tickets to fly, the com-pany is currently only selling a maximum of sixtickets a month as the economic downturnmakes space travel a luxury few can afford. Butthe point behind this and many of the other

“Creativity is not somethingthat is budget related. Butthere's a different styleemerging and clearly wantonexpenditure is not in”Simon Francis, CEO, EMEA,Saatchi & Saatchi(Page 32)

“The biggest challenge for us is tomake the Police Service the best itcan be with shrinking resources”Ailsa Beaton, CIO, MetropolitanPolice Service(4)

“Business and IT, at this stageand in this century, must beintimately close. It should beone entity”Alex Pilar, supply chain CIO, DHL(Page 110)

FROM THE EDITOR5

Out of this worldSir Richard Branson’s latest venture is his riskiestyet, but it has infinite potential .

ED NOTE CXO:july09 13/08/2009 10:37 Page 5

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58

Handcuffs and hard drivesCXO pounds the beat withMetropolitan Police CIO AilsaBeaton and discovers how she isputting technology on the frontline

84

26

32

Betting on a sure thing Betting exchange Betfair rose fromthe ashes of the dot.com crash andquickly became a red hot favouriteamong shrewd punters. CXO goesbehind the scenes and meets CTOTony McAlister

CONTENTS7

Space OdysseyCould Sir Richard Branson become the first person to put touristsin space? Find out in this exclusive interview with WillWhitehorn, President of Virgin Galactic

Loyalty beyond reasonSaatchi & Saatchi dominates the world advertising scene and has the powerto transform ordinary brands into global success stories. We hear fromCEO for EMEA, Simon Francis

CONTENTS:aug09 13/08/2009 10:33 Page 7

38 Six of the bestWe profile six businesses that are boomingdespite the credit crunch and reveal why theircustomers keep coming back for more

46 Adapting to change Alan Roger outlines the importance ofmodernising outdated IT applications

48 Going publicHMRC CIO Deepak Singh has one ofEurope’s toughest technology jobs. In thisexclusive interview we discuss his key projects,the impact of the recession and how he seesthe role of CIO evolving

54 Sky-high tech thinkingTaking technology to new heights withLufthansa’s Dr Christoph Klingenberg

66 Phish tales Dave Jevans on the fight to reduce phishingcrimes

72 Meet the gatekeeperWith huge pressures on the shoulders oftoday’s security chiefs, CXO seeks the advice ofPaul Wood, information security aficionadoand Aviva’s CISO

76 Islamic finance comes of ageHow Shariah-compliant banking ispenetrating western financial institutions

96 King of the jungle Why Amazon’s CTO Werner Vogels isfocused on transforming the internetbehemoth into the world’s most customer-centric organisation

96

3880

CONTENTS8

Money and morality

Werner Vogels

ROUNDTABLE DISCUSSION

102 Business Process Management

INDUSTRY INSIGHT

82 Haitham Abdou, ITS

EXECUTIVE INTERVIEWS

64 Herman Meuldermams, EscrowEurope 78 N. Ganapathy Subramaniam, TCSFinancial Solutions90 Matthew Light, TempuraCommunications93 Fredrik Sjostedt, VMware114 Philip Edwards, Draka122 Neil Rasmussen, Schneider Electric130 André Bonvanie, NewsGator

ASK THE EXPERT

44 Jean-François Scardigli,MetaWare and Richard Pegden,Micro Focus74 Deborah Clark, Thawte, Inc


Ataccama Ad P9.indd 1Ataccama Ad P9.indd 1 12/8/09 15:47:0112/8/09 15:47:01

116

110

14 The Brief 16 Insight 24 In My View 134 Leadership 136 Business Doctor138 Books 140 City Guide 142 TheKnowledge 144 Objects of Desire

CONTENTS10

Chris Veiehbacher

A logistical challenge

Objects of desire

Sky-high tech thinking

REGULARS

Bangkok

110 A logistical challenge The complexities of running DHL’s IT withsupply chain CIO Alex Pilar

116 In with the new Sanofi-Aventis CEO Chris Veiehbacher onmergers, mega trends and why he’s optimisticabout pharma’s future

124 Building for the future, todayBy EU Environment Commissioner StavrosDimas

126 A change of focus Jeff Hayzlett, CMO of the undisputed king ofphotography, Kodak, describes how hiscompany best communicates with its customers

132 A social approach By CRM expert Michael Thomas

Leadership

54


Canto Ad P11.indd 1Canto Ad P11.indd 1 12/8/09 15:47:5612/8/09 15:47:56

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“A well organised and productive meeting with good topics and open discussion – worth the effort!” Dr. Mark Burfoot – Executive Director, Pfi zer

“This was a fantastic opportunity to meet our target market in one-on-one meetings, where we could listen to the customers’ challenges. A sort of voice of customer meets speed-dating event” Mark Collins – Senior Product Manager for Informatics, Thermo Fisher

The Next Generation Pharmaceutical Summit is a three-day critical information gathering of C-level technology executives from the pharmaceutical industry.

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CREDITS CXO.indd 12CREDITS CXO.indd 12 13/8/09 10:36:0213/8/09 10:36:02

Oracle.indd 1Oracle.indd 1 13/8/09 08:22:3313/8/09 08:22:33

UPFRONTTHE BRIEF14

could be exacerbated by the arrivalof winter and a second wave of re-

ported cases. This could paralysesmall business and leave

the bigger players se-verely under-staffed.

On top of this,there are reports sug-

gesting some em-ployees are using the

virus as an excuse to sup-plement their holiday allowance.

Indeed, employers suggest thatthese absentee workers are causingmore disruption that the virus itself.

absent from work with swine flu bythe end of August. Director GeneralDavid Frost said: “If the project-ed figures for the numberof people contractingswine flu come topass, companies willbe hit by intense pe-riods of staff ab-sence. Both supplyand demand could be im-pacted and businesses need tobe prepared.” Although in the pastmonth the number of infections hasdipped, the fear is that the situation

nearly 18,000 cases confirmed inEurope as of mid-July but the truecost of the pandemic to industrycould be astronomical with infect-ed staff housebound for up to afortnight. And according to the EUHealth Commissioner AndroullaVassilou, 60 million people acrossEurope will need priority vaccina-tion against H1N1.

In the UK, which outstrips therest of Europe for the number ofconfirmed cases, the BritishChamber of Commerce forecaststhat one in eight employees could be

PANIC STATIONS

As soon as business leaders hadstarted to tentatively consider thenotion that Europe could beemerging from the economic bat-tering of the recession, they werehit by another painful blow –swine flu (H1N1). There were

people across Europe will need

priority vaccinationsagainst H1N1

60 million

As tens of thousands ofworkers across Europe arestruck down with swine flu,experts predict the pandemiccould have a detrimentaleffect on businesses.

UPFRONT CXO 13:25 June 13/8/09 09:24 Page 14

UPFRONTTHE BRIEF 15

The UK’s Employment LawAdvisory Service told theTelegraph newspaper that it start-ed receiving complaints from em-ployers as soon as a self-diagnosiswebsite was set up last month.Some 1000 complaints have beenreceived from managers con-cerned that staff have exploitedthe situation to have anextra week off work.“Because the em-phasis has beenon not going toyour local GP butusing websites toassess the infectionand the risk to others in-stead, those who stay at home arenot going to need a doctor’s noteor have too many people calling onthem to see how they feel,” PeterMooney, the service’s Head ofConsultancy told the newspaper.

But while offices and factoriescould soon be devoid of staff (bothhonest and dishonest absentees),technology could be industry’s

saviour. Despite symptoms offever, cough and fatigue, manypeople are still able to work fromhome by computer and still haveaccess to their email and the com-pany’s network. It’s not ideal butit’s better than key workers missingfrom work for up to two weeks. SueHill, Managing Director of a small

business told comput-ing.co.uk that compa-

nies should keepassessing the situa-tion and planningahead for absen-

teeism. “We’ve madethe facility for most

people to work from homeavailable with virtual private net-work connections and web mail.It’s important that my staff canwork from home,” she said.Employees still at work are advisedto wash their hands often with soapand water, especially after cough-ing or sneezing, and to avoidspreading germs by touching theireyes or mouth.

Experts predict

of the Europeanworkforce could be

absent in winter

12%

Lord Sebastian Coe and British diver Tom Daley survey the progress atLondon’s Olympic Stadium. It’s three years until the opening ceremony andconstruction work on the centrepiece of the event is ahead of schedule. Afterthe games the 80,000-seater stadium will be downgraded to 25,000 seats

A jobseeker trudges out of a UKemployment centre. At least200,000 foreign nationals willleave Britain every year as jobopportunities become increasinglyscarce, research suggests

It’s all hands to the pump as Frenchoil and gas major Total records a 54percent nosedive (€1.7 billion) inprofits for the second quarter. Fallingoil prices and a sharp decline in globaldemand have hit the industry hard

NEWS IN PICTURES

Source: ECDC situation report

FLU OUTLOOK Reported cumulative confirmed cases of H1N1in EU and EFTA countries as of 22 July

1

10

100

1000

10, 000

Confirmed cases in EU/EFTA countries

Disused cars stack up at a car recycling centre near Leverkusen, Germany. The so-called ‘bangers for cash’ scheme has provided a shot in the arm for the country’sailing auto industry; new car registrations were 30 percent higher in the firstseven months of this year compared to the same period in 2008


UPFRONT16 EUROPEAN NEWS

FRANCE

French media giant Publicis haswon the battle to acquireRazorfish, the second largest dig-ital advertising agency in the US.The deal means it will acquirearound a quarter of its revenuefrom digital platforms followingthe purchase of the €371 millionbusiness from Microsoft. Publicis,which owns Saatchi & Saatchi, ac-quired Digitas in 2007 andformed a partnership with Googlelast year.

Analysts believe it is now setto dominate the global digital ad-vertising market. It saw off com-petition from WP and Dentsu ofJapan to buy Razorfish.

GERMANYThere is hope that the Germaneconomy is on the road to recov-ery following the news that thecountry enjoyed a seven percentincrease in profits in June. Thefigures, released by Germany’sFederal Statistical Office, showedthe biggest rise in exports sinceSeptember 2006 when they in-creased by 7.3 percent. Importsto Germany were also slightly upin June, rising by 6.8 percentcompared to the previous month

The world’s largest utility compa-ny, E.ON has seen the first signsthat demand for energy is stabilis-ing following a major slump.

It has increased its 2009 out-look after announcing higherthan expected first half profits.The company now sees its fullyear net income falling five to 10percent rather than 10 percent asinterest payments and taxes willbe lower than expected.

The company’s profits dou-bled between May and August dueto the success of its energy tradingunit. It has announced that itsDeputy Chief Executive JohannesTeyssen would take over as ChiefExecutive following the departureof Wulf Bernotat in May.

UK

The UK government has signed adeal to recover lost tax fromBritons holding bank accounts inLiechtenstein. HM Revenue andCustoms believes up to 5000British investors have an estimated€3.4 billion stashed away in ac-counts held in the alpine tax haven.Under the terms of the deal, in-vestors will be offered the chance tovolunteer details of their deposits inreturn for penalties. These will becapped at 10 percent for tax evadedover the past 10 years.


17EUROPEAN NEWS

RUSSIA

The latest Russian Federal StateStatistics reveal the country’seconomy shrank by 10.9 percentin the second quarter of thisyear. This exceeded the contrac-tion of 9.8 percent that the coun-try experienced in the firstquarter. Russia, which in thepast has relied heavily on oil ex-ports, now expects its economyto shrink by as much as 8.5 per-cent this year.

SWITZERLAND

Zurich-based recruitment firmAdecco has reported a secondquarter net loss of €147 millioncompared to a net profit of€212 million for the same peri-od last year.

The figures reflect the sharpdecline in the economy and con-sequently the job market inEurope. Adecco’s CEO Patrickde Maeseneire said the companyhas put in place a cost cutting ex-ercise that has seen it cut its costsby 21 percent so far. He addedthat the company had set aside afurther €40 million for cost cut-ting this year. Meanwhile it hasagreed to buy the British retailcompany Spring Group PLC forUK£108 million.

Food giant, Nestlé, has an-nounced disappointing sales re-sults for the first quarter of theyear, forcing it to lower its 2009outlook. It achieved first half or-ganic sales growth of just 3.4 per-cent. Originally organic salesgrowth outlook for 2009 was fivepercent. It has now beendropped to around 4.3 percent.

The firm’s Chief FinancialOfficer Jim Singh said the firmexpects results to improve in thesecond half of the year.

NORWAY

Seven Norwegian towns havesued Citigroup for €140 million inlosses after they purchased com-plex mortgage backed invest-ments from the bank. They claimthe purchases brought them tothe brink of financial collapseafter they lost tens of millions ofdollars and all of their original in-vestment in the funds.

The lawsuit is being broughtby Brenmanger, Hattfjelldal,Hemnes, Kvinesdal, Narvik, Ranaand Vik which claim, in additionto a now defunct brokerage, tohave lost €81 million collectively.

UPFRONT


UPFRONT18 COMPANY NEWS

Twitter is consulting itslawyers after hundreds ofdocuments were hackedinto and published by anumber of blogs, includingTechCrunch. “We are intouch with our legal coun-sel about what this theftmeans for Twitter, thehacker and anyone who ac-cepts or publishes thesestolen documents,” saidTwitter’s Biz Stone. In ablog posting he wrote,“About a month ago, an ad-ministrative employee hereat Twitter was targeted andher personal email accountwas hacked.”

He continued: “Fromthe personal account, webelieve the hacker was ableto gain information whichallowed access to this em-ployee’s Google apps ac-count which containeddocs, calendars and otherGoogle apps Twitter relieson for sharing notes,spreadsheets, ideas, finan-cial details and more withinthe company.”

Despite the recession, the European con-struction industry is still suffering from acritical shortage of skills, with 77 percent ofprofessionals within the industryclaiming this will hinder the sec-tor’s development. The UK-based Chartered Institute ofBuilding’s third annualskills survey revealed thatmore than three-quarters ofconstruction professionalsbelieve there is a lack of skills.They said they felt the shortage islargely due to companies being unable toemploy workers. A further 54 percentsaid their company had alreadymade redundancies.

Michael Brown, DeputyChief Executive of theCIOB, said one ofthe biggest con-

tributors to the skills shortage was the in-dustry’s inability to attract students to theprofession:

“Construction has been notoriously badat attracting students and other new entrants,

which has exasperated the industry’slong-term skills development.

There is no denying the im-portance of graduate andapprentice recruitment asthese employees representthe future of the industry.

Over three-quarters (76 per-cent) of all respondents felt ap-

prenticeships should be mandatoryon public projects, which would help to en-courage the employment of apprentices.

However, economic problems areforcing many companies to re-

cruit fewer graduates and tocut the number of ap-

prenticeships – justto survive.”

TWIST

FAST FACT

Banking giant HSBC was fined

in July for data securityfailings and for not havingadequate controls in place

to protect customer details

€3.5

million

MIND THE GAP

On the CXOwebsite (www.cxo.eu.com) we asked: Which indus-try will wriggle free of the recession first?” These are the results:

THE RESULTS ARE IN

TWIT

TER

INA

AUTOMOTIVE

CONSTRUCTION

BANKING

RETAIL

MANUFACTURING

2%

23%

48%

23%

3%

of construction professionals said

their company had al-ready made

redundancies

54%


Latest integrated project and portfoliomanagement solution announced Advanced Management Solutions, producers of the pop-ular project planning tools Schedule Publisher and AMSREALTIME Projects and the AMS REALTIME Solution,have released the latest version (7.1) of their flagship prod-uct AMS REALTIME Enterprise. This flexible integratedproject and portfolio management solution supports anyorganisation’s processes and projects.

In these days of fluctuating fortunes, organisationsmust gain and maintain control of their portfolio of pro-jects. Executive decisions need to be based on trustworthyfacts. Programme/project managers need tools to helpthem control and manage their projects effectively and tokeep project plans up-to-date to reflect the progress beingmade. Team members working on projects need clarityabout what they should deliver, and a simple way of re-porting progress to project managers. Resource managersneed to ensure that their staff are fully utilised and man-age overloads so that projects are not adversely affected.

AMS REALTIME Enterprise Version 7.1 efficientlyjoins up the steps in your processes. It enables team mem-bers to update progress on their tasks, progress informa-tion to update the project manager’s project plans, projectmanagers to adjust and reschedule their project plans, re-source managers to manage staff overloads and ensurethat project managers have the resources they need, andexecutives to see an up-to-date dashboard view of theirportfolio of projects. AMS REALTIME Enterprise’s welldesigned database, driven by easy-to-use integrated appli-cations, enables the slicing-and-dicing and summarisationrequired to support decision making for all the people in-volved in your organisation’s projects and processes.

IT Security professionals admit thatthey are suffering from password fatiguewhen it comes to using their mobile de-vices, which leaves their data exposed topersonal and corporate identity theft ifthese devices were to fall into thewrong hands. That’s accord-ing to a survey releasedtoday by endpoint dataprotection specialistsCREDANTTechnologies, who con-ducted the ‘mobile usagesurvey’ amongst 227 ITprofessionals with the majoritydrawn from companies that employmore than 1000 people. Thirty-five per-cent revealed they just don’t get aroundto using a password on their businessphones and smartphones, even though

they know they should as they containsensitive and confidential information.Surprisingly, IT professionals are onlymarginally better at using passwordsthan the general population, with the

survey discovering 40 percent ofall users don’t bother with

passwords on their mo-bile phones. “It isalarming to note thatthe very people whoare responsible for IT

security are not muchbetter at protecting the

information on their busi-ness phones than most of their co-

workers, who don’t necessarily know anybetter,” says Andrew Kahl, AVP ofOperations and co-founder ofCREDANT Technologies.

MANAGEMENT SOLUTIONS IT CHIEFS CAN’T BE BOTHERED WITH PASSWORDS

UPFRONTCOMPANY NEWS 19

Please visit www.amsrealtime.com or call +44 (0)1753 607641 for moreinformation or a demonstration (face-to-face or held via Webex).

FAST FACT

The time micro-blogging site Twitter

was offline inAugust following a

Denial-of-Serviceattack by hackers

2hours

of all users don’tbother with

passwords on theirmobile phones

40%

The sorts of information that IT professionals are storing on their smartphonesand mobiles, many of which are totally unprotected with a password, include:

1%

4%

5%

7%

12%

16%

23%

66%

80%

12%

Passwords & PINs

Photos

Credit card information

Personal diary

Diary appointment & meetings

Bank account details

Personal emails

Business emails

Personal names & addresses

Business names & addresses


UPFRONTCOMPANY NEWS20

STREAMLINING COMMUNICATIONS

EU officials have warned that a “second digital divide”is opening up between Europe and Asia.

According to the European Commission, Europerisks losing its competitive edge in the information andcommunication technology market, after they found thatAsia's economies were moving far quicker than Europein both the development of wireless broadband and fibre-based networks. The Commission found that leadingAsian economies, such as Japan and South Korea, are in-vesting more into fibre broadband networks, which canrun up to ten times faster than old, copper-based ones,and that the US dominates “the new interactive web habi-tat, especially blogs and social networks”.

Many countries in Europe, including Britain, wereseen as pioneers when it came to rescuing the economyfor so called “old industries”, but now it would seemthat they are falling behind in the newer, digital mar-kets. European Commissioner for the InformationSociety, Viviane Reding, said that Europe must estab-lish a new “digital agenda” to help narrow the widen-ing gaps.

According to the Commission, older, economical-ly inactive and less-educated people remain excludedfrom the ‘digital age’. Despite notable problems whichcontribute to this “digital divide”, the Commission saysthat there have been significant digital advances in thepast few years. It notes that 56 percent of Europeanswere regular internet users in 2008, an increase on pre-vious years, and that two-thirds of Europeans under theage of 24 use the internet every day.

If they seriously want to close the gap betweenthemselves and Asia, the EU must help out countriessuch as Romania, Bulgaria and Greece, where internetuse is below 35 percent.

Reding hopes to complete work on a new strategyfor the development of Europe’s digital sector in timefor EU leaders to approve it at either at their summitnext year.

WHERE DIGIT-ALL GO WRONG?

The world’s biggest miningcompany, BHP Billiton, hasappointed Jas Nasser, the for-mer Ford CEO, as its newChairman.

Nasser, 61, will replaceDon Argus when he retires

NEW CHAIRMAN APPOINTED

UNEMPLOYMENT UNDER THE MICROSCOPE

The highest youth jobless rate is 6.3% in the Netherlands

Interoute recently became the firstEuropean service provider to supplySession Initiation Protocol (SIP) trunkingto Microsoft Office Communicator Server(OCS), a platform for presence, instant mes-saging, conferencing, and enterprise voice forbusinesses. Microsoft OCS streamlines com-munications for businesses looking to con-nect their employees more effectively byenabling them to find and communicate withthe right person, when they want, from theapplications they use most.

By connecting Microsoft OfficeCommunicator, Server R2 to Interoute’s pan-European network via SIP trunking, enter-prises can move straight to unifiedcommunications and VoIP, without havingto discard their previous investment in PBXplatforms or embark on expensive migrationprojects. Interoute pioneered its integration

with the Microsoft Unified Communicationssuite three years ago, integrating VoIP withMicrosoft’s Live and Office CommunicationsServers (LCS and OCS) and offers Direct Dialnumbers in 47 Countries. Interoute’s pan-European network currently carries 500 mil-lion VoIP minutes each month for wholesalecarriers and enterprises.

Interoute One, Interoute’s voice offering,provides a cost effective and flexible VoIP so-lution. All incoming and out going phonecalls between offices and business partnerswho are using the OCS platform are free.Enterprises can also benefit from dramatical-ly cheaper telephone calls from and to virtual-ly any communications device. Businessescan even avoid international roaming chargeson all other calls, enabling international com-munication at a fraction of the price of tradi-tional telephony. www.interoute.com

Eurozone unemployment stands at 14.9 million

This is a rise of 3.17million since June 2008

The number of people out of work rose to 9.4% in June– the highest in 10 years

Spain holds the top spot with 18.1% unemployment

Source: Eurostat

early next year. Nasser, whoworked for Ford for 33 years,joined the BHP Billitonboard as a non-executive di-rector in 2006 and is also amember of the board’s Riskand Audit Committee.



YOU CANNOT VIRTUALISE IN A VACUUM

“Virtualisation is a proven soft-ware technology that is rapidlytransforming the IT landscape andfundamentally changing the waythat people compute.”

Factors such as consolidation,cost savings, dynamic provision-ing, and migration are drivingmost IT shops to exper-iment with someform of virtualmachine producttoday. Gartnerresearch sug-gests that themajor economiesof Western Europe lagonly behind the US in theirintention to implement server vir-tualisation but, by the same token,we are some way from seeing fullmainstream adoption in this re-gion. We are feeling our way inpartial darkness in many ways.We know that there are clear ben-efits to be had, but proof of con-cepts and lab experimentation areonly indicative on certain levels.

For all of their benefits, virtu-al machines also add complexity,scale, and management challenges.Planning to avoid showstoppers

means recognising that problemswill arise that cross typical IT bar-riers, requiring that membersfrom different teams work togeth-er. The biggest inhibitor to com-parable projects, like successfulapplication deployments, is not

the technology per se, but thepeople and processes

that develop anddeliver the wholeproject.

The goal isvirtualisation-

ready IT net-work and

infrastructure –something built to be fluid,

dynamic, and provisionable or, inother words, immensely agile andgreatly to your company’s benefitin terms of both cost and scalabil-ity.

“To meet our clients’ businessrequirements, we need to be ableto scale up and scale down veryquickly with no disruptions,” saysPat O’Day, Chief TechnicalOfficer at BlueLock. “The onlyway we can do that is with the ar-chitecture we’ve built usingVMware and F5 BIG-IP LTM.”

FAST FACT

YOU CAN QUOTE ME ON THAT

“We are inturbulent times,

volatile anduncertain. But

we continue tosteer a steady

course throughchoppy waters”

BP CEO TONY HAYWARDdelivers his assessment

on the economy afterannouncing a 53

percent slump in profits

“The monthlycost of thebattery, plusthe electriccharge, will beless than thecost ofgasoline” CARLOS GHOSN, CEO of Nissan,speaking at the launch of theJapanese auto manufacturer’sfirst electric car

“It’s a win-windeal from myperspective”

Microsoft CEO STEVEBALLMER confirms thelandmark partnership

that will allow Microsoft'sBing search engine

to be used to power Yahoo’s

search function

The total number of credit cards issued

globally rose to

last year 6.8 billion

For more information, contact Nick Bowman, EMEA Corporate CommunicationsManager at F5 Networks, on 44 (0) 1932 582098 or go to www.f5.com

1 VMware, www.vmware.com/virtualization/2 Gartner, User Survey Analysis, Server Purchasing Plans, August 2007

The goal is

- ready IT networkand infrastucture

virtulalisation


UPFRONTCOMPANY NEWS22

THE TRUE COST OF FRAUD

BRANSON GOES GREENchallenge is too great toachieve.”

Talking about one producthe has ‘discovered’, isobutanol,he told The Times, "isobutanolis wonderful, it doesn't absorbwater, so you can pump it in thesame way as petrol. And you canmake it from anything. Sugar isgood. What if all the sugar thatis now turned into soft drinkswas instead, turned into cleanfuel?” Other renewable energysources that will be supportedby the Virgin Green Fund in-clude biomass and solar power.

Branson has already invested€2.5 million into the Carbon WarRoom, a New York environmen-tal ideas incubator. He has alsoled a €10 million funding roundin GreenRoad Technologies - astart-up that helps reduce car fuelusage. Then there’s the VirginEarth Challenge, a €16 millionprize fund which aims to findcommercially viable green tech-nologies.

The Virgin Green Fund willbe based in London and SanFrancisco and will plougharound €100 million into grow-ing renewable energy sectors.

Mega-rich entrepreneurRichard Branson looks as if hemight be about to turn Virgininto a mean, yet green, money-making machine.

He has started the VirginGreen Fund and has alreadyinvested a reported €50 mil-lion of his own money into theproject, and has now turnedhis attention to fundraising inorder to add to the €170 mil-lion already in the green-kitty.Branson’s green enterprise isdefying the global economicdownturn, reaching its currenttotal through a panel of insti-tutional investors and Bransonhimself.

The fund will eventually beused to invest in renewable en-ergy projects. Critics ofBranson accuse him ofhypocrisy, because of the factthat he owns an airline, a so-called “dirty business”, whilesimultaneously campaigningfor the environment. However,in response Branson has said,“We shouldn’t stop trying justbecause we have not yet putour own house 100 percent inorder or because we think a

The UK is the second largestmarket for first-party credit cardfraud after the US, with aUK£610 million total loss in 2008meaning a UK£9 loss for eachcredit card issued in thecountry. These alarm-ing figures, re-leased byLafferty Group,reinforce thepoint that thecredit card in-dustry can nolonger afford to toler-ate this issue. With first-party fraud, the perpetrator willtake out a loan, open a bank ac-count or apply for a credit cardwith no intention of paying itback. They often use a false iden-tity, or apply for credit using

bogus information. The difficul-ty lies with proving intent and asa result financial institutionsare forced to continue writing offfirst-party fraud as credit risk.

Security expert MartinWarwick says banks can

increase predictabili-ty and identify po-tential first-partyfraud before itreaches the collec-

tions stage. “By in-troducing advanced

analytics, banks can gainaccess to rich information

about each customer and form awider view of that customer’s his-tory. This will allow them to iden-tify suspicious customers andultimately reduce bad debt levelsand collections expenses.”

CYBER CRIME IS ON THE RISE

FINANCIAL SERVICES SECTOR STABILISING?

The latest UK job figures indicatethat there has been some im-provement in London’s financialservices recruitment market dur-ing June. Despite there being 58percent fewer new job vacanciescoming onto the market com-pared with the previous year, new

job volumes were up 20 percentcompared to May, reaching theirhighest level so far this year. Thetime it took individuals to find anew role during June was un-changed versus the previousmonth, taking candidates an aver-age of 55 days.

The UK is the second largest

market for first-party credit card

fraud, with a

million total loss in 2008

UK£610

There was a 250 percent increase in 2008 in the number of comput-er bugs used by organised criminals to attack the IT systems of

individuals, small businesses, governmentsand commercial organisa-

tions.



FROM THE VAULT

THE BUSINESS EXITNew research reveals that 71 per-cent of entrepreneurs considerthemselves ‘exit obsessives’ – boss-es who think about selling theirbusiness on at least a monthly basis.And while one in four decide to re-tire early following exit, 40 per-cent still need the thrill ofrunning a businessand go on to startagain. Just overhalf of thosequizzed said theystill have some di-rect involvement inthe business they havesold. The report, The LongGoodbye: myths, realities and in-sights into the business exit process,commissioned by Coutts & Co, ex-amines for the first time the chal-lenges and concerns businessowners face during their prepara-tion for and throughout the busi-ness exit process. The study reveals

that on the day of actual sale, only36 percent of entrepreneurs feltelated or happy, which was nearlymatched by the 32 percent whosaid they were relieved and 26percent who were filled with

tiredness, sadness or anti-cli-max. On a financial

level, 59 percent ofentrepreneursoverlookedtheir financialplanning until

the last minute,despite more than

three-quarters agree-ing that it is an important

part of the process. Andrew Haigh,Managing Partner at Coutts & Cosaid: “This report has shown thatalarmingly, two-thirds of entrepre-neurs are risking long-term busi-ness success by not giving properthought to their exit strategies.”

Back in issue eight of CXO, AL-NOOR RAMJI offered an insight into howmistakes attract the most attention when you manage IT for a telecomscompany as large as BT. “If you haven’t done a decent job, people no-tice. If you have, nobody does.” As we discover, this is an uncomfortabletruth, particularly for some involved in the radical overhaul of a globalbusiness’ entire technology infrastructure.

To read more, go the past issues section at www.cxo.eu.com

of entreprenuersthink about selling

their business every month

71%

Europe’s energy bill could be cut by at least €43 bil-lion thanks to mobile technology, according to a re-port issued by Vodafone in collaboration withAccenture. This potential saving represents 18 per-

cent of the UK’s annual CO2 output in 2008and approximately 2.4 percent of expectedEU emissions in 2020. However, this op-portunity can only be realised if industry

and governments collaborate, the report stat-ed. It also found that mobile technology has the

potential to be a major cata-lyst in driving carbon reduc-

tions across a range ofindustry sectors, and

identified 13 op-portunities

that couldenable carbonabatement across25 EU countries.

Computer hackers have at-tacked MI5’s official website inan apparent bid to steal theidentities of visitors to the site.The hackers, calling themselvesTeam Elite, could have beenable to download viruses onto

the machines of anyoneusing the British

Intelligenceservices web-

site. The iden-tity of agents

and informers interror groups such as

Al Qaeda are held by MI5.

MI5 WEBSITE HACKED

MOBILE TECH TO SLASH CARBON FOOTPRINT


UPFRONTIN MY VIEW24

Hasbro’s move into the movie business is part of the compa-ny’s vision to transform it beyond being a mere toymaker intoan entertainment and intellectual-property powerhouse.We made a commitment to re-invent, re-ignite and re-imagineour core brands in order to create new experiences for our con-sumers. We’re now putting our brands in front of consumers ina number of different ways, and Hasbro’s shareholders have ben-efited as a result.

We’re unleashing the creative power of the company a lotmore than previously.Consumers will very readily accept well-loved brands in newforms of entertainment and new experiences. So Transformers isa great example. It was a comic book animation and a toy line,and now it’s also part of the motion picture business. We’re de-veloping it as a theme park attraction with Universal. We’re de-veloping it in numerous other forms such as video games andonline. And so if we can take our brands and reinvent them in anappropriate way for each of the consumer audiences that aremost interested in them, then we will continue to grow our busi-ness and unleash the potential of those brands around the world.

Hasbro strives to make sure branding or the message remainsconsistent across all those different platforms and channels.Up until recently we’ve been working to restructure the compa-ny and focus more on our brands, and it took about six years toget where we are today. Now we’ve restructured as a globalbrand organisation, we have global brand leaders for our biggestproperties and those leaders are responsible for the architectureof each of those brands.

The focus is on re-inventing the business.We want to create an array of experiences. What we need to donow is to be very imaginative about how we reinvent the core toyand game business, and how we tell stories for those brandsacross a number of formats. The last two quarters have provedto be the most challenging in the current economic cycle, butwe’re confident we have the brands and the strategy to succeed.

Despite these tough economic conditions we can emergestronger from the downturn. Our goal, first and foremost, is to develop tremendous value forour shareholders, which is really all about Hasbro having thetools necessary to re-invent, re-imagine and re-ignite the growthof our brands across multiple platforms. We need to keep ourheads down and focus on that, irrespective of the environment,recognising we need to be cautious about the utilisation of ourcash, have a strong balance sheet, and continuing to generategrowth in earnings and revenues over the long term.

BRIAN GOLDER, CEO of toymaker Hasbro,on taking the brand to the next level.


UPFRONTCOMPANY INDEX 25

Companies in this issue are indexed to the first page of the article in which each is mentioned.

Aabar Investments 26Act Now 32Adeptic 36, 125Advanced Management Solutions 19, 120Amadeus 54Amazon 96Anti-Phishing Working Group 66Apple 38Ascentn EMEA 102, 107AstraZeneca 48Attaccama 9AT&T 110Aviva 72Betfair 58BHP Billiton 20BlueLock 77Bombardier 128BP 21British Airways 38BT 23Butler Group 46Cadbury 38Canto 11Capgemini 48Carlsberg 38Centrica 48Christian Steven Software 98CRM Association 132Deutsche Poste 110Deutsche Telekom 54DHL 110

Draka Communications 86, 114, 115eBay 58Emerson Network Power 57Escrow Europe 6, 64, 65Exact Software 61Exel 110F5 Networks 21, 67Frost & Sullivan 109Google 58GSK 38Guinness 32Hasbro 24HMRC 48HSBC 16IBM 54IDS Scheer 102, 105Interroute 20, 100inubit 53, 102, 103ITS 2, 3, 82, 83Jaguar 48jCOM1 102Juniper Networks 70, 71Kodak 126Lufthansa 54Marshal 51McDonald’s 38Meet The Boss 92Mercedes IFCMetaWare 40, 44, 45, 69Metropolitan Police Service 84MI5 23

Micro Focus 40, 44, 45, 69Microsoft 21NetOp 88NewsGator 130, 131, OBCNissan 21Novell 4Oracle 13, 58Pampers 32Panasonic 144Philips 48Royal Dutch Shell 38Saatchi & Saatchi 32Samsung 144Sanofi-Aventis 116Scaled Composites 26Schneider Electric 47, 122, 123Sony 144TCS Financial Solutions 78, 79Telefonica O2 110Tempura Communications 90, 91, IBCTesco 38Thawte 74,75T-Mobile 32Total 15Toyota 32Twitter 16Virgin Galactic 26Virgin Group 26VmWare 93, 94, 95Vodafone 58

HANDCUFFS ANDHARD DRIVES Technology on thefrontline with theMetropolitan PoliceService’s CIO Ailsa Beaton

BETTING ON A SURETHING A look behind the scenesat betting dot.comphenomenon Betfair

DON’T MISS...

32

58

84

COMPANY INDEX Q3 2009

LOYALTY BEYONDREASONSaatchi & Saatchi’s SimonFrancis reveals how tocreate a superbrand

COMPANY LIQUIDATIONS SOARFigures revealed today have shown that company liquida-tions in the UK are at a 16 year high, however the numbersshow a significant slow down in the rate of firms going under.

The number of companies liquidated between Apriland June in England and Wales totalled 5059, which is stableconsidering the rise in recent months. Whilst it’s still thehighest figure since the second quarter of 1993, the rate of in-solvencies has slowed from 57 percent to 37 percent in thepast three months.

The insolvent company figures were made up of 1457compulsory liquidations and 3598 creditors voluntary liqui-dations. Other corporate insolvencies increased by 22.7 per-

cent to 1529 in the second quarter of 2009, including 345 re-ceiverships, 1027 administrations and 157 company volun-tary arrangements.

The number of administrations was down 22 percent.In comparison, a record 33,073 people in England and Waleswere declared insolvent in the second quarter of the year. Thisis a 27.4 percent rise on last year accounting to the InsolvencyService and the highest since it was formed in 1960.

The data also showed that the property sector was stillthe worst affected sector by the recession, accounting for athird of liquidations. Manufacturers were also hit hard, aswere companies in construction, retail and the motor trade.

Quarterly Liquidation Statistics: a comparison of compulsory and voluntary liquidations in England and Wales

0 Compulsory Liquidations 0 Voluntary Liquidations

1st Quarter 2008 2nd Quarter 2008 3rd Quarter 2008 4th Quarter 2008 1st Quarter 2009

1100 2068 1340 2295 1494 2623 1560 3055 1579 3362


COVER STORY

Will Whitehorn ed:20 July 13/8/09 09:48 Page 26

It’s the 30th anniversary of the first moon landing and, if Sir Richard Branson has his way, just two years awayfrom another giant leap for mankind – space tourism. Will Whitehorn, President of Virgin Galactic, has justgiven a speech at the London headquarters of the Royal Aeronautical Society at the organisation’s first SpaceTourism Conference. It’s a sign of the times. What was once regarded as a harebrained scheme and headline-grabbing stunt by Branson is now the subject of a two-day conference attended by the world’s aeronautical elite– and Whitehorn’s speech is the star attraction.

Afterwards, over lunch, he relives the scepticism he encountered from the scientific community when Virgin Galacticwas first launched in 2004 – and how much their attitudes have changed since then: “The initial reaction was, ‘we’ve heardit all before, people think they can build things to get to space cheaply but it has never turned out to be the case’. I thinkwhat’s happened now is that the interest in the scientific community has grown exponentially with the witnessing of thetechnology actually starting to come together and work.”

To boldly goFor Whitehorn and his team the Virgin Galactic project has reached a turning point, with ideas that have been five

years in the planning finally becoming a reality. A week before the Space Tourism Conference, Whitehorn was in NewMexico where ground was finally broken on the construction of Virgin Galactic’s first launch site: Spaceport America. The

www.cxo.eu.com 27

Sir Richard Branson has paid €70 million in a bid tobecome the world’s first space tourism operator. But howrisky is his investment and will the credit crunch mean acrash landing for the project? Diana Milne meets VirginGalactic president Will Whitehorn to find out.

SPACEODYSSEY


28 www.cxo.eu.com

110,000 square foot facility will be the site of VirginGalactic’s €212 million space launch system, which willrocket its space launch vehicle, VMS Eve and spacecraftSpaceShipTwo, into space. On board won’t be profes-sional astronauts but passengers who will have paid€$124,000 for a ticket and undergone just three days oftraining before taking their place in history as theworld’s first space tourists.

The hugely complex and high-risk project representsa massive investment for the Virgin Group – €70 millionso far. And Whitehorn admits that there were many timesalong the way when he wasn’t sure that the gamble wouldpay off: “There were times when I didn’t think this wasgoing to happen. We’ve had numerous occasions when weweren’t sure whether the technology would work in differ-ent areas.” He goes on to say, however, that many of thetechnical problems have now been ironed out. VMS Evehas already undertaken 16 test flights, with Sir RichardBranson on board for one of them, and SpaceShipTwo,which is modelled on SpaceShipOne, originally designedby the renowned aeronautical engineer Burt Rutan, is on

Are you game?Booking a Virgin Galactic ticket isremarkably simply. You simply log ontothe website, click ‘book’ and fill in anonline reservation form. There are threetiers of astronaut reservations. The first100 to fly pay a deposit of €140,000 – thefull price of a ticket. This list is now closedto new reservations. Pioneers, passengerswho will fly in Virgin Galactic’s first yearof operation, pay a deposit of between€80,000 and €124,000: Those that havemade reservations to travel immediatelyafter Pioneers pay a deposit of €14,000.All passengers undergo three days oftraining where they experience zerogravity in the WhiteKnightTwo carrieraircraft, which will feature a duplicateSpaceShipTwo cabin. Passengers alsoundergo medical checks, though VirginGalactic claims these are unrestrictiveand that the vast majority of people willbe deemed fit to fly.

TOP: Sir Richard Branson with Buzz Aldrin MIDDLE: WillWhitehorn (L), President Virgin Atlantic, Sir RichardBranson (C), founder Virgin Group, and StephenAttenborough (R), Head of Astronaut Relations, unveila scale model of Virgin Galactic's SpaceShipTwoBOTTOM: Sir Richard Branson with Burt Rutan


www.cxo.eu.com 29

target to be unveiled at the end of this year. “The space portis under construction, the spaceship is nearly finished,”Whitehorn explains. “The rocket motor is now firing andit is performing excellently so I’ve gone from probablyseeing hundreds of stumbling blocks two or three yearsago to seeing no real stumbling blocks now.”

Cash flowOne problem that can’t be fixed at Virgin Galactic’s labs, however, is the

effect of the economic downturn on ticket sales. To date, the company hassold 300 tickets, with customers paying an initial deposit of €14,000 each. Itsaim, says Whitehorn, is to have sold 700 tickets by the time it starts flying com-mercially and to have accumulated €56 million in deposits. Whitehorn says saleshave been affected but that it is currently on track to reach its target, selling

around five to six tickets a month: “Ticket saleswere affected by the credit crunch but less than weexpected. We had a few cancellations, particularlyfrom one or two people that had been affected bythe Bernard Madoff scandal who lost all theirmoney. But sales are now at the same level as theywere before the credit crunch began. We’re selling onaverage five to six tickets a month which puts us ontrack to get to 700 tickets in the next two to three years.”

Ticket sales are crucial to Virgin Galactic’s success in the early years;however, the company sees an exciting long-term future for the technol-ogy in scientific research.

To date, says Whitehorn, scientific experiments in space have been ham-pered by the fact that existing space launch systems are too expensive to use

for the purpose. Virgin Galactic’s relativelycost effective solution could see it beingused, for example, to produce solarpower in space, or to store servers inspace. “There are three or four thingshappening at the moment in the world ofscience, which are really exciting if wecan find cheap ways to fly to space. Thetechnology is there. The problem is thatthe space launch systems were designed60 years ago for big old-fashioned rocketsand it costs hundreds of millions of dol-lars every time a launch is done. Wewon’t get the breakthrough in space, in-dustrially and scientifically for the nextgeneration unless we find much cheaper,more environmentally friendly ways toget there.” He goes on to say that as otheruses for Virgin Galactic’s technology arefound, space tourism could end up ac-

The visionaryThe original SpaceShipOne and now SpaceShipTwo,Virgin’s passenger carrying aircraft, were designed byrenowned aeronautical engineer and founder of ScaledComposites, Burt Rutan. Rutan designed SpaceShipOne in2004 and it went on to become the first privately mannedspacecraft to exceed an altitude of 328,000 feet. In 2005,Rutan formed a partnership with Sir Richard Branson to

set up a new aerospace productioncompany, which would build a fleetof commercial sub-orbitalspaceships and launch aircraft, andwould own the designs forSpaceShipTwo and White KnightTwo.

A diagram showing the VirginGalactic spaceships’ dimensions


point outside the atmosphere. That would be a really exciting breakthrough.That means people could travel from London to Australia in two-and-a-half

hours – and not only that but they wouldn’t be putting fossil fuelsinto the earth’s atmosphere in doing so.”

Getting on boardGiven the huge potential of the technology as a form of

low carbon travel and a catalyst to scientific research, it isdisappointing that as a British company, Virgin Galactic has

had to build its first spaceport in the US. The main reason isthat the technology came from America but also because at

present the UK lacks the regulatory framework needed to sup-port the development of space tourism – a bone of great contention

with Whitehorn, particularly as Lossiemouth in Scotland had put itselfforward as a potential location for the spaceport: “I think it’s quite likely we

counting for just 50 percent of its profits: “In the early years, space tourismwill be the source of the economics to make this work. “80 per-cent of this business will be space tourism. And as we moveforward that percentage will diminish over time as allthese other industrial and scientific applications startto be utilised. Eventually I can see space tourism fallingto 50 percent.”

Ironically, however, one of the biggest potentialuses for Virgin Galactic’s craft doesn’t involve spacetourism at all. Ultimately, Whitehorn believes thatSpaceShipTwo could be used as a form of low cost, lowcarbon, high speed commercial air travel – taking pas-sengers from one side of the world to the other outside theearth’s atmosphere. “I think the potential for that is huge,” saysWhitehorn. “We want to give this system the capacity to get from point-to-

(maximum altitude) of its flight path, the spaceship feathers(folds its wings) in preparation for re-entry into the earth’satmosphere, drawn by the Earth’s gravitational pull. As thespaceship meets the resistance of the upper atmosphere, thefeathered wings act as air brakes, safely positioning anddecelerating the spaceship, allowing for a carefree re-entryinto the earth’s atmosphere. At approximately 60,000 feet,the spaceship’s wings are re-configured into their originalposition, allowing for an unpowered (glide) landing back atthe spaceport.

What is feathering?In the past, re-entry into the earth’s atmosphere was one ofthe greatest risks associated with space travel. However, BurtRutan’s feathering design has significantly reduced this risk. Inspace, the wings are folded up to provide a shuttle-cock or‘feather’ effect, giving the spaceship extremely high drag for

Virgin has invested

€71 MILLION

in space tourismprojects

How often will the flights take place?Initially, there will be one flight per week. As operationsprogress, this will increase to one and potentially two flightsper day.

How many passengers and pilots will there be on each flight?SpaceShipTwo will carry six astronaut passengers and twopilots.

What does the space flight consist of?The spaceship hitches a ride up to around 50,000 feetattached to a specially designed carrier aircraft, ‘themothership’. Once at 50,000 feet, the spaceship is releasedfrom the mothership and ignites its hybrid rocket. Thespaceship then begins a climb to over 360,000 feet. This climbtakes about 90 seconds and will reach a speed of just overthree times that of sound. Shortly before the apogee

30 www.cxo.eu.com

Virgin Galactic: FAQs


would have had to do this project in America anyway because the originaltechnology came from America. But clearly this is a system that doesn’thave the old problems of old ground-based rockets, which were difficultto launch in Britain because of the high population and the weather. Thisis a system that could work here albeit in less populated areas like theNorth of Scotland or Cornwall. The fact is that even if we could come toan area such as Lossiemouth and they welcome us with open arms to op-erate there in the future, we don’t have the legislation to allow us to do it.”

Whitehorn believes that the UK’s slowness in introducing this legis-lation is foolhardy given the potential future value of the space industry.“In Britain alone nearly 50,000 people currently work in space-related ac-tivities and in Europe the number is probably treble that. And if we hadcheap ways to get to space there would be so many more things we coulddo.” He reveals that Virgin Galactic is in talks with the UK government to re-solve the issue and that it hopes the situation will change within the next 18

www.cxo.eu.com 31

re-entry. This allows the re-entry deceleration to occur at ahigher altitude and greatly reduces the forces and heating onthe structure. Also, the ship, in the feathered configuration,will align itself automatically such that the pilot has a less-critical flight control task. Burt Rutan describes this as “care-free reentry.” Once in contact with the atmosphere, thefeathered wings position the vehicle to the correct altitudewithout pilot input.

What is the difference between a Virgin Galactic spaceshipand a NASA shuttle?The Space Shuttle was designed to carry significant payloadsand people into orbit rather than people only into sub-orbit.However, there are some key design differences whichrepresent important developments in the future of safe andcommercially viable space travel. Firstly, SpaceShipTwo isbeing built from composite materials not metal, creating

major benefits in weight, power output requirements andresilience. Secondly, the feathering mechanism means thatthese spacecraft do not require specially designed (andhistorically unreliable) thermal protection systems used bythe Space Shuttle. Thirdly, SpaceShipTwo will be air launched,not ground launched. This has important benefits for bothsafety and environmental impact. SpaceShipTwo is being builtfollowing a design brief that deliberately seeks to avoidunnecessary complexity and, in particular, moving parts. Thisis a very different concept than that which applied to thespace shuttle and one that is key to safety and reliability.SpaceShipTwo’s rocket propellant system will be a singlehybrid rocket motor rather than the separate solid and liquidrocket boosters/engines used by the Space Shuttle. There aregreat safety advantages to the hybrid system, which requiresfar less power than the Space Shuttle due to weight andscope of flight.

months. In the meantime, he says, he expects there to be a wave of private in-vestment into space-related ventures: “Now that realisation about the poten-tial of the space industry has come about (and it really has come about justrecently) I think you’ll see a wall of private sector investor money going intospace over the next 10 years, the likes of which we haven’t seen since the in-ternet revolution.”

His prediction has already come true. Shortly after the Space TourismConference, Virgin Galactic announced that Abu Dhabi-based AabarInvestments will invest around €200 million and take a 32 percent stake inVirgin Galactic’s holding company, valuing the business at €640 million. TheMiddle East has already been touted a possible location for Virgin Galactic’snext spaceport and the strategy is in line with the UAE capital’s aim to becomea world centre for scientific research. Given this latest announcement, it iseven more crucial that Europe catches up – or it could find itself a loser inwhat has become the 21st century’s space race. �


32 www.cxo.eu.com

LOYALTYBEYOND REASON

Saatchi & Saatchi has consistently dominated the world advertising scene and has the power to transform ordinary brands into global success stories. Diana Milne catches up with its CEO for EMEA, Simon Francis, and asks how to get ahead in advertising.

MEDIA

32 www.cxo.eu.com

Simon Francis.indd 32Simon Francis.indd 32 13/8/09 10:49:3013/8/09 10:49:30

www.cxo.eu.com 33

He may not be a household name but Simon Francis is the brain behind some of Europe’s best-known advertising campaigns – from Pampers and Toyota to Guinness and T-Mobile. As Saatchi & Saatchi’s CEO for EMEA he has the power to make or break a brand and to create what he de-

scribes as “lovemarks” – products which attract “loyalty beyond reason” from their customers.

His fi rm has dominated the global advertising industry since the 1970s and currently employs 6000 people across the world, with 150 offi ces in 86 countries worldwide. In the past fi ve years alone it has won 3500 awards for creative work, most recently scooping six Lions at the Cannes International Advertising Festival 2009 for its T-Mobile ‘Dance’ advertisement.

Th e T-Mobile campaign featured real life footage of 350 people breaking into a spontaneous dance routine at London’s Liverpool Street station among the rush hour crowds. Th e footage was later shown across online, direct and retail channels, as well as through a specially created YouTube channel. It encompasses, says Francis, what advertising in 2009 is all about and refl ects the dramatic technological changes that are shap-ing the industry. It is no longer enough to target a captive audience on prime time television. Th e fragmentation of the media landscape and the vast array of media choices available mean advertisers must try harder than ever to engage with consumers on all fronts; through digital, televi-sion and print but, most importantly, through word of mouth. “Tech-nology has completely transformed the industry,” says Francis. “It’s very challenging to go to market with push messaging right now because the audiences’ choices of media are so fragmented. Maybe 15 to 20 years ago, 34 percent of the UK population would be watching Coronation Street. You could reach 34 percent of the population in a 30 second advertising slot and talk to people of all social typologies. Now the average rating is much lower for all TV programmes because there are so many diff erent channels and shows.”

www.cxo.eu.com 33


34 www.cxo.eu.com


www.cxo.eu.com 35

Falling revenueTh e decline in print and television advertising in the past decade has

been well documented. According to the latest fi gures by the Advertis-ing Association, newspaper advertising fell by 12 percent last year

in the UK alone and TV advertising dropped by fi ve percent. Meanwhile, internet advertising rose by 17.3 percent. Given

these fi gures does Francis believe there is still a future for traditional media in Europe? “We would say our primary media now is people. Th ey do the marketing work for us. Th e traditional media are still amazingly good conversation starters. And if you look at our case histories they make full use of traditional media to start

a socal networking conversation. But that is now carried on through social media, such as blogs, Twitter and Face-

book. If you have an idea that is so compelling, arresting and enjoyable then people will come to your idea and propagate it.”

Th e pressure for Francis and his team to come up with these com-pelling ideas is growing in the face of harsh economic conditions and their clients’ ever shrinking advertising budgets. “We’ve seen, on aver-age, advertising budgets shift 10 to 20 percent south depending on which market you are in and how the client is placed,” says Francis. “Clearly some market leaders are more resilient and have carried on and main-tained their expenditure. Some of the middle ranked and smaller players have found it more challenging and they are the ones that have been the most impacted.” He goes on to say that advertising markets that have suf-fered the biggest impacts are in the UK, Spain, Italy and parts of Russia.

While he maintains that shrinking budgets have not stifl ed cre-ativity, he says that economic conditions are setting the tone of today’s advertising campaigns, with a move away from extolling the virtues of excessive spending and an emphasis on what consumers are really looking for: “Hope, joy and optimism.” Francis adds: “Creativity isn’t something that is budget related. But there’s a diff erent style emerging and clearly wanton expenditure is not in. It’s not appropriate and many people won’t be advertising in that way. But many people are looking for optimism, for hope and for humanity, and these seem to be becoming recurrent themes”. He goes on to say that with recessionary conditions, it is the products that can off er that “emotional connection” with the con-sumer, which will beat the competition, even products that are off ered at a lower price with the same functionality. “In an age where there’s not much money around and times are tough, people will, of course, look to compare and contrast brands and services. Th ose brands and services that can off er an emotional reward, beyond just the functionality of the products, are the ones that get loyalty beyond reason. Th e brands that can off er hope, joy and an emotional connection to the consumer are the ones that will prosper when all the other brands will suff er.”

Creating lovemarksSaatchi & Saatchi’s belief that customers’ buying choices are made

on the basis of emotion, not rational thought, drives its creative process-es. It aims to make every brand in its portfolio a ‘lovemark’ and, when creating a new campaign, it embarks on a complex process of analysis to establish the emotional connection the product has with consumers.

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“We do extensive research on our client’s business where we look at how respected they are and how loved they are. We plot them on a map versus the competition and then we work out a plan to either increase the level of respect towards the brand or increase the amount of love it engenders among consumers. Th en we put together a plan accordingly. For many brands it’s about the emotional side of things rather than the functional side of things. It’s a very scientifi c plan constructed to build ‘lovemarks’ over a period of time.”

Increasingly, says Francis, companies must prove their moral cre-dentials in order establish an emotional connection with an increasingly socially conscious consumer – with sustainability and corporate social responsibility becoming key diff erentiators between brands. With this in mind, last year the company acquired the environmental sustainability agency Act Now run by Adam Werbach, one of the founder members of Greenpeace and the youngest ever member of the US-based environ-mental organisation, the Sierra Club.

“‘Lovemarks’ are all about standing for something,” says Francis. “And increasingly many consumers will make choices and decisions

based on how well a product or service performs for them but also for the world at large. Th e advice we’d off er our clients is to align their in-ternal impact on the world to what the consumer wants and to build that into our ‘lovemarks’ thinking.”

He cites the example how this strategy was used to create a cam-paign for Pampers, which he regards as one of Europe’s most successful ‘lovemarks’. “At pampers we put in place a programme where every time somebody bought a pack of Pampers one euro went towards a vaccine that would save a child’s life. It was an extraordinary programme we put in place with UNICEF and it’s a great example of how a brand can change the world and off er mothers an emotional reward whilst at the same time driving the business forward.”

Great mindsIt is the job of Saatchi & Saatchi’s 2500 strong European creative

team to come up with the ideas that will build emotional connections between brands and consumers – a process which Francis says relies for its success on the team being “incredibly brutal creatively”, an ap-proach characterised by the company’s catchphrase for the process; ‘let’s kill some puppies’. “It’s a crude phrase but it’s true. You fall in love with your ideas and you don’t want any harm to come to them but to get ideas such as the T-Mobile campaigns, you have to be utterly brutal and use consumer testing and gut instinct to make your choices,” he explains. Describing the process he says: “We have these huge tribes where we have creatives from all over the world to work for two intense days where we fi ll rooms and rooms with ideas which we will whittle down to 10 or 15. Th en through consumer research we whittle them down to one or two. We do some development work before one comes out at the end of the process. But fi rst we have to kill some puppies.”

Despite having won countless awards for his teams’ creative work, Francis says he is by nature, never fully satisfi ed by the outcome of a cam-paign. “We’re incredibly proud of all our campaigns and hate them all in equal measure. Th is uncompromising, perfectionist approach extends to Saatchi & Saatchi’s working culture which Francis admits, is not for the faint hearted, with anybody not deemed to embody the agency’s values, quickly weeded out. “It’s a tough place to be if you want to cruise. It’s a very tough place if you are not creative or you won’t put yourself at the service of an idea. For every single individual we have a peak per-formance appraisal system. We are quite brutal with people that don’t match our spirit.” Th at spirit is built on Saatchi & Saatchi’s twin pillars of philosophy: ‘Nothing is impossible’ and ‘One Team, One Dream’. Francis says the strong emphasis on good teamwork is the real key to Saatchi & Saatchi’s success in the cut throat competitive advertising world: “In many agencies people don’t work together and egos get in the way,” he says. “Profi t and loss accounts get in the way, and reporting lines get in the way. Saatchi is unlike anywhere else I’ve worked before, where we have one team, one dream.”

www.cxo.eu.com 37

“We’re incredibly proud of all our campaigns and hate them all in

equal measure”

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In today’s economic climate bad news dominates the busi-ness headlines – with companies more likely to go bustthan boom. It’s a case of survival of the fittest where onlythe companies with the strongest foundations, the mostloyal customer followings and the best marketing cam-paigns will pull through.

The fate of companies is also dictated by changing consumerspending habits during a recession. According to the latest 100 MostValuable Global Brands survey, certain credit crunch related retailtrends have emerged including a rise in the popularity of brandsclaiming to offer value for money. Meanwhile, consumers are alsoincreasingly turning to ‘tempting treats’ such as fast food, cigarettesor alcohol. Products that offer consumers the opportunity to enjoypleasures at home are also booming, with computer games, videorental and takeaway pizza bucking the trend. However, accordingto Joanna Seddon of Millward Brown Optimor, which compiled thesurvey, the biggest weapon a company can have in its arsenal isbrand strength. She said: “In the current environment where thevalue of many businesses has fallen, brand has become even moreimportant because it can help to sustain companies in tough times.”

Here we analyse the secret behind the success of six of thebrands that are prospering despite the downturn. And we list someof the less fortunate companies that have fallen victim to the creditcrunch curse.

www.cxo.eu.com 39

Out of the gloomovershadowing the European

economy an army ofsuperbrands have emerged

victorious, with glowingfinancial results despite the

downturn. Here we profile sixcredit crunch survivors and

reveal why their customers keepcoming back for more.

SPECIAL REPORT


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2. McDonald’sFast food chains are one of the few businesses to profit from a recession andnone more so than McDonald’s, which continues to dominate the Europeanfast food market. In the second quarter of this year the company’s sales in-creased 6.9 percent in Europe, 3.5 percent in the US and 4.4 percent in AsiaPacific, the Middle East and Africa. Globally, its sales grew 4.98 percent. Andit seems that arguably the least discerning diners are in the UK, France andRussia where McDonald’s experienced the strongest sales performances. JimSkinner, CEO of McDonald’s, said he believed the chain was attracting a larg-er volume of customers as incomes fall in the wake of the economic downturn:“As consumers find themselves more cash strapped and time-challenged, theycontinue to count on McDonald’s for value, convenience and variety acrossour menu. I am pleased with the McDonald’s results and remain confident inour outlook for the year.”

The strong McDonald’s performance in Europe reflects the US chain’sfocus on strengthening its international presence. Today, over half of thecompany’s total sales come from outside the US and last year they ac-counted for 60 percent of its €1.66 billion revenue.

An aggressive marketing strategy, combined with cash strapped con-sumers switching from bistros to burger joints has seen the McDonald’sbrand increase in value by 34 percent this year according to the 100 MostValuable Global Brands survey.

1. TescoAs the world’s third largest retailer behind Walmart and Carrefour, Tesco has retained avice-like grip over the UK grocery market. From humble beginnings as a stall in the East Endof London, today the company employs 468,000 staff worldwide and has 4308 stores aroundthe world, including 2282 in the UK.

Rising food prices and the economic downturn have not, so far, harmed Tesco. Lastyear it achieved record profits of €3.4 billion a rise of 10 percent. Its sales increased by 15.1percent in 2009 and group profit before tax grew 5.5 percent. In the first quarter of this fi-nancial year it announced that its like-for-like retail sales had increased by 4.3 percent withnew stores contributing 4.3 percent and Tesco Personal Finance adding a further 2.2 per-cent. The retail giant’s international sales increased by 20.1 percent including particular-ly successful growth in Asia, where sales rose by 43.8 percent. As well as internationalexpansion and aggressive marketing campaigns – including those targeted against its mainUK rival Asda – Tesco also attaches a high priority to technology as a business enabler andrecently carried out an application modernisation exercise to help strengthen its US pres-ence. The project focused on its Continuous Replenishment system, which assures storesare always fully stocked with the products which customers want.


4. Apple When times are tough you would think new shiny new gadgets are the first thing con-sumers would choose to do without as they hold onto their existing computers, MP3 de-vices and mobile phones. Try telling that to tech giant Apple who has bucked thatphilosophy with a 15 percent jump in profit in the three months to June. Despite a re-ported three to five percent dip in the overall PC market worldwide, the Seattle-basedfirm sold 13 percent more laptops than a year ago. Sales for the whole company grew by12 percent to €5.8 million. The company has also been buoyed by the phenomenal suc-cess of its iPhone. Launched in 2007, the featured-packed device has taken the mobiletelecoms market by storm with 5.2 million units flying off the shelves in the second quar-ter alone – seven times more than what was sold in 2008’s second quarter. The releaseof the latest version, the iPhone 3GS, along with price cuts, is expected to swell figuresfurther. “In a better economy I think we would have sold even more,” Apple ChiefFinancial Officer Peter Oppenheimer said in an interview when discussing overall sales.One downside has been the fall in iPod sales but the company says this is to be expect-ed as devices like the iPhone include integrated MP3 players.

3. CadburyChocolate has always been considered a pick-me-up for those feelingdown in the dumps. It is therefore little surprise that with the gloom anddoom of the recession permeating most people’s lives, more and more ofus are reaching for the confectionary. This sweet-toothed craving has beenCadbury’s gain, with net profits tripling in the first half of 2009 to €362 mil-lion compared to €130 million during the same period last year. On the backof these bigger than expected profits, Cadbury, whose products also includeHalls sweets and Trident gum, confirmed that chocolate sales climbed 10percent with a market share gain in the UK and healthy growth in SouthAfrica and India. “Our growth in the UK is particularly strong, driven byconsumers pulling back to buy affordable indulgences,” said Todd Stitzer,Cadbury's CEO. The company’s strong performance was also boosted by

record sales of Easter eggs as well as Wispa bars and Giant Buttons.Advertising plays a key role in enticing consumers to purchase their

sugary favourites so the fall in advertising rates due to the recession has beento Cadbury’s benefit too. However, Cadbury’s good fortune can’t all be at-tributed to chocolate and sweets; the demerger of its Americas Beveragesbusiness last year and the offloading of its Australia beverages business toJapan’s Asahi Breweries made a significant difference to its bottom line.Stitzer said his company expects full-year costs to fall by €17.5 million aftertwo years of factory closures and job culls.


www.cxo.eu.com 43

5. GlaxoSmithKline (GSK)When you’re in the pharmaceuticals business any disease or virus outbreak can sendyour profits through the roof as governments clamour to get their hands on a po-tentially life-saving (and financially lucrative) vaccine. At pharma giant GSK boss-es have been accused of profiteering from the H1N1 (swine flu) outbreak bycharging the UK’s National Health Service (NHS) €7 for the vaccine that costs littlemore than €1 to produce. Several politicians want an inquiry into whether the UKgovernment is being ripped off. Others have suggested introducing a windfall tax onpharma firms profiteering from swine flu. Despite the furore, GSK’s Relenza inhaler,which is an alternative to Tamiflu, is expected to produce sales of €700 million, ac-cording to media reports. GSK also manufactures antiviral masks. Deliveries of theswine flu vaccine are also expected in September just before a potentially bug-rid-den winter arrives, which would swell the company’s profits further. Amid accusa-tions that it was cashing in on the crisis, GSK recently reported profits of €2.45billion (up 11 percent) in the second quarter, while CEO Andrew Witty describedthe swine flu outbreak as a “significant financial event for the company”.

6. CarlsbergEuropean consumers may have cut down on unnecessary spending but one indul-gence they are determined not to give up is beer. Indeed, it seems they regard it as anecessity not a luxury, judging by Carlsberg’s latest figures. The Danish beer maker re-ported net profits for the first half of this year of €427million – up more than a thirdfrom the same period last year despite the recession. Meanwhile net sales rose by ninepercent. Carlsberg is one of the world’s largest brewery groups and its portfolio includesthe likes of Carlsberg, Pilsner and Holsten. Over 45,000 people work for the group andin 2008 the company sold over 120 million hectolitres of beer, which is about 100 mil-lion bottles of beer a day.

Carlsberg’s beers are currently sold in 150 countries worldwide and in the first halfof this year it gained market share in most markets in Asia and Europe, with particu-

larly strong gains in Russia. It continues to dominatethe beer markets of Northern and Western

Europe. Despite its continuing success this yearhowever, Carlsberg released a statement say-ing it expected to encounter tough marketconditions, particularly in Russia where itpredicts the beer market will drop by five tosix percent. As a result, it has reduced its net

revenue outlook to €8.1 billion from the pre-viously stated €8.4 billion.

THE OTHER SIDE OF THE COINCompanies that are feeling the pinch

• British Airways We all know the airline industry is experiencing somebumpy turbulence after last year’s spike in fuel pricesalongside plummeting passenger numbers – BA,however, is in freefall. Business travellers provide thebulk of BA’s profits but the downturn has seen corporatetravel slashed. This contributed to BA reporting a pre-tax loss of €172 million for the second quarter.Passenger numbers fell 12.5 percent. In June, CEO WillieWalsh asked thousands of employees to work for freefor up to one month in a bid to keep BA in the skies. Theairline has also scrapped sandwiches on short-haulflights, a decision forecast to save €25 million a year.However, BA does expect its fuel bill to be between €525and €580 lower this year compared to 2008.

• Nokia At one time the Finnish mobile phone manufacturerwas sitting pretty at the top of the telecoms tree. It’sstill the market leader but the recession has batteredits bottom line – second-quarter profits nosedived by awhopping 66 percent to €380 million. In the threemonths to end of June, Nokia shipped 103.2 millionphones, down 15 percent year-on-year and 11 percent onthe first quarter. As well as the economic climatehurting sales, the much-coveted Apple iPhone ruffledthe feathers of traditional phone manufacturers tobecome the smartphone of choice for today’s twentysomethings. Nokia has counter punched with its rivalto the iPhone, the N97, although this flagship devicehas received mixed reviews.

• Royal Dutch Shell What a difference 18 months makes. At the start of2008 oil supermajor Shell announced record annualprofits of around €17 billion – about €1.2 million every hour.Fast forward to last month (July) and second quarterprofits sunk 70 percent to €1.6 billion and sales fell 51percent compared to the same period a year earlier. “Thereis an ample supply [of oil] and not enough to go around,”Shell’s CEO Peter Voser was quoted as saying. This is instark contrast to just over 12 months ago when the priceof crude rocketed to stratospheric heights of US$147 abarrel as demand soared and speculators jumped on thewagon. Shell has said it will continue with cost-cuttingmeasures after notching up savings of €500 million inthe first half of the year, and has axed 20 percent ofsenior management positions.


The demand placed on CIOs to reduce costs has increased duringthe economic downturn. Mainframes often carry a relatively highoperational cost and as a result, more organisations are migratingaway from mainframe environments. Many organisations have been

able to drastically cut operating costs using a migration strategy, including theFrench Social Security (CNAM), who migrated 11 mainframes totaling 12,000MIPS to Unix. This resulted in a staggering estimated €45 million TCO (totalcost of ownership) reduction. The EADS subsidiary, Eurocopter, was also ableto significantly reduce costs by migrating their time management system off themainframe and onto a Windows environment. This allowed Eurocopter to fi-nally turn off their mainframe environment, resulting in significant cost savings.

Working with software from Micro Focus, Bernhard Gebhart, ApplicationsManager at Eurocopter, was delighted with the results. He states: “The projectpaid for itself in considerably less than a year. This solution has been live for overtwo years now and we are very satisfied with it. The project involved so few prob-lems we could say it was a shame we didn’t have to migrate other programs.”Many more organisations have been able to utilise application migration as astrategy to reduce costs by upwards of 50 percent.

Mitigating riskRisk mitigation is at the forefront of any executive’s business planning.

Application migration can offer a low risk, high return alternative to re-write or

replacement strategies which can be extremely costly and lengthy, often with noguarantee that all existing business logic will be maintained. Through workingwith effective technology and partners, organisations can utilise application mi-gration to mitigate risks. Automation capabilities of conversion software likeMetaWare’s, ensure that the likelihood of errors linked to, or introduced byhuman intervention is reduced by up to 100 times, compared to re-writing orimplementing a packaged application. Areva and Eurocopter have successfullyapplied this strategy to mitigate the risks and reduce the delays of implementingpackaged applications (SAP) in their business, using these tools.

Driving innovationIn today’s increasingly competitive markets, organisations have to look

to innovate to be able to keep pace with their competition. Organisations cansignificantly reduce the time-to-market of new IT solutions and servicesthrough application modernisation projects, and in particular, through ap-plication migration projects. Migrating applications to new technologies cansignificantly decrease development processing time and thus enable develop-ment projects to complete faster. This in turn enables companies to focusmore time and resource on innovation. Organisations have been able to cutthe costs of providing new functionality by up to 60 percent as a result of mi-gration projects. They can adopt a two-phase approach to migration. The firststep is to migrate the application ‘as-is’ off the mainframe and onto a new plat-

44 www.cxo.eu.com

As a result of the current economic climate, there is a growing trend towards organisationsmigrating applications off mainframe environments and on to open systems such as

Linux, Unix and Windows. Jean-François Scardigli and Richard Pegden ask what are thedrivers behind these initiatives?

ASK THEEXPERT

The major trends for mainframe replacement

MicroFocus-Metaware ED:20 July 13/8/09 09:32 Page 44

form. Once this is complete, the associated cost savings can be invested into mod-ernising the application to fit the business needs. This may include improvingbusiness process integration or making applications available to new geogra-phies, for example.

Increasing productivityMigrating platforms can enable organisations to improve productivity, as

certain processes in a mainframe environment may take a lower priority behindproduction-related tasks and can often take hours to run. Migration off main-frame architecture not only reduces the associated costs of enterprise applica-tions, but can also improve productivity. Orange Business Services has improvedthe productivity of 200 business users by 30 minutes per day since the move toUnix platforms, representing a saving of above €1 million per year.

Tesco By migrating or re-hosting applications, organisations can take advantage

of the lowest risk strategies while maintaining competitive advantage. At Tescoin 2007, international growth was the driver for the company’s migration strat-egy, with plans to open new stores in the US. As featured earlier in CXO, Tesco’sproven competitiveness in retail is in no small part dependent on its highly ef-fective IT systems, and the team was confident that the effectiveness of their op-erations would be key to their success in new markets. This is especially true forTesco’s innovative Continuous Replenishment (CR) system, which drives storeordering and makes sure that what customers want is always available while min-imising waste. This unique application was developed by the Tesco IT depart-ment in the UK and encapsulates decades of retail expertise and experience.

The CR application plays a key part in generating tens of millions of eurosin profit for Tesco in the UK and, more importantly, provides a very significantimprovement in customer satisfaction. The challenge was that this highly so-phisticated store ordering system resides on an IBM z/OS mainframe in the UK,and Tesco wanted to make this intellectual property and associated competitiveadvantage available to the rest of its group where the data centres are basedaround IBM p Servers running Oracle Retail under AIX. However, guidingTesco’s decision about how to achieve this was its common operating model,which defines how to build a set of repeatable processes and systems to supportinternational growth. This involves the establishment of a standard computingplatform using consistent technologies and then ensuring that all key applica-tions can run in this environment. An important aspect of this flexible approachis that all versions of the enterprise applications have to be derived from com-mon sources, even if they run on different platforms. This is essential to ensurethat enhancements and fixes only have to be developed once and can be propa-gated consistently and quickly.

SolutionTesco’s executives knew that for global success they need to ‘think globally

and act locally’. This meant that an instance of the crucial CR application wouldbe needed locally, running on existing Tesco servers within their international op-erations to manage the local supply chain. The solution they chose enabled Tescoto address the legacy issues without changing the IT architecture within the ex-isting international operations structure.

The solution was to migrate and replicate the critical application. Tesco need-ed to enable the vital z/OS based CR application to run on its AIX servers. MicroFocus’ application migration and modernisation solution was chosen to port theCR application to the IBM System p server running the AIX operating system,and integrate it with the existing Oracle Retail solution. Work on the project start-ed in autumn 2006 and by January the Tesco IT team had a version ready todemonstrate and test on the new environment. This was a reassuringly short timeto deliver this unique and very sophisticated functionality. Also, compared to thelong and risky alternative of developing a new application for the IBM System pserver, or adding the functionality to Oracle Retail, the project was remarkablyrisk free and straightforward.

Tesco went live with its powerful replenishment application in July 2007. Themigration approach Tesco chose has the added benefits of preserving the unique,proven functionality of the CR software and meeting the goal of a common sourcestream for both versions of the application. Establishing the crucial CR applicationon the flexible IBM System p server platform has moved the common operatingmodel strategy forward by a major step. Tesco are now poised to release theirunique CR functionality, which provides such a competitive edge in the UK,throughout their international operations. It can do this cost efficiently as it can de-ploy this major improvement to its supply chain system on existing data centre en-vironments, with suitably sized servers, for each specific international operation.

As shown by Tesco, technology has to be approached from a business per-spective. As other companies across all geographies face the challenges of today’seconomic climate, the benefits of application migration strategies become morecompelling for effective cost reduction, increased innovation, improved produc-tivity and risk mitigation. �

www.cxo.eu.com 45

Richard Pegden is Product MarketingManager at Micro Focus. Pegden spent 10years in the service management industry,notably at BMC Software as ProductManager for BMC Service Desk Express andIT Systems Management Express,delivering a number of strategic initiatives.Richard is ITIL-certified and has aBSc.(Hons) in IT and Society.

Jean-François Scardigli is EVP of Sales,Marketing and Alliances at MetaWare, aprovider of conversion software formainframe re-platforming. Scardigli hasspent 15 years in the software industry,notably in sales management positions atSAP. He is specialised at promotinginnovative automated conversion softwarethrough technology and consulting partners.

“By migrating or re-hostingapplications, organisations can take advantage

of the lowest risk strategies whilemaintaining competitive advantage”

MicroFocus-Metaware ED:20 July 13/8/09 09:33 Page 45

46 www.cxo.eu.com

language. Applications represent part of the organisation’s intellectual property (IP), and when you consider all the business rules and other logic that are bound up within them, and the fact that they are part of what makes the organisation tick, translation can be seen as a way to preserve that IP. Although transla-tion is a specialist fi eld, and projects can take a while, the time taken may well not compare too badly with the demanding option of defi n-ing and writing something from scratch. One characteristic of that approach is that it tends to take some of the organisation’s key people out of their main roles for a while, which may not be considered viable or desirable.

Migrating an application from an ob-solete platform to a more modern system is not just a lift -and-shift operation, but never-theless it can be readily achievable in many cases. Th e choice of new platform might well be limited by factors such as the application code language, or the database, so in some cases there might be decisions involved about re-architecting elements of the supporting technologies – but the objective of migrating something to be near like-for-like must be borne in mind. In the case of either transla-tion or migration, though, it should be con-sidered whether there might be a degree of redundancy in the existing application.

Investigating the optionsDuring years of changes and re-design,

areas of code become ‘cut off ’ within many ap-plications, and investigation of what code may be left behind can avoid the cost of migrating and testing code that would never be used.

Either of these approaches can enable organisations to retain the value of their IP, while taking advantages of the benefi ts of using modernised applications or platforms. Rationalisation of the variety of technology within the organisation should enable savings to be made, and be more effi cient in terms of sustaining fewer supplier relationships, and potentially benefi ting from discounts. Aft er translation or migration, the benefi ts of being able to integrate applications better and use them more fl exibly are substantial, as these will be essential organisational capabilities in the near future, enable the value within ap-plications to be shared by partners and cus-tomer, and potentially to add to revenues.

Proponents oft en repeat defensively the adage that ‘legacy’ indicates something that actually works reliably, having long passed the teeth-ing problems that beset some

new applications for long periods. Although amusing, that is too glib an assessment for there are real problems, at operational and strategic levels, in depending on legacy tech-nologies. One of the major associated problems is whether skills will continue to be available to meet the support and maintenance needs of organisations’ legacy applications. Th e coding language used is the crucial factor here – in the case of many, the skills base can be seen dwin-dling dangerously, and inevitably the costs of those skills when needed will rise due to the laws of supply and demand. Ultimately, skills shortages can prevent the organisation from considering certain avenues of change – or be

a barrier when there’s a need to comply with regulations or legislation. When these prob-lems are encountered, continuing corporate life with the applications in question must be seen as constituting a real risk. Another major headache can be the platform on which an ap-plication is run becoming obsolete. Even before reaching that point, however, infrastructure platforms can introduce problems as they age, in failing to integrate with an organisation's security, application management, applica-tion integration, or reporting facilities, any of which introduce risk and extra cost.

Changing processesAdopting a packaged solution is one

option, but inevitably business processes have to be changed to adapt to what the new ap-plication supports, and any customisation to support the organisation’s needs will have to be paid for, and supported for the lifetime of its use. In making a decision on the approach to take, many organisations assess the value that is represented by their existing applications, and look for some way to continue to benefi t from their past investments in them.

Where the coding language is the source of the problem, there are an increasing number of options to translate code to a more modern

APPLICATIONMODERNISATION

ADAPTING TO CHANGEAlan Roger, Senior Research Analyst at Butler Group, outlines the importance of modernising outdated IT applications.

ALANROGER

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48 www.cxo.eu.com

Before HMRC you worked in various roles at the likes of AstraZeneca, Jaguar and Philips. What would you identify as the key differences between the public and private sector from an IT standpoint? Deepak Singh. Th e fi rst is sheer scale and complexity. I don’t think I have come across a private sector organisation that has the same level of complexity as HMRC, given the range of sophisticated products in-volved in managing a tax administration. Deeply complex legislation and tax policies result in a highly diff erentiated and diverse business model which makes the work of the HMRC CIO even more diffi cult. Given that HMRC supports virtually every man, woman, child and business in the country, our scale is huge and covers everything from Self Assessment to Corporation Tax.

Secondly, the cultural diff erences are massive. In the private sector you fi nd a very common purpose around shareholder value, the custom-er agenda and the fi nancial success of the business. In the public sector you tend to have less focus on those outcomes and much more focus on public sector values, and providing eff ective services for the citizens who use those services. It’s a diff erent culture in that people are much more passionate about the service agenda as opposed to the fi nancial results and outcomes a private sector organisation would look towards.

There is this perception there is greater pressure on transparency or accountability in the public sector when completing IT projects on time and within budget. Do you agree?DS. No I would not agree; it may appear to be more diffi cult to be clear on accountability in the public sector but the reality is that accountability is even more demanding and stringent. Accountability is more layered be-

GOVERNMENT

With an annual €1 billion budget to juggle and the pressure of managing the mammoth IT operations of Her Majesty’s Revenue & Customs (HMRC), CIO Deepak Singh has one of the toughest technology jobs in Europe. CXO travels to Westminster in the heart of London to discuss his key projects, the impact of the recession and how he sees the role of CIO evolving.

“I don’t think I have come across a private sector

organisation that has the same level of complexity as HMRC,

given the range of sophisticated products involved in managing

a tax administration”

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have much clearer understanding and better planning around the propo-sitions we want to put forward and how they turn into IT solutions.

A huge outsourcing project continues to be the 10-year Aspire out-sourcing deal with Capgemini. Is it correct that you have extended this contract three years to 2017?DS. Soon after the Aspire construct was created we had the merger between Customs & Excise and Inland Revenue, which has gone really smoothly. We are now constructing the future of our outsourc-ing arrangements to drive transformation at pace. Th is will be achieved through the outsourcing arrangements with Aspire, so that we can le-verage the global skills, capabilities and expertise that key players like Capgemini have. Pre-merger with Customs & Excise, the Inland Revenue spend was projected to be around €3.5 billion to 2014. We are currently projecting that we are in the region of €8 billion, partly because of the Customs & Excise merger. It also refl ects the sheer amount of investment that has gone into modernising the department As a consequence there has been a huge investment in IT, which was not in the original expendi-ture projections, to enable that transformation.

cause of the political aspect and much more complex because, as well as public accountability, IT projects face the scrutiny of Parliament and its powerful committees. Not forgetting close media interest and also in depth examinations by bodies like the National Audit Offi ce. Overall, accountability in the public sector is much more demanding given the spread of customers and how Government IT impacts on citizens in a much more real way than a private sector organisation. Th ere’s nowhere to hide in the public sector.

How has HMRC progressed with efforts to slash the running costs of its IT infrastructure by 10 percent?DS. We achieved this target back in December 2007 so we are going even further and have a number of internal activities that will involve fun-damentally re-architecting our outsourcing arrangements. Th is doesn’t just mean we want to reduce the prices of services we have purchased but is more about looking at how we work and the accountability we have across the outsourcing organisation and internal organisation. We are also looking at how we work with our business and how we consume as well as procure IT services from within the HMRC construct. We want to

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On the subject of security, what have you done to tighten your defences since the loss of two unencrypted discs containing child benefi t-related personal data on 25 million people? DS. We now have locked down the use of CD-ROM and USB devices pretty much overnight on the back of the child benefi t data loss. We have encrypted every single laptop and only use USB-encrypted de-vices. We have also tightened up the accreditation of our applications to ensure they are secure and meet the standards that exist across gov-ernment. We successfully protect against 11 million intruder attacks every single year and we are not aware of anyone who has managed to get through. We have done quite a lot in terms of the technology to the point at which now the vulnerability and the impact of a data loss, be it the loss of a laptop or USB device, is much lower given the fact that we have pretty sophisticated and advanced encryption on these types of devices. Th e agenda has moved much more towards getting cultural and process issues associated with security embedded as a discipline. Th at is not saying that our staff within HMRC are not security aware because this is at the heart of any tax administration. Th e confi dential-ity of tax-payer data is an ethos that we have had for a long time. It is also not so much about understanding why security is important, but is about making sure our staff are enabled by having the correct and simpler processes by which to handle customer data.

Why is a robust IT infrastructure so essential to the successful and smooth running of HMRC?DS. Th e world is moving much more towards a society that requires in-teraction in a much more fl exible way – be it through the e-channel, text messaging, email or telephone. We have to make sure that our IT infra-structure is fl exible enough to support the changing needs of our custom-ers. Th e backbone of this is that if you assume that society will move to a self-serve agenda, whereby they can access services at their convenience as opposed to HMRC’s convenience, then inevitably you have to invest in robust ‘always on’ infrastructure. We still have a long way to go with seeing how far our customers move in terms of their channel shift but we are seeing this through self-assessment and other regimes. Th erefore, our IT investments are going to have to be much more 24/7 and stable to enable our customers to access our services at their convenience.

HMRC’s website has crashed in recent years under the strain of the sheer number of people trying to fi le their self-assessment tax returns online. What are you doing to make the site as stable as possible?DS. We received close to six million self-assessments online last year and 40 percent of those returns appeared within the last month of the 12-month period for returns. So there is this huge exponential growth in returns expected in the last month of fi ling. We have made huge invest-ments in the stability of our online portal over the last two or three years. Last year was the fruition of that investment in terms of making sure all of the components of our IT infrastructure were stable, resilient so that we don’t go through the same scenario that we had on January 31st 2008. Last year we had a 50 percent upturn in customers fi ling online and we did this with 100 percent availability without any real diffi culties. Th e service is stable and highly resilient.

HMRC is working with the British Bankers’ Association (BBA) to establish a secure electronic data transfer with the banks. What benefi ts will this deliver?DS. Th e secure electronic transfer solution has moved beyond the pilot stage and we have implemented it with two key BBA members. It means we can simply automate a lot of the data movements between ourselves and external third parties like the fi nancial institutions and the insur-ance companies. It also means that we have a much more streamlined process, with auditing capabilities. More fundamentally, doing these things electronically, as opposed to through manual handling, means we have created a much more secure environment. Within the next two years we expect the vast majority of BBA members to be transacting with us through the electronic transfer solution as opposed to through ‘remov-able’ media solutions. For instance, HMRC currently handles 40,000 media movements such as tapes, CD-ROMs and USB sticks, which are all securely protected through additional layers of encryption that we introduced in the last year or so. Th is will no longer be necessary using the secure electronic data transfer solution.

DEEPAK SINGH ON THE CHANGING ROLE OF THE 21ST CENTURY CIO:

“Most CIOs that I have met are technologists and don’t speak the language of the business. They manage the business by fear and they fi nd it diffi cult to get a seat at the table in terms of their voices being heard, so they are going to have to fundamentally change. You are seeing a prominence of CIOs coming through that are not traditionally from an IT background and I think this will become much more dominant in the future. It is saying that we want IT people who are much more akin to the business agenda as opposed to what the technology agenda is. I always believe that it is far easier to teach people about IT than it is to teach them about business. So the IT industry is going to have to change and it can’t be full of hobbyists and it’s got to be much more about people who are passionate about the customer and the business agenda and those who really understand how IT can enable that from a business perspective rather than a technology perspective.”


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DS. I think that is absolutely true. Th e agenda has shift ed

fundamentally. I think businesses, both private

and public sector, are going to be much more cau-tious about, one, their investments

and, two, the value of those investments

and the benefi ts they get from them. Th ey

will be much more cautious about

how they manage money and will expect

those organisations to be lean, including the IT func-

tion. Th at requires a diff erent mindset, it requires IT lead-

ers to take on a slightly diff erent remit that is not

just about modernisation but about getting your own

house in order. It is about making sure you are effi cient

in how you manage your in-ternal IT processes, how

you procure IT and that you leverage

much more the opportunities that the IT

industry is providing CIOs. For example, the whole concept of cloud computing whereby you buy services in the ‘cloud’ as opposed to creat-ing them yourself is all playing towards the agenda of making sure IT can be seen as a commodity and delivered through the most cost eff ec-tive means. I think you are going to see CIOs and IT leaders much more akin to that agenda than they ever have been in the past.

Also, I don’t think the IT industry itself is going to be any less af-fected by the downturn than any other industry sector. Typically, back-offi ce functions get aff ected by monetary or fi nancial squeeze and IT tends to be a back-offi ce or corporate services function. I believe there is still plenty of growth in the marketplace, plenty of opportunities for IT to play a supporting role and as a consequence of that, the economic downturn will have a short-term impact. But investment in IT is not really an option – it is obligatory for all organisations given that IT is an enabler of transformation and an enabler of more effi cient and eff ective services for our customers. In short, there is enough growth in the IT sector that will happen over the next fi ve to 10 years and that will overcome some of the short-term diffi culties in the next two to three years.

Presumably late fi ling would be solved by educa-tion? DS. We have struggled with how we educate and enable our custom-ers to smooth out the peaks and troughs that we get through self-assessment. What contributed to the 50 percent uplift in returns made online was the shift of the deadline for paper returns to Octo-ber 31st. Th is said to our customers that they have a choice: if they want to use paper-based returns then they have a much more limited window by which to transact with us. Th ose that are prepared to move towards an online channel have the extended deadline of January 31st. It still doesn’t fully remove the peaks and troughs and we have to both edu-cate and enable our customers to see the value of fi ling in a much quieter period. We don’t want to necessarily incen-tivise our customers fi nancially because it is tax-payers’ money but at the same time we have got to make sure people under-stand the benefi ts of doing this.

This is obviously a very tough time for all businesses – both in the private and public sector. What effect will the recession have on HMRC’s IT budget?DS. Anyone who works in IT is always challenged to manage their costs in the most effi cient way. Most CIOs and IT Directors do not go out and spend money for the sake of spending money. So this is a permanent agenda, whether in an economic downturn or otherwise. Th at said, the economic conditions that we see are going to lead to a much tighter squeeze on public expenditure than we have ever seen before. Th e agenda coming to the fore and being given much more attention by CIOs is the cross-government agenda i.e. how we can more holistically leverage across the public sector the opportunities to reduce our costs through economies of scale and by using the corporate buying power of the public sector as a whole. For ex-ample, the plan to consolidate our data centres, from 138 across the whole public sector, to less than a dozen is a massive cost saving opportunity. So the agenda is shift ing much more towards shared services across govern-ment and making sure we can achieve greater economies of scale.

There is a danger that this recession could affect the next generation of IT leaders coming through. However, you were quoted recently as saying the “next generation of IT leaders will be born out of this crisis”. Do you still believe this?

WANTEDCIO to fi ll a job labelled the

“biggest and most challenging in Europe”.

Deepak Singh is due to step down as IT chief in September and be replaced by Transport for London (TfL) CIO Phil Pavitt. The job, which was advertised with a starting salary of €125,000 but with potential for the right candidate to earn double this, was described as the “biggest and most challenging in Europe” earlier this year. Pavitt has been CIO at TfL since 2007 – his fi rst public sector role after opting for semi-retirement when he departed from Centrica.

“Our intention is to have Phil at least up to speed on the basic things by the time he starts in September” says Singh. “There will be a two-week handover period where we will take him through the challenges that we face as an IT function, right through to some of the operational issues that are being managed right now.”

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although he has a computer science background, he joins a growing list of business executives being handed top tech jobs across Europe. It seems that having a purely IT career is not always a golden ticket to the best CIO and CTO roles out there as organisations seek out business savvy individuals who can carry over their skills and experience to the world of technology. And with Klingenberg having worn various hats during his 13 years at Luft hansa, this no doubt furnishes him with a greater holistic overview of the airline’s operations.

Klingenberg also reveals that while it is certainly “tempting” to become a very much hands-on technology chief, he foresees the role being much more about steering the IT function in the right direc-tion. “It’s about setting the IT strategy and setting the rules for an architecture so you know what the systems we employ will look like in five to 10 years time. It’s also about the path we take to get a more consistent computer and architecture landscape, as well as what gov-ernance rules we should establish to arrive at that plan.”

AVIATION

Dr Christoph Klingenberg has only been behind his new desk as Lufthansa’s Passenger Airline’s IT chief since April but his in-tray is already overf lowing. With his predecessor Christoph Ganswindt swapping Lufthansa

for Deutsche Telekom, Klingenberg is busy getting to grips with overseeing a huge IT infrastructure migration project amid prob-ably the toughest economic period ever seen for the airline industry. Nevertheless, a buoyant Klingenberg has a clear vision of his role ahead. “The expectation is that I can strenghen the bridge between the various functions and the IT people” he remarks calmly. “It is certainly too early to judge whether I have achieved this but it is certainly my aspiration.”

Prior to his latest appointment he was Luft hansa’s Senior Vice President of Direct Services for four years, responsible for the planning and operation of all Luft hansa domestic and European direct fl ights not routed through the company’s Frankfurt and Munich hubs. And

SKY-HIGH TECWith German national carrier Lufthansa on target for a mammoth technology overhaul, we hear from Dr Christoph Klingenberg, the new Head of Information Management and CIO of the airline’s passenger business.

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users travelling with diff erent status levels.” CITP will also enable the 21 full Star Alliance members to better respond to market conditions and change class usage or schedules quickly to improve yield.

Like many of the legacy carriers dominating the skies, Luft hansa’s IT systems, especially those that handle departure control and check-in functionalities, need to be switched in the long run. Indeed, some of its older systems are between 15 and 30 years old, which creates mainte-nance and upgrade problems amongst other challenges. Luft hansa was one of the fi rst Star Alliance partners to shift its inventory system to

the CITP, which was a deliberate move according to Klingenberg. “Instead of being a late follower of developments that we

could not shape, we thought it would be a good idea to shape this development and partner with Amadeus

in order to get a system that would suit our needs. We can exert a lot of infl uence to get our functions and processes into the new system, but of course this is much easier to get done if you are the fi rst company to migrate rather than the 25th.”

As well as CITP, Klingenberg is also busy with the self-service check in functionality, designed to

make life easier for passengers, as well as improve effi -

IT Migration Th e bulk of his work (as it was with his predecessor Ganswindt) is

focused on the mammoth Common IT Platform Initiative (CITP) – a multi-million euro project powered by Amadeus to migrate Star Alliance partners’ loosely connected IT infrastructures to a common platform. Th e goal of the CITP is to better serve customers, slash IT costs and boost the speed of launching new products to market. Th e switch over has been carved into three key parts, with the fi rst achieved 18 months ago when the old inventory systems were migrated. Th is fi rst stage alone reduces Luft hansa’s IT-costs considerably. “Th e ticketing function will be moved over in November 2010,” Klingenberg explains, “and one or two years later we plan to migrate the whole of the departure control systems, such as check-in and fl ight handling at the airport.”

For this IT chief the benefi ts have been clearly visible thus far: “It has already been a huge economic benefi t to migrate the fi rst step,” says Klingenberg. “Th e other steps will bring lots of new functions, such as being able to accommodate customers much faster at the airport or off er, for example, dovetailed services to the diff erent frequent fl yer programme

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56 www.cxo.eu.com

ciencies and cut costs for the airline. In Frankfurt, manual check-in capac-ities have been reduced for economy class passengers as they can check in using the internet, their mobile phones or the kiosks at the airport, which has created “big value” for customers and the airline according to Klin-genberg. He adds: “Th e customer can be master of his own destiny and it creates value for us because we can free up resources at the airport reduc-ing those manual check-in functions.” So how has the response been from customers? “Generally, it has been very positive,” he notes. “It has been an especially positive response from those who are checking in and reserv-ing their seats using their internet-enabled phones whilst on the move.” To keep Luft hansa operating smoothly the passenger airline wing of the group is powered by some 200 systems managed by 400 staff . Luft hansa opts not to do programming and coding in house; instead these functions are outsourced to the likes of IBM, Amadeus and Luft hansa Systems.

Haircutting Th e CITP transition and other new technology implementations

coincide with a period where the airline industry is sustaining a severe battering from the turbulent economic conditions of the past two years. Th e re-cession and cuts in corporate travel, com-bined with extremely volatile fuel prices have grounded some carriers and left the likes of British Airways with mounting losses and staff layoff s. Like any indus-try the airlines need to cut costs where necessary, and Luft hansa is no diff er-ent in that regard. “Our [IT] budget has had a haircut of 10 percent, which means we are mainly cutting external expenses,” the CIO remarks. “All the IT projects have to jump some tough economic hurdles, and the payback has to be within a couple of years but we identifi ed some projects that we could postpone without much harm to the business. And we feel it is valuable to have the know how, especially when it comes to supporting all the big proj-ects we have here.”

In these lean times where every euro counts, IT can sometime feel the force of budget cuts as a prudent CFO takes a tight hold of the company’s purse strings. Without technol-ogy, however, the airline industry would be crippled. “You won’t fi nd a manager in the airline business who tells you that IT is an unnecessary expense,” Klingenberg states. “Our CEO has been a huge promoter of the CITP, for example. He sees it as an enabler for consolidation.

“Every airline has its own IT system and they don’t really talk to each other. So problems can be overcome once we migrate a lot of air-lines to the new Amadeus system. I would say it has been rather easy to convince top management to free the funds to support this project,” Klingenberg concludes.

urse strings. Without technol-be crippled “You won’t find a


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ENTERTAINMENT

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It’s a Th ursday morning in July at Betfair’s headquarters in Hammersmith, London, overlooking the River Th ames. Tiger Woods has just teed off at the British Open on a windswept Turnberry course while England’s cricket team is about to lock horns with Australia in the second test match of the Ashes. Th ere’s a buzz in the trading room as call handlers match bets from punters over the phone while arm-chair gamblers ‘back’ and ‘lay’ (see page 58) on Betfair’s website. Computer screens in the room are a frenzy of activity as money from all over the world comes pouring in for Tiger who is now a clear 2/1 favourite. Today’s going to be one of the busiest betting days of the year.

Betfair currently boasts more than two million registered customers from more than 140 countries. At peak periods the site has to be robust enough to stand up to 450,000 page views per minute and 1000

bets a second. Keeping this extremely complex site running smoothly 24/7 is the responsibility of the company’s ebullient American CTO Tony McAlister. Although having only been in the tech hot seat for six months, McAlister is relishing the job so far and the technology challenges ahead as Betfair looks to penetrate new markets around the world. He is also in awe of what founders Andrew Black and Ed Wray have created in nine years, turning the company from internet upstart into the world’s largest betting exchange with a 90 percent share of the market. “I get to stand on the shoulders of giants, as Isaac Newton once wrote,” McAlister explains. “What the company does today is because Ed Wray and Andrew Black created the exchange nine years ago, which is a pretty incredible foundation for me to build from.”

When the company launched in June 2000 just UK£30,000 was matched between punters on the opening event – the Oaks horse race. Fast forward to July 2009 and a wallet-busting UK£53 million was matched on the fi ve-set thriller between Roger Federer and Andy Roddick in the men’s Wimbledon fi nal. Th is was a record for Betfair. “Th e volume [of bets] here is astronomical,” McAlister enthuses. “Th is creates the obviously huge challenge of maintaining the appropriate level of uptime and response time for our customers.” And while the site started life as a sports exchange, Betfair now houses an online casino, poker room, games and more. Unsurprising, the role was somewhat of a baptism of fi re for McAlister who

With around 6.4 million transactions completed every day, online betting exchange Betfair is busier than all of Europe’s stock exchanges combined. It’s a British phenomenon born in the aftermath of the dot.com crash that has become a red hot favourite among shrewd punters. Julian Rogers goes behind the scenes and meets CTO Tony McAlister.

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has 30 years’ experience in systems development in non-gaming related industries across Europe and the US.

He admits that although he enjoys sports, the only wagers he has ever struck were in his homeland on casino blackjack or the odd game of poker. Getting his head around how the exchange works, the markets and gaming on off er, as well as gambling rules and legislation, was ini-tially a tough hurdle. “It’s been a pretty steep learning curve,” he admits. “However, I am more excited about the job today than when I fi rst took it, mainly because of what I have learned about the industry, the company and the growth possibilities, as well as the tools and the pretty amaz-ing people I have here to help solve problems.” He also reveals that his impression during the interview process was that this was more of a technology company than a betting company. “Aft er six months I can strongly say this is indeed what it is.”

Place your bets now For McAlister and

his customers, speed is of the essence. A signifi cant chunk of betting activity on the site occurs ‘in play’ right up to the fi nishing line or the fi nal whistle. But while cricket matches can last fi ve days, other sports like a fi ve-furlong

it is.

HOW IT WORKS

At Betfair punters with differing opinions on an outcome can wager with each other instead of using a traditional bookmaker. For instance,

John thinks footballing giants Barcelona (2/1) will beat a star-studded Real Madrid in the Spanish capital. He wishes to bet €10 at 2/1, which will return €20 plus his €10 stake (€30 in total). On the other hand, Jack believes Barcelona won’t emerge victorious so ‘lays’ (accepts) John’s €10. If Barcelona lose or draw he pockets the €10 but if they win he pays John €20 as well as his original €10 bet. Betfair then charges commission of between two and fi ve percent (commission is reduced the more

you use Betfair) on winning bets. If you don’t fancy the odds on offer

you can ask for a better price. Likewise, you can determine what odds you offer when you lay a selection. It’s then up the other players whether or not they chose to place a bet with you. More importantly, because you are betting with individuals you can often get better odds than those on offer with a bookmaker who has to factor a profi t margin into his odds. At Betfair all bets are matched

anonymously with gamblers all over the world and you can wager on a bewildering array of markets (9700 a week) – from popular sports and events like horse racing and tennis to the more obscure such as water polo and this summer’s hottest temperature.

In-play betting: not for the faint-hearted

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horse race lasts around one minute from start to fi nish. Punt-ers will be backing, laying and trading their positions in play as the sprint unfolds. “Speed is key because I have to get those bets matched very quickly for the customer,” he explains. “When [David] Beckham steps up to take a penalty people will be trading their positions at this point so if I am a second late the shot has already been taken.”

Betfair claims that 99.9 percent of all transactions are executed in less than a second – the average time is 23 mil-liseconds. Th e complex IT infrastructure powering Betfair is an Oracle database. In fact, the California-based fi rm rates Betfair as one of it’s top fi ve customers, alongside the likes of eBay and Google. “I have some of the most sophisticated Oracle PL/SQL developers in the world,” says McAlister. “We push that database probably as hard as any Oracle customer, which creates a lot of opportunities from this database that they don’t get to see from their other customers.”

As well as his engineering team at Betfair HQ, McAlister also has 65 local developers and staff at his disposal in the Romanian city of Cluj, dubbed the Silicon Valley of Eastern Europe. Th is Betfair-owned facility is responsible for around a quarter of the company’s development projects and is focused on innovations. “We have given them some of our product sets to build and it is our intention to double the size of the team in

the next couple of years. It is also allowing me to stretch my development team outside of London and I am looking at other parts of the globe too.” McAlister recently returned from Romania to welcome the team onboard and spent a few weeks in the US in June interviewing people with a view to expanding a technical team across the pond.

The right architecture Th e globalisation of the back-offi ce functions mirrors the exchange’s

desire to crack new markets as it becomes an increasingly recognised player and international brand. However, McAlister is forced to create what he calls “jurisdictional architectural” due to the legal constraints of

“One of the things both I and the company believe

in is investing in a business during a downturn”

Software engineer and former professional gambler Andrew Black formulates the idea of being able to buy and sell, or back and lay, sporting event outcomes in a similar fashion to buying and selling shares

19982000 Site launches with its fi rst market being the Oaks horse race, won by Love Divine. UK£30,000 is matched on the race

2003 Betfair wins the Queen's Award for Enterprise, in the Innovation category, on the recommendation of the British Prime Minister

First in-play market offered on UEFA cup fi nal between Alaves and Liverpool. Betfair merges with rival Flutter.com

2001

Tony McAlister


www.cxo.eu.com 63

ability to do this?’. Keeping your eye fi rmly on what the business is trying to achieve and not being distracted by your ‘IT blinkers’ is key. Indeed, McAlister says he always “stays close” to the business.

“I have been in technology almost 30 years now but I have always viewed myself as a business person fi rst and foremost. I work directly with the business and get to know it very well and work closely with my commercial counterparts. I attend all of their meetings, stand in there and do strategy sessions with them, and these might not have anything to do with the technology itself.”

Back a winnerAs the interview winds up I pick McAlister’s brains on how the

blackening recession will impact on Betfair and its technology functions. When a recession bites people will look to curb their expenditure

and gambling could be one pleasure to get the chop. McAlister believes however that the company will emerge from the

downturn stronger and healthier, which is why invest-ment in IT people and technology is being made now. “One of the things both I and the company believe in is investing in a business during a downturn,” McAlister suggests. “Th e whole world knows the market now is in a pretty diffi cult fi nancial situation. Betfair is cautiously

optimistic that we are doing OK and we do believe the market will turn around. My goal is that when we come out

of this recession, we will have a stronger architecture, better products and services, a more effi cient development process and

have a globally dispersed technology team.” Staying in tune with where the business is heading and its require-

ments will be paramount for this IT chief. “I need to align my technical architecture with the business architecture so I have got to build an in-novative platform that can change quickly into diff erent shapes and sizes that I cannot even see today.”

In case you were wondering, Tiger Woods struggled with the inclem-ent weather and crashed out of the British Open before the third day’s play. Th is time the layers got it right and bagged some juicy profi ts.

operating a betting exchange in certain countries. “As we expand globally we realise that we need to build our solutions and products and services so that they can easily be turned on or off depending on the regulatory requirements. Th erefore, I have to make sure my technical architecture matches the business architecture and go into a region and use one prod-uct but not another and then a diff erent product in another region. Th at has created a pretty diffi cult challenge for the technology department here.” McAlister has spent a great deal of time recently in the company of Betfair’s legal team and the regulators to better understand what he can and cannot do in certain regions. Th e company plans to overhaul its platform in order to react nimbly to legal changes in countries where it does not yet operate. Th e idea is for a ‘Betfair in a box’ system that can be rolled out should laws allow Betfair to enter.

One medium McAlister has been keen to get his teeth stuck into is Betfair Mobile. Th is stripped down ver-sion of the site allows users to place bets and check odds through their internet-enabled mobile phones. And with previously experience as CTO of Vodafone’s mobile content division, he is confi dent he can leverage its power. “Mobile is a perfect example of what was traditionally in the internet boom, around 1999/2000, one-to-one marketing. With mobile I really can do that because you have that computer in your pocket and I can get to you anywhere you are and likewise you can get to me.” He continues: “I want to leverage mobile and use the power of the exchange to push our mobile products more strongly than most people are doing today.”

With all of these back-offi ce and customer-facing technologies on his plate, it’s clear to see why he feels Betfair is more about technology than gambling. And while his remit is to align the IT architecture with the business architecture, he has found technology can prove to be a real game-changer. “Sometimes because the company is very technically fo-cused and very innovative, the technical architecture can infl uence the business architecture. I can go to them and say ‘do you know I have the

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1000 bets are matched

every second

Successfully migrates 300,000 customers to Betex, its new platform. Also hosts its fi rst online poker tournament with UK£100,000 prize money

2004

2005 Named the UK's seventh fastest-growing technology company in The Sunday Times Tech Track 100. Betfair is granted a licence in Austria, its fi rst outside the UK

2006 French, Bulgarian and Czech language sites are added, taking the total to 18 worldwide. An online casino launched

2008 Registers its two millionth customer. Wins an unprecedented second Queen's Award for Enterprise, this time in the International Trade category

A record UK£53 million is matched on the men’s fi nal at Wimbledon between Roger Federer and Andy Roddick

2009


64 www.cxo.eu.com

In the current economic climate why is it so important to have businesscontinuity systems in place?Herman Meuldermans. Escrow is a legal, technical and administrativearrangement in which an asset (e.g. source code) is deposited into safekeep-ing with a trusted third party – the escrow agent. If contractual conditions aremet, the escrow agent will deliver the asset to the party prescribed by the con-tract, mostly the user of the technology. Thesedays, trust between business partners tends tobe institutionalised. Over the past few monthswe’ve seen that the complex business relation-ships as we know them, essentially are basedon mutual trust. What happens if trust sud-denly disappears? The thing collapses.Business partners still like each other, andwant to continue doing business with eachother. But they are careful, more than ever de-pendencies have to be secured. That’s exactlywhat we do. We could state therefore that thecurrent economic climate is in favour of prod-ucts such as ours, offering security and guar-anteeing business continuity.

What business continuity challenges arebusinesses currently facing?HM. There are a lot continuity challenges, ofcourse. The one that’s very often forgotten, orthat’s being thought of too late, is the depen-dency of a supplier. When it comes to IT sys-tems or technology in general, this dependencycan be very, very critical. As well as any othercompany, suppliers, due to the economic game,can win, can lose, and can fail in delivering theexpected service. This can have very nasty con-sequences. Realistic suppliers are aware of theirposition and take pro-active action. Togetherwith their service agreement, they offer an escrow contract to their clients. Thusthey show themselves as a reliable partner, they turn their weakness into astrength. We help them do this.

What common mistakes do companies in Europe face when it comes tobusiness continuity?HM. I wouldn’t call it a mistake, rather a lack of awareness. When it comesto continuity, a lot of company issues are almost naturally thought of. Ontop, of course, management teams think about financial conditions, in-

cluding shareholder perception. Production and service issues come next,followed by marketing and sales. People are important too and a huge ef-fort is put into human resources programmes. In this context, also knowl-edge management is very often mentioned. All of this is administrated byhuge and sophisticated IT systems, costing immense amounts of money inboth development and support. Is continuity of this critical infrastructure

assured to an acceptable level? Is there an es-crow-arrangement in place ?

Even a company relying on its own per-sonnel when it comes to IT or technology de-velopment is essentially dependent fromthem. If the team disappears, what happensto the knowledge of the system? Escrow ser-vices reach beyond the safeguarding of adepot. The technical team will always verifyif the depot is what it’s supposed to be; theadministrative support team will update thedepot at least once a year, thus continuouslyguaranteeing maximum usability to the user.Whether technology is created internally orexternally, due to the structured and updat-ed verification service, continuous use of thesystem is guaranteed.

You talk a lot about dependency betweenusers of technology and the suppliers of it.What’s the use of escrow services for sup-pliers? Aren’t they considered to give awaytheir intellectual property?HM. Indeed we speak of beneficiaries whenwe mean users. If something goes wrong,they receive the deposit, including sourcecode. But I don’t agree with the statementthat suppliers give away their intellectualproperty. They don’t. On the contrary, they

secure it by depositing it.Our contract very clearly states that the IP remains property of the sup-

plier, whatever happens. When a deposit is given to a user, he obtains theright to further develop the source code for his own purposes, nothing elseand certainly no commercial objectives. A very significant penalty is fore-seen in the contract. n

Fail to prepare and prepare to failBurying your head in the sand when it comes to business continuity planning is

just not an option today. CXO hears more about this critical function withindustry expert Herman Meuldermans.

EXECUTIVEINTERVIEW

Herman Meuldermans, General Manager of Escrow Europe, holds a university degree inSocial and Political Sciences from the Catholic University of Leuven. He started his careeras an account manager for ING Insurance in Belgium and later worked as a principalconsultant for almost six years for a Dutch consultancy bureau.

“When it comes to continuity,a lot of company issues are

almost naturally thought of”

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W hen I founded the Anti-Phishing Working Group in 2003, I thought that we would have eliminated

phishing by mid-2004. How wrong I was.Th e Anti-Phishing Working Group

(APWG) was founded to bring together the diverse communities of banks, ISPs, e-com-merce companies, security vendors and law enforcement agencies. Our core philosophy was to create a forum where these diverse players could talk frankly and honestly about the evolving phishing attack situation, without fear that these conversations would become public. Th is format proved to be im-mensely successful, and the APWG now has over 1500 member companies and govern-ment agencies.

In 2003, phishing attacks spread from attacks against eBay and PayPal customers to a wave of coordinated attacks against the cus-tomers of Australian fi nancial institutions. In the summer of 2003, these attacks were then aimed against customers of UK fi nancial insti-tutions and in late 2003 US banking customers began to be targeted.

Th is global pattern indicated that cyber criminals were becoming just as organised as traditional crime gangs. Th ey were testing new techniques in smaller markets like Australia, where users are easily targeted by their network address and because there are a smaller number of fi nancial institutions. Th e model was then perfected and expanded in the UK, where there were still a small number of institutions, and an easily targeted customer base. Th e scam was then scaled up to the US market, particularly targeting customers of the top few banks.

It became clear that one particular group could not solve the phishing problem on their own. It would require cross-industry collabo-ration. Th us the APWG was formed.

As phishing scams became ever more so-phisticated and professional, members of the APWG were able to discuss the evolving tactics and best practices for detecting these attacks, shutting down the phishing sites and tracking and reducing losses. In closed-door APWG meetings, members were able to discuss the indirect fi nancial losses from phishing attacks; for example, the costs of call centres receiving tens of thousands of phone calls from consum-

SECURITY

David Jevans discusses the challenges of fi ghting a global war on phishing and crimeware during the fi nancial crisis.

Phish tales

ers when a major attack was launched.Th e APWG publishes monthly reports

that track phishing statistics around the globe. Th ese statistics allowed us to see pat-terns where some fi nancial institutions would be attacked with much more intensity than others. Eventually it became clear that one signifi cant factor in the number of attacks that an institution faced was related to how easily criminals could transfer funds out of compromised customer accounts. We also began to see cross-channel fraud, where account numbers and PINs were used to create ‘white plastic’ ATM and debit cards. Financial institutions started to realise that the phishing problem spanned all types of fraud, and was involved in ATM, debit card, cheque card, wire transfer, ACH and account opening fraud. More recently we have been seeing the telephone banking channel used as an attack vector, where phishers send out emails requesting customers to call a fake call centre, where the IVR system is used to collect account numbers and PINs from customers without them ever having to visit a spoofed bank website.

The cyber criminals fi ght back

Th rough 2005 and 2006 the security community began to develop anti-phishing technologies and service off erings, such as outsourced takedown services, to get spoofed websites shut down in a timely fashion. Th e phishers responded by increasingly hosting their spoofed websites in foreign countries, making takedowns very time consuming, re-quiring foreign language skills and extended working hours to deal with sites hosted in varying time zones.

For every defensive measure that is put in place by the industry, the criminals react with a creative new approach to continue their fraudulent activities. For example, the security and web browser community began to track known phishing sites and share those web addresses as a block-list, which would allow browsers and email servers to prevent users from receiving known phishing emails or vis-iting known phishing sites. One of the promi-nent phishing gangs, known as the ‘Rock Phish Gang’, responded by using tens of thousands of sub-domains on their phishing sites, thus overwhelming the block-lists.

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A very disturbing trend over the last year has been the use of social networks to spread crimeware and phishing. Th ere have been at-tacks against users of MySpace and LinkedIn that have infected tens of thousands, and in some instances up to a million users in a very

short time frame. Th ese attacks do not rely on traditional email, as they spread inside the social networks using their internal web-based messaging systems. Th is can make these at-tacks very diffi cult to track and profi le.

2009 and beyond We expect that the current global fi nan-

cial crisis will continue to give phishers new ways to create believable social engineering attacks to steal account credentials and to spread crimeware. In the fourth quarter of 2008 there were numerous attacks against customers of major fi nancial institutions that were being acquired or were in the news as re-ceiving government aid. In 2009 we can expect

Another example of escalation in the war against cyber fraud was the invention of fast-fl ux technology by the leading phishing gangs. Fast-fl ux is a DNS technique used by botnets to hide phishing and malware delivery sites behind an ever-changing network of compromised

hosts acting as proxies. A sophisticated type of fast-fl ux is when multiple nodes in the fraud network register and de-register their addresses as part of the DNS record list for the DNS zone. Th is makes taking down phishing and crime-ware sites extremely diffi cult, as they are hosted on many machines with changing IP addresses. Th e APWG and our members have been work-ing with ICANN, the Internet Corporation for Assigned Names and Numbers, to create poli-cies for rapid takedowns of fraudulent domain names that are being used to host phishing and fast-fl ux sites. Th is has been a multi-year eff ort, and there is still much work to do with policy and education among the registrar and registry communities.

David Jevans is the Chairman of the Anti-Phishing Working Group. For more information, please visit www.antiphishing.org

Over the last several years we have seen phishing augmented by the spread of malicious software that is designed to steal online account details. This malicious software that is designed for electronic

crime has been dubbed ‘crimeware’. The crimeware wave seems to have started in Brazil in 2003, and has spread around the world. Crimeware variants are merged with remotely controlled malicious software to create networks of hundreds of thousands of compromised home computers (botnets) that are used by cyber criminals to launch phishing, crimeware and spam attacks. The botnet explosion since 2006 has infected millions of personal computers around the world that are being used by criminals without the knowledge of the person who owns the computer.

Recent activity in the crimeware landscape is the evolution of targeted crimeware that is designed to get on to the computer of a targeted employee in a large corporation or government agency. Once that person’s computer is infected, the criminals can upgrade the crimeware to add new functionality to compromise other computers, steal

intellectual property, create backdoor access paths into the corporate network, or even to run customised software to generate transactions inside the company network. This represents the ultimate professionalism of the cyber crime industry, where crime gangs plot attacks for many months, and using highly sophisticated crimeware and targeted social engineering to get it into corporate networks. This is called ‘spear phishing’.

CRIMEWARE ESCALATION

an increase in money mule recruitment scams, where criminals recruit unemployed consum-ers to act as online funds transfer agents, or to reship goods that were purchased using stolen credit card numbers.

Th e rapid and continuous evolution and expansion of online fi nancial fraud through phishing, crimeware and social engineering is something that requires a coordinated global response from the fi nancial services industry, ISPs, security vendors, e-commerce merchants and law enforcement agencies. Th e APWG and our members have been working to expand our systems and tools for secure collaboration and data sharing. We have facilitated the sharing of phishing site URLs between members, and are expanding this to allow fi nancial institutions and security researchers to share information about fraudulent websites and IP addresses of known and suspected cyber criminals.

In these challenging fi nancial times, it is more important than ever for the fi nancial services industry, the security industry, ISPs and law enforcement to work together to share information and pool our resources to keep our customers safe, and to secure our assets. Come and join us.

“We expect that the current global fi nancial crisis will continue to give phishers new ways to create believable social engineering attacks”

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How can IT managers achieve cost savings and a better data centre performance at the same time, especially in today’s eco-nomic climate?Trevor Dearing. Most data centres have evolved over a period of time and much of the network architecture is consistent with that used in traditional campus networks. Capacity and resilience have been designed into networks by adopting a multilayered approach with a one-for-one redundancy to deliver the same per-formance in the event of failure as you would expect normally. Equally, in a drive to make the data centre more secure and provide protection for users and applications, a very complex se-curity infrastructure has been built in parallel

to the core network. All of this adds up to a data centre network that can be very complex and diffi cult to manage. Th e challenge is that because of the way it has been built people may not notice just how complex it is because it is what they are used to. By simplifying the infra-structure it is easy to achieve an improvement in performance, security and reliability.

What is the most cost effi cient way for companies to overhaul their data centres and how will they achieve the best return on investment from such a move?

TD. Unless you are building a new data centre, it is not always easy to start from scratch. Th e easiest fi rst step is to move to a more power-ful integrated security platform. Instead of racks of separate security devices, a single device can replace the multiplicity of boxes and deliver security as a service to users and applications. Th e second step is to remove layers of switching from the physical infra-structure. Juniper Networks can reduce the number of managed devices by a factor of 10, so removing physical links and reducing the spanning tree issues. Th is is achieved through two methods: the fi rst is to consolidate the edge and to deploy virtual chassis technology, which makes multiple top of rack switches

act like a single switch. Th e second is to use a very high capacity switch in the core of the network, which allows us to remove the ag-gregation layer completely.

What new IT trends are currently infl uenc-ing the way companies manage their data centre resources?TD. Th e big issues are virtualisation and con-solidation. Th e fact that a single server can now do the work of many older devices deliv-ers much more scalability and a reduction in fl oor space. New virtualisation techniques

mean that multiple applications can be run on a single system and this makes much better use of available resources. However, these things are not without risk and need some careful planning. Both of these technologies can have a signifi cant eff ect on the network and so this should be considered in the design. Higher capacity servers will naturally require more bandwidth and virtualisation will change the security model.

Why are more companies now moving to-wards a centralised data centre as opposed to a decentralised system?TD. Some years ago, decentralisation was viewed as the way forward. By using all of the computing and storage around the network it was believed that the cost would come down signifi cantly. Th e challenge with this was that the ability to manage and secure distributed processing and storage was just too high and that centralisation made everything much more manageable. Th is is especially true in a world of WEB 2.0, SaaS (soft ware as a service) and SOA (service-orientated architecture) where an increasing amount of traffi c actu-ally stays in the data centre. Th is has a major impact outside of the data centre, as it makes the use of thin workstations more appropri-ate, delivering an easier to manage and more secure model. Th e balance to this is that if the network fails or delivers low performance then the operation of the organisation is directly aff ected. Th e reality of realising the benefi ts of a centralised model is that the net-work needs to be faster, more secure and more reliable than it has ever been before.

Putting data at the heart of your business

Juniper Networks’ Trevor Dearing speaks to CXO about managing a data centre to get the best performance.

Trevor Dearing is the Head of Enterprise Marketing for Juniper in EMEA. He has worked in the telecoms industry for 23 years in a variety of roles. He began in R&D developing networking solutions for digital CO voice switches, and newly-invented Ethernet technology. His career then moved to a predominantly data networking focus.

EXECUTIVEINTERVIEW

“Unless you are building a new data centre, it is not always easy to start from scratch. Th e easiest fi rst step is to move to a more powerful integrated security platform”

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Information security is vital to almost every department within or-ganisations today. What would you say are your biggest issues and challenges when it comes to protecting the business from security breaches?Paul Wood. Th e issue today is around data loss more than anything else. It is the thing that is in consumers’ minds as much as it is in the minds of organisations. Th e other issue aligned with this is the potential for fi nancial crime and the exploiting of personal data. Th e main challenge, however, is around making sure that once something happens we are able to react to it appropriately, realistically and pragmatically. Oft en the issue becomes much worse if the incident response plan is not done in the proper and robust manner. It is about how we assess what that particular incident or breach was and how we risk assess what the impact became to the business. If it involved customer data then you have to assess the potential of that exposure for the customer. You need to see how you will limit that exposure, learn lessons from a particular mistake or error and how you will manage everyone’s expectation.

In the UK we have seen some pretty serious security breaches and confi dential data going ‘missing’, even within government depart-ments. From your experience what would you say are the common mistakes that organisations make when handling, storing and moving data?PW. Understanding where data is at any one point in time is probably one of the biggest challenges organisations have. Also, getting the indi-viduals inside businesses to understand the true value of information is a challenge in itself. So, a company may not adopt the appropriate security measures to reduce the potential for the risk of exposure of the data if it does become lost. Th is could mean not adopting sensible encryption mea-sures, looking at how to stop or control data leaving systems or the area of mobile computing and how people use these devices. Th ey may think it’s just a toy they have been given and don’t understand the powerful nature of what that particular device might contain.

In most organisations people are the biggest risk. In presentations I have given on security I talk about there being no patch for stupidity,

ITSECURITY

Meet the gatekeeperWith the potential for data leaks to infl ict serious fi nancial and reputational damage on organisations, CXO seeks the advice of information security afi cionado and Aviva’s CISO Paul Wood.

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How do you weigh up the risks versus the reward of introducing new technology for Aviva em-ployees? For instance, a technology may allow for greater productivity from staff but is a risky proposition from a security standpoint.PW. We look at a new technology, conduct a risk assessment to see where the weak points are and the counter-measures we can introduce, and arrive, at a position where we are all comfortable. Th at may mean that for a period of time we don’t get the full benefi ts of that productivity if we feel the risk is too high. Equally, it may mean that we live with it [the security concern] but we look to try and mitigate it as the new technology develops. Mobile devices were a good example of this be-cause in the early stages everybody wanted them but the levels of controls that you could position on those devices have only developed and grown over time. But we shouldn’t shy away from these things because technology enables business. What we have got to do is fi nd cost-eff ective and prag-matic ways of reducing the risk from using these new tools.

When it comes to investing in new security technologies, bosses can fi nd it hard to quan-tify how IT security benefi ts the business. You spend money but you see nothing much in return because it is there to purely protect the business. How do you ‘persuade’ management

to invest in security?PW. Th e days when people thought this was a ‘nice to have’ and we did it because it was the right thing to do have done. People understand that customers, clients and partners all expect there to be a level of security that they are going to have to work through and expend to make sure the data that people entrust to us is protected in a pragmatic and sensible way. What we have turned around is to make sure that security is built in at the beginning of a project and not retrospectively. Management also need to accept that security is part of a project’s lifecycle and it happens as a matter of course.

which is about the ‘people risk.’ Oft en it is not de-liberate but human error and mistakes or people trying to do the right thing but it goes wrong. However, there is the potential of the disgruntled employee or there is the chance for someone who wants to steal corporate data because they want to take it with them to a new organisation. Th e risks are split about 80-20 percent. By this, I mean there is an 80 percent risk of theft internally and 20 percent externally. Lots of people talk about hackers and threats from the outside world but the risks are much greater internally for any organi-sation. Staff already have access to your systems, they understand your management processes and controls that you have in place and know how to work their way around them. Th e only thing you can do is to have good security education aware-ness, ensure people know that sensitive data theft and corruption of data – be it through planting malware or Trojans – is unacceptable. If you go back and look at the disgruntled ‘mal-intended’ events of the past you can nearly always predict that the event was a possible. Th e individual will have either exaggerated signs of bad behaviour or will have been disgruntled by the way they have been treated or will have been not happy with their pay review. But people then continue to let them have access to systems instead of realising this could be a problem child and there is a need to limit this individual’s access.

If you choose to outsource, again you struggle to defi ne and protect the perimeter. What’s your advice in this area?PW. I think the issue is about protecting the data and not the perimeter. It doesn’t matter how the data is being processed and what mechanism is being used to access the data because it’s about ensuring that the mea-sures you put in place to protect the data are correct. It doesn’t matter if it is a laptop or desktop or a portable device – it’s about making sure you have the appropriate level of encryption, controls around access and that you are regularly reviewing that the people using these devices have the right level of access. You also need to educate people about not sharing passwords and log in details but if you do discover this to be the case you need to deal with it eff ectively and promptly in line with your policies.

At Aviva we outsource a fair amount of our call centre and back-offi ce processes and a bit of IT development. We do very thorough due diligence over selecting the partner we are going to do business with because we have to make sure that the negotiations and discussions over security parameters are very clear. It’s important that they understand that this is a two-way undertaking and that we want them to operate as if they were part of our organisation and apply the same rules and pro-cesses. It’s a partnership approach to make sure we get to where we want to be so in reality it’s no diff erent than the outsource company actually working inside Aviva.

Paul Wood

“Th ere is an 80 percent risk of theft internally and 20

percent externally. Lots of people talk about hackers and threats

from the outside world but the risks are much greater internally for

any organisation.”

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In the 21st century, people are com-fortable with processes validating aspects of their backgrounds. No one expects to apply for a job, rent a fl at, or procure an identity card without a

background check. A parallel development oc-curred on the web, where analogous processes for online businesses have been developed. Th is evolution was required to secure the in-creasingly sensitive information exchanged over the web against threats that arose to ex-ploit the various vulnerabilities, technical and human, inherent to transacting online. Busi-nesses benefi t greatly by understanding these authentication processes and the credentials granted to websites as a result of them, namely SSL certifi cates.

An SSL certifi cate is an electronic fi le iden-tifying a site and enabling encrypted commu-nications, issued by a Certifi cation Authority (CA). Certifi cates assure consumers that they are doing business with a legitimate website. To authenticate a site, CAs perform investi-gations similar to background checks. Th ere are three commonly recognised categories of authentication: domain, organisation, and Extended Validation (EV). Diff erences in the levels are vitally important. Even within a cat-egory, authentication processes vary amongst CAs – a key reason for choosing a trusted one.

Domain Authentication: Th ese certifi cates use the lowest form of authentication. CAs verify that an entity requesting a domain au-thenticated certifi cate either owns the domain

or has the right to use that domain name. Some leading CAs, such as VeriSign, do not off er these certifi cates.Organisation Authentication: Organisa-tion authentication is employed for ordinary certifi cates. CAs verify the organisation’s ex-istence through a government-issued business credential, normally by searching government and private databases. Before issuing the cer-tifi cate, CAs confi rm the company’s right to use the domain name and that the individual who requested it was so authorised. Authenti-cation practices for this type of certifi cate vary between CAs. Businesses should research this process when choosing a CA. Extended Validation (EV) Authentication: EV is the highest authentication level, adding

structure and controls to the organisation au-thentication process. Th e process starts with a signed acknowledgement of agreement from the requestor. CAs then validate registration documents or legal opinion letters to confi rm details about the company or requestor. Th e

ASK THEEXPERT

Background checks onlineThe authentication processes underpinning the issuance of online credentials are becoming increasingly important for websites as cyber crime grows in sophistication and the internet becomes a less trusted place. By Deborah Clark.

process represents little burden for legitimate organisations, but is a substantial obstacle for a fraudster.

SSL indicators such as ‘https’ in the address or the gold padlock icon were once suffi cient to quell consumer fears; they provided assur-ance that data transmission was encrypted. However, the strongest encryption is no longer enough because of a diff erent problem. Phish-ers pose as genuine e-businesses. Th ey pur-chase certifi cates from CAs that perform weak authentications, using them to trick customers. Encryption does no good if the recipient of the transmission is a phisher. If a site appears to belong to a trusted business, users frequently fail to realise it is a malicious clone. In surveys, 90 percent of users are unable to distinguish phishing sites from legitimate ones.

To earn trust, a business’ site needs to show customers that its transactions are secure and the site is legitimate. To meet this need, security vendors and internet browsers combined forces to establish the EV standard, the fi rst fundamen-tal change in the secure e-commerce backbone in over a decade. When customers visit a site secured with EV, the address bar turns green, provided they use a high-security browser. Th is feature cannot be mimicked by a phisher.

One wouldn’t dream of hiring an employ-ee without a basic check of his background; the authentication processes behind the issu-ance of SSL certifi cates are similarly critical. Online users are savvier, more sceptical, and more scared. Th ey expect businesses to pro-tect them, and currently 84 percent of them believe that businesses are not doing enough. Th e new authentication processes go a long way in allaying their concerns and protecting online businesses. Deborah Clark is Product Marketing Manager at thawte, Inc

“One wouldn’t dream of hiring an employee without a basic check of his background; the authentication processes behind the issuance of SSL certifi cates are similarly critical. ”

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backing, and in the cases of Tunisia and Egypt, policy-makers are doing what they can to encourage the infl ow of investment. Th is is not the case in Morocco, however, where regulation remains tight.

“Th e collapse of conventional fi nancial markets has left many trau-matised investors seeking a return to conservative and ethical fi nancial practices, and we believe Islamic fi nance is now one of the most attrac-tive alternatives to conventional fi nance in this regard,” says Dr Gerrit Seidel, Managing Director and Global Head of Arthur D. Little’s Finan-cial Services Practice. “With such huge growth over the last two decades, MENA’s capital markets are now ready to shine on the world stage, and smart investors from the West will act quickly to make the most of these alternative markets.”

A wide variety of products and services exist across the spectrum of Islamic fi nance, which are likely to expand further as the industry devel-ops. Along with the popular sukuk or Islamic bonds, syndicated lending, project fi nance and refi nancing, and equity markets all represent real opportunities for growth.

However, despite the tremendous progress it has made in recent years, the MENA capital markets still face many challenges. For one, they remain vulnerable to sector-specifi c shocks. Fluctuations in the property or oil industries, for example, will aff ect MENA fi nance disproportion-ately. In addition, many of the major players in Islamic fi nance do not have robust infl ation-fi ghting policies in place, while the legal, institu-tional and regulatory environment also requires work. Despite progress,

many Islamic fi nance markets still operate with relatively new or in-complete regulatory and compliance regimes in place

that risk the transparency and smooth operation of capital markets.

“Western private banks and wealth manag-ers can gain credibility in Islamic fi nance by of-

fering strong market-specifi c research reports on Arabic local markets, or even volunteering to host exchange programmes to help fi nan-

cial market specialists from Islamic banks gain knowledge of the traditional fi nancial market,”

adds Dr Seidel. “Collaboration between established Western banks and the rapidly growing Islamic fi nance

industry can be mutually benefi cial. We have already seen leading players such as Deutsche Bank, Barclays Capital and HSBC initiate such partnerships.”

IslamicFinance

A report by management consultancy Arthur D. Little en-titled Islamic Finance Comes of Age has identifi ed a surge in activity around Islamic fi nance as a promising opportunity for the global fi nancial services industry as it emerges from

the current recession. With Islamic fi nance assets currently standing at around US$800 billion, Arthur D. Little expects this fi gure to surge to as much as US$4 trillion in the next six years – representing a major opportunity for Western fi nancial institutions looking to develop new partnerships and global markets.

Th e fi rm’s latest report investigates 10 capital markets in selected Islamic countries, each of which off ers the Western investor diff erent opportunities due to their varied levels of market maturity and sophis-tication. Th e study groups the 10 markets into three clusters, helping fi nancial players to identify the best strategies for entering each Islamic fi nance market.

Th e so-called ‘big four’ – the Kingdom of Saudi Arabia (KSA), Kuwait, the UAE and Malaysia – have highly developed capital markets that are supported by both government and private sector initiatives to promote fi nancial education and diversify the range of available fi nancial products. For instance, KSA and Kuwait hold the largest concentrations of Islamic fi nancial assets of 40 percent and 21 percent respectively.

Th e ‘challengers’ – Qatar, Bahrain and Oman – are rapidly growing Middle Eastern economies, and market growth as well as a range of gov-ernment incentives has meant that these emerging players are quickly climbing the global Islamic fi nance ranks.

Meanwhile, the ‘newcomers’ (Morocco, Tunisia and Egypt) are also making progress. Morocco and Tunisia authorised Islamic fi nance markets in 2007, while in Egypt Shariah-compliant products were only recognised last year. Despite this, the new players have government

With global fi nancial markets in fl ux, Shariah-compliant banking is an increasingly attractive option for Western investors and fi nancial institutions.

Islamic fi nance comes of age

“Th e collapse of conventional fi nancial markets has left many traumatised investors seeking a

return to conservative and ethical fi nancial practices”

BAHRAIN

KUWAIT

QATARU.A.E

MALAYSIA

Map showing the global hubs for Islamic fi nance

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Th e TCS BaNCS platform encompasses an array of pre-confi gured, customisable banking product lines, including deposits, investments, retirement accounts, consumer and commer-cial loans, mortgage loans, equity fi nancing, cards, payments, treasury management and trade fi nance. In addition, transaction bank-ing services, clearing and settlement functions across the banking value chain can be enabled through the solution’s business process con-

fi gurability and service integrator component. We also off er Sharia compliant insurance solu-tions based on Takaful to meet the varied needs of insurance enterprises across multiple lines of business, distribution channels and cus-tomer segments. TCS BaNCS, with solutions in core banking, universal banking, payments, regulatory compliance, and wealth manage-ment, meets the needs of a diverse range of organisations, including microfi nance, euro-zone powerhouses, and the operators of one of the largest branch networks in the world. Built using advanced SOA technologies, the solutions are robust, STP-enabled, fl exible and highly scalable.

We enjoy a track record of having suc-cessfully designed and implemented bank-ing solutions to deliver fi nancial institutions with ‘embedded transformation intelligence’, thereby, creating a culture of growth and prof-itability for our customers.

Islamic banking as well as Shariah scholars qualifi ed to advise banks operating interna-tionally under Islamic law.

What impact does it have on their core banking systems? NGS. Islamic banking may diff er from western-style conventional banking in many respects but the same business, regulatory and technol-ogy requirements prevail. Most banks today deploy core banking systems to support their business processes and increase operational effi ciencies. Th is requires enterprise-wide planning, commitment and resources. Th ere are also considerable complexities and risks associated when a bank attempts to set up an Islamic banking window using the existing conventional core banking system to support Islamic banking. Th e major areas of concern that banks need to address are product com-pliance, profi t sharing/distribution and the requirement to maintain separate entity books for customers and for reporting purposes.

Could you explain how your Islamic banking services and products are benefi ting fi nan-cial institutions today?NGS. TCS BaNCS enables business trans-formation in Islamic banking in the form of increased market share for our customers, su-perior service quality, consistent and well-de-signed product integration, alongside a lower cost infrastructure for transaction processing. Endowed with a customer-centric bent, it helps banks manage their customer relation-ships eff ectively. Th is comprehensive solution maintains distinct identities of Islamic and conventional fi nancial products and banking solutions on a common platform. It can be implemented as an Islamic and conventional banking solution in a single instance or as two separate instances, or as an Islamic fi nancial solution alone.

Could you shed some light onto how Islamic banking has exploded into a US$300 mil-lion industry in recent years? How much of a footing does it have in Europe?NG Subramaniam. Islamic banking has been growing at a rate of 15-20 percent every year, spanning most of Asia and the Middle East, and is now beginning to make inroads into the western fi nancial markets. Th e growth in Islamic banking can be attributed to high revenues from the petro-dollar and the trickle eff ect on affl uence in the Middle East and Asia, as well as socio-demographic trends such as the population growth and rising affl uence of Muslims worldwide.

Many countries in Europe have begun showing interest in Islamic banking. France recently announced that it has eliminated tax obstacles and improved the legal framework for the setting up of Islamic fi nancial institutions in the country. Many German banks have been active in the global scene issuing Sukuks, and are in the early planning stages for retail bank-ing off erings in the domestic market, while the UK is home to the only fi ve Islamic banks in the EU so far, with €6.4 billion in Sukuks on its stock exchange.

What are the challenges international banks face when wishing to offer Shariah compliant products for their customers, whilst ensuring that they meet interna-tional standards and regulations?NGS. International banks face many chal-lenges in setting up Islamic banking op-erations. Th e regulatory environment, local taxation and contract laws need to accom-modate Islamic banking products. Th ere is a need for diff erent countries to put in place the appropriate local regulatory framework to address Islamic banking, especially in areas such as tax treatments. Th e biggest challenge yet lies in the shortage of skilled resources in

EXECUTIVEINTERVIEW

With Shariah compliant banking surging in popularity around the world, CXO hears about its potential in Europe from NG Subramaniam, President of TCS Financial Solutions.

The rise of Islamic banking

N. Ganapathy Subramaniam is the President of TCS Financial Solutions, a strategic business unit of Tata Consultancy Services Limited. A part of TCS and the Indian IT industry for the past 25 years, NGS has had numerous opportunities to perform a variety of roles in delivering solutions to customers globally, especially in the banking and fi nancial services sector. For more information log onto www.tcs.com/bancs

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ISLAMICFINANCE

When examining the social and economic factors driving the popularity of Islamic banking, we need to look at it in the following manner: there are approximately 1.3 billion Muslims around the world. If I were a Muslim and wanted to take

out a loan or go into business, I would go for an Islamic option. I would be supporting an institution that adheres to my faith. Moreover, I would see doing business with an Islamic institution as something that is more morally responsible. Around the world today, there is greater religios-ity, especially in Islam. So it is understandable why Islamic fi nance and banking has taken off the way it has. Muslims are looking to spend or save their money with institutions that align with their faith.

In places like Central Asia where Islam is on the rise, a majority of the countries in the region view the presence of an international Islamic fi nancial institution like the Islamic Development Bank (IDB) positively because of its ability to help respective governments promote both Islam and socio-economic development. Islamic banking and fi nance, where no usury or riba is permitted, has only just begun to take root across regions like Central Asia and could be used in the future as an instru-ment to channel the energy of Muslims who desire greater inclusion of Islam in government.

But it’s also easy to see the infl uence of Islamic banking and fi nance spreading to non-Islamic entities. In addition to upholding certain busi-ness practices that are in line with Islam, those involved in Islamic bank-ing and fi nance also view it as a business where they seek to make a profi t using the concept of profi t and loss sharing. Islamic fi nancial institutions are now operating in approximately 80 countries and their assets have increased more than 40-fold since the 1980s. Major western fi nancial fi rms and banks like HSBC and Citibank have all opened up Islamic windows within their institutions where they abide by all Islamic bank-ing and fi nance principles. Further, there is now a Dow Jones Islamic Market Index that tracks more than 600 companies whose operations and services adhere to Islamic Law.

Historical basisTh e history of Islamic fi nance dates back to the days of the Prophet

Mohammed in the seventh century. Every business transaction that took place between the capital provider and merchant was set up through a profi t and loss sharing system, or mudaraba. Th e capital provider was similar to that of a venture capitalist today. He wouldn’t know the out-come of the deal but when the merchant returned aft er six months or so, the two would settle the deal between them. If there was a loss, they would split losses. If there was a gain, they would split the profi ts. Mor-ally, it was a system that made sense. And if nothing went wrong, you could make a lot of money.

Religiously speaking, there are four references to riba in the Koran. More specifi cally, the Koran states that earning money from interest or riba is unacceptable, but earning money from trade is acceptable. Th e hadith and sunna also provide interpretations for riba and other Islamic-compliant business transactions.

To complicate matters, there is no one central authority when it comes to Islamic banking and fi nance. Each country or Islamic fi nancial institution has a Shariah Board consisting of Imams or prominent reli-

Now managing funds in excess of US$800 billion, Islamic fi nancial institutions are predicted to become even more popular. Geoffrey Gresh

takes a look at the realities of religious fi nance and considers the possibility of other faiths getting in on the act.

MONEY AND MORALITY

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A growing trend?Islam is not alone among religions in

off ering precedents for morally motivated fi nance. Historical debates and references regarding interest go all the way back to the Hamurabi code of 1800 BC. Th e code placed limits on interest rates and banned compound interest. It was the fi rst legal code in history, written in Mesopotamia. Centuries later, Ar-istotle also provided the most infl uential ar-gument about the “barrenness” of money. He stated that money should be solely a means of exchange and not allowed to multiply.

Th e Bible alone makes many references to this idea of morally motivated fi nancial transactions. For example, Deuteronomy, 19:19-20: “Do not charge your brother inter-est, whether on money or food or anything else that may earn interest. You may charge a foreigner interest, but not a brother Israelite, so that the Lord your God may bless you in everything you put your hand to in the land

you are entering to possess.”Or look at Leviticus 25:36: “You shall not charge your brother inter-

est on a loan, either by deducting it in advance from the capital sum, or by adding it on repayment.” In other words, you shouldn’t charge your brothers. Lastly, we have Luke 6:34-35: “And if you lend only where you expect to be repaid, what credit is that to you? Even sinners lend to each other to be repaid in full. But you must love your enemies and do good; and lend without expecting any return; and you will have a rich reward.” In essence, you should lend without expecting any return.

So there are a number of historical precedents for morally motivated fi nancial services. In theory at least, this would mean that there is plenty of scope for others to follow in Islamic fi nance’s footsteps. But as to the future success of such an institutional model, I really don’t know how successful it would be. Islamic banking and fi nance has been so successful because of the 1.3 billion Muslims that are enticed by responsible fi nancial institu-tions that uphold their faith. Additionally, the petrodollar windfall of the 1970s and 1980s permitted many Arab countries of the Gulf to invest in establishing Islamic fi nancial institutions that have spanned the globe over the past few decades. I don’t know if other religious organisations would achieve this same success unless they had similar resources. If another religious institution wants to invest in establishing a successful religiously based fi nancial institution, it might be diffi cult to break into the market. But as with everything, you don’t know how it will work until you try.

gious fi gureheads that establishes the specifi c operating practices and principles. In recent years, there has been an attempt to stan-dardise practices and Islamic fi nancing. In Malaysia, for example, the country has forced uniformity with a national Shariah board.

Islam is a very diverse religion with many diff erent sects and interpretations. Islamic banking and fi nance is exactly the same. Each country or fi nancial institution’s Sha-riah Board might have a very diff erent idea of what is or isn’t permitted. Some countries like Malaysia have a more ‘liberal’ interpre-tation in Islamic banking, while a country like Pakistan or Saudi Arabia would have far more strict rules. All of this is slowly chang-ing and there is an impetus now to further standardise some of the Islamic banking and fi nance practices applied in a respective country. Uniformity around the world will probably never take place but there is at least an attempt to bring more of the interpreta-tions and practices closer in line with one another so that what one does in Malaysia will be similar with a practice in Egypt for example. You must keep in mind as well that Islamic fi nancial institutions are also businesses and they must adapt to the global economy if they want to succeed and make a profi t. Maintaining a strict interpretation of Islamic Law and applying that to Islamic banking and fi nance might not always be the most sound business decision.

Again, Islamic fi nancial institutions abide by Islamic Law and uphold the principles of profi t and loss sharing in their daily practices. Th ere is nothing against earning a profi t. Rather, it is the way you go about making a profi t that is contested. Islamic institutions have come up with innovative products and services that uphold these Islamic principles and bypass traditional conventional banking practices that charge interest. For example, there are Islamic bonds, Islamic hedge funds, and even Islamic mortgages and insurance. In sum, there is a genuine diff erence between ‘conventional’ banks and Islamic banks. It is not just semantics.

As far as standardisation goes, there are certain aspects of Islamic fi nance that are similar throughout the market. Terms like murabaha or mudaraba will be familiar to all, as will recognised products like sukuk (Islamic bonds). However, the school of Islamic jurisprudence that an in-stitution follows will aff ect the products it off ers or creates. For example, a Shariah Board that follows the Shafi i school of Islamic jurisprudence might have a much more liberal interpretation of what Islamic products are permitted compared to a Shariah Board that upholds the Hanafi school of law. A Shariah Board in Iran that follows Shi’a Islam might also have a diff erent interpretation on what Islamic products are permitted. Yes, all Is-lamic fi nancial institutions uphold core principles like profi t and loss shar-ing and the prohibition of usury. But there are so many diff erent Islamic fi nancial products, as well as diff erent Islamic jurisprudence schools, that it makes it hard to devise any universal procedures and products.

“Islamic fi nancial institutions are now operating in approximately 80 countries”

Geoffrey Gresh is editor-in-chief of Al-Nakhlah, the Fletcher School of Law and Diplomacy’s Journal on Southwest Asia and Islamic Civilisation. He is a former Rotary Ambassadorial Scholar to Turkey and Presidential Fellow at the American University in Cairo. He publishes frequently on contemporary issues facing the Middle East and Central Asia.

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EXECUTIVEINTERVIEW

With the western banking modellooking pretty rough after ayear of collapses and crises,even Pope Benedict XVI re-

cently urged financiers to look at the Islamic sys-tem, where bankers are automatically more riskaverse because they share the risks with the cus-tomer. This shows that Islamic banking is nowready to be re-branded as ethical banking, a sys-tem that could find new customers in the westernworld and elsewhere, as well as its traditionalhome in the Islamic world.

The new focus on Islamic banking in thewest comes just as ITS prepares for a global roll-out of its latest suite of banking solutions, calledEthix.

Going globalToday ITS supplies more than 85 banks in

the Middle East. In the past couple of years it hasgrown into Africa, and into the Far East fromMalaysia to the Philippines. Its core expertise is inIslamic banking, but it also supplies into the con-ventional banking industry. ITS has a lot of theTier One banks as customers; it supplies conven-tional banks in Africa, Nigeria and South Africa.

“Conventional western banks are looking toopen up Islamic ‘windows’, especially with theglobal banking crisis,” says Haitham Abdou,Group Director of Marketing at ITS. “Islamicbanking saw a boom starting a couple of years agoand we feel it’s been growing atabout 15 to 20 percent here andglobally. We don’t see thatslowing down. We’ve seensome of the Tier One bankssuch as HSBC, Citibank andABN Amro, all establishingIslamic windows in their oper-ations. The ITS developmentcentre is in Cairo. We haveabout 1400 software engineersthere. We’re the only CMMlevel five software organisationin this part of the world. Whatwe’ve done is put several prod-ucts together whether they’reours or third-party, and re-packaged them as one solution,which we call Ethix FinancialSolutions. The focus is on ethi-cal banking, which is the new

term, really that is starting to be used for Islamicbanking. This way it can cross the borders of theWestern community.”

Unique Sharia complianceThe nature of Islamic banking means that

every bank interprets what rules there ought tobe. The problem that causes is that it makes build-ing a rigid IT platform to administer all the dif-ferent versions very difficult. However, ITSwelcomes diversity: “We don’t believe there willever be a standard, and I believe that if there wasone it would defy the whole point of an Islamic

bank. I don’t think you could come up with astandard, for example, of how Murabaha [a typeof sale compliant with Sharia, involving a decla-ration of the seller’s fixed costs, to be added to theprice] is defined,” says Abdou.

What ITS has done, is create an Islamic plat-form which represents the underlying principlesof Sharia. This then allows the client bank to de-fine its own products from the ground up, froman accounting point of view, a product point of

view, a line of business point ofview, how the particular bank’sSharia board wants to see itdone and define the workflowcompletely from scratch.

ITS is preparing to marketthe product globally, and hasnow had its name registeredaround the world as a trade-mark. “Even conventional banksneed to be more ethical,” saysAbdou. “There are many com-ponents that fall under the Ethixbrand, such as Ethix – finance,Ethix – branch, Ethix – invest,Ethix – ledger: overall theremight be 25 different productsunder that banner. The goodthing is, you don’t have to pur-chase all of that, they’re all com-ponents in the suite.” n

Banking, the ethical wayIslamic banking has been widely established as an ethicalalternative to the conventional banking system. Softwarefirm ITS hopes to help drive its adoption worldwide.

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Haitham Abdou is Group Directorof Marketing at ITS. He has over15 years of IT experience in thebanking and finance industryand expertise in IT strategies forfinancial institutions based onthe latest service orientatedarchitectures. His areas ofexpertise include: bankautomation projects; branchdelivery; core replacements;Islamic financing; AML; electronicbanking; payment systems.

“We’ve seen some ofthe Tier One banksestablishing Islamic

windows”

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There aren’t many CIOs who spend their spare timepounding the beat on the streets of London. But forAilsa Beaton there’s no better way to understand the ITrequirements of her organisation than to volunteer as aspecial constable. As CIO of London’s MetropolitanPolice Service (MPS), Beaton’s remit is vast, and in-cludes supporting 50,000 employees with 30,000 desk-

tops, controlling a €406 million IT budget and ensuring officers are equippedwith the technology they need to fight crime. She describes IT as the “lifebloodof the organisation”, underpinning modern policing methods from the con-trol room to the street patrols. Its growing importance comes at a time, how-ever, when the organisation is facing tight economic constraints and Beatonadmits one of the most challenging aspects of her role is balancing increasingdemands with depleting resources. “The biggest challenge is for us to makethe police service the best it can be with shrinking resources. In absolute terms

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LAWENFORCEMENT

HANDCUFFS AND HARD DRIVESWhen she’s not controlling theMetropolitan Police Service’s€406 million IT budget CIO Ailsa

Beaton dons her uniform andgoes out on patrol. And as shetells Diana Milne, there’s nobetter way for her to understandthe demands of the job.

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the money may not have been cut, but we’re being asked to do more with itthan we’ve ever done before.”

Project pipelineThe “more” Beaton refers to includes being tasked to deliver service im-

provements and savings in the region of €58 million and spearheading a majoroverhaul of the Met’s IT and communications infrastructure. This was the aimof the C3i programme, which was completed in 2006 and involved integratingthe force’s communications and monitoring systems, including its 32 boroughcontrol rooms. Describing the project, Beaton says: “We’ve taken five call re-ceipt centres, 32 borough control rooms and integrated them into three opera-tional centres that handle the 12 million inbound calls each year, whether theyare 999 or non emergency calls. The centres also co-ordinate the dispatch ofofficers, whether it’s an immediate blue light situation or less urgent scenario.We despatch not just by voice, but through mobile data terminals in police ve-

hicles and we monitor alarms across London. It was very complex and as such,took a great deal of time from the inception of the idea through to delivery. Butas a project it ran to time and budget and we’re very pleased with the outcome.”

As well as C3i, another huge focus for the MPS is mobility and ensuringpolice officers on the beat have easy access to all the information they needwhen they attend an incident. With this in mind the Metropolitan Police isrolling out PDAs to officers so that they can get information on the moverather than having to radio a colleague or return to their patrol car to the mo-bile data terminal. “Through mobile data terminals the information we’re ableto give police officers has changed beyond all recognition,” says Beaton. “Butalthough the information is available over the radio, and they may have mo-bile data terminals in the cars, we were left with a bit of a gap for officers onfoot. So we’re rolling out PDAs to officers which will allow them to conductvarious business processes such as checking people’s details on the PNC(Police National Computer) while they are on the street.”

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Policing efficiencyIn her role as ACPO member, Beaton is also involved in efforts to better

co-ordinate working practices across the UK’s 43 independent police forcesas part of the nationwide Information Systems Improvement strategy (ISIS)programme. “This is about all 43 independent forces working together to getthe most out of information and communication technology (ICT) in polic-ing, and in the most cost effective way. We’re working very closely with theISIS lead, the National Policing Improvement Agency (NPIA). We’ve got tothe stage where we’re starting to find solutions to help support local policing,without having the cost implication of all 43 local forces doing their ownthing” Achieving this sort of efficiency and cost effectiveness within the po-lice service is an integral part of Beaton’s role. However, to free up the groupto focus more on information management and using technology to meet theMet’s objectives on the frontline, back-office IT procedures were outsourcedto Capgemini in 2005 as part of a seven-year €60 million deal. “What we out-sourced to Capgemini was what I called the standard IT, such as phones, desk-top computers and applications.” Beaton goes on to say that the contract hasresulted in both cost savings and service level improvements. She reveals thata previous outsourcing deal didn’t take account of the round the clock re-quirements of the Metropolitan Police: “Our first generation outsourcing did-n’t take as much account of us being a 24-hour, seven-days-a-week,365-days-a-year business and was far too geared to what I would call a stan-dard office way of working.”

The bigger pictureAlthough her main focus is on the Metropolitan Police area, Beaton is

also involved in implementing nation-wide improvements to policing and isa member of the Association of Chief Police Officers and Head of theInformation Management Business Area. One of the biggest projects she isinvolved in within that capacity is the migration from the PNC to the PoliceNational Database (PND). The PNC has been used since 1974 and consistsof several databases containing millions of police records that are accessible24 hours a day. The Police National Database is a new and improved versionwhich, says Beaton, will provide access to more data about individuals, de-tailing not just criminal records but police intelligence about a person, in-cluding ongoing investigations and suspicious activities. She explains: “ThePNC will tell you if somebody has a criminal record. It will know if they arewanted or missing or if a vehicle is stolen or missing. But what it can’t tell youis about intelligence that has been gathered through investigative work we’vedone. For instance, if we think a person may have been linked with the saleof illegal weapons, the PND will give broader picture of what we know, forexample that someone is suspected of conducting illegal activity with under-age children, or is involved in a paedophile ring. When you know that addi-tional information you might take some different actions or ask somedifferent questions to help in the investigation.”

While Beaton is satisfied with the improvements that are being made tothe information that can be accessed by police officers, she admits there aregaps that must be bridged in terms of accessibility to information by the pub-lic. This particularly applies to witnesses and the victims of crime: “I think theinformation available to victims and witnesses has improved tremendously,but more can be done. The gap we’ve got is that face-to-face interaction is notalways the way people would prefer to receive that information. Currently weare unable to provide information to the public electronically so people cansee how their case is going. That’s largely because we haven’t separated whatthe police need from what the public need in the case process and we are un-able to give members of the public access to absolutely everything there isabout a case, because we would jeopardise the case.”

THE BOYS AND GIRLS IN BLUEThe Metropolitan Police Service is by far the largest of thepolice services that operate in greater London (the othersinclude the City of London Police and the British TransportPolice). Founded by Sir Robert Peel in 1829,the originalestablishment of 1000 officers policed a seven-mile radiusfrom Charing Cross and a population of less than twomillion.

Today, the Metropolitan Police Service employs 31,000officers, 14,000 police staff, 414 traffic wardens and 4,000Police Community Support Officers (PCSOs) as well asbeing supported by over 2500 volunteer police officers inthe Metropolitan Special Constabulary (MSC) and itsEmployer Supported Policing (ESP) programme. TheMetropolitan Police Service covers an area of 620 squaremiles and a population of 7.2 million.

“Being a special constable makes mefeel much more connected to the

frontline business than I would if Iwas just a board member”

Ailsa Beaton


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On the frontlineUnderstanding the unique needs of the police service is key to success-

fully aligning information management with crime fighting. Beaton’s secretweapon is her voluntary work as a Special Constable which she says gives herthe best possible insight into the IT needs of the police and whether the sys-tems her team have put in place are really working: “Being a special consta-ble makes me feel much more connected to the frontline business than Iwould if I was just a board member. When I’ve done an upgrade to mobiledata terminals or I’m putting out PDAs or talking about how good the radioservice is, I’ve experienced it all first hand so have a greater appreciation ofhow technology is meeting the needs of the service.” As well as keeping intouch with the technology used by officers on the front line, an important partof Beaton’s role is understanding the technology that is being used by crimi-nals to commit offences: “We must keep aware of all the things that are beingmade available through the internet whether, it’s deceiving people into part-ing with money or setting up various scams around it. It’s also a way of crim-inals communicating with each other maybe without ever meeting, whichchanges the way that we investigate crime.”

Beaton’s passion for her role should, she hopes, serve as an inspiration toother aspiring female CIOs in an industry which remains heavily male domi-nated. She is keen to encourage women to follow her example and is involvedin initiatives in the UK such as Computer Clubs for Girls, “I don’t think it’s beenparticularly more difficult for me than for anybody else,” she says. “But we’rein a challenging position, and I think only about 15 percent of the BritishComputer Society is female. So the numbers of women going into computingis frighteningly low. I sit on the Sector Skills Council for InformationTechnology (e-skills) which supports activities like Computer Clubs for Girlsto try to get girls when they are at school to realise that this isn’t just a boy’s thing.They need to know that it’s actually very interesting and it’s not just about com-puter games. There are lots of ways of using technology that are useful andworthwhile,” a point she has proven very successfully herself. n

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THE ORGANISATIONAL STRUCTUREOF THE MET

Territorial Policing: London's local policeFollowing a recent restructuring, most of the day-to-daypolicing of London is the responsibility of 33 boroughoperational command units (BOCUs).

Specialist Crime DirectorateIn addition to policing London’s streets, the Met hasvarious specialist units dedicated to reducing all aspectsof serious and specialist crime.

The intention of Specialist Crime Directorate is toplace a renewed emphasis on working collaborativelywith communities, boroughs and partners to identifyeffective solutions to serious crime problems.

Specialist OperationsThe Met has various specialist units that work across thecapital or which fulfill a national role.

A number of these are grouped into a section of theorganisation known as Specialist Operations. They dealwith tasks such as intelligence, security, protection ofpoliticians, embassies and royalty, and the investigationof certain categories of serious crimes, including racialand violent crime and terrorism.

Central OperationsCentral Operations consists of a number of specialistunits that provide a broad range of policing functions.These units effectively provide an integrated,collaborative and community focussed service to London.

With Capital City Policing at the forefront of itsresponsibilties, it also has the remit for delivering thesecurity arrangements for the 2012 Olympic andParalympic Games in London.

Administration and supportAn organisation the size of the Metropolitan PoliceService could not function without various management,administration and support functions. For this reasonThe Met has thousands of staff, including police officersas well as civilians, who work behind the scenes toensure that the front line units can do their job. Theirfunctions include recruitment, training, personnelmanagement, provision of information technology,publicity and communications. Some functions, such asvehicle maintenance and aspects of informationtechnology and telecommunications, have beencontracted out to the private sector.

Below: Met police adverts to raise awareness of terrorism


EXECUTIVEINTERVIEW

What impact is the recession having on or-ganisations installing videoconferencing facil-ities? In these lean times is now the idealopportunity to make cost savings?Matthew Light. There has been a trend of com-panies trying to get videoconferencing facilitiesinstalled as soon as they can, as they recognisethe benefits of reducing travel costs and savingtime. Whole offices have been closed as staff areencouraged to work from home. There hasnever been a better time for companies to en-hance their communications and move to video-conferencing. With the increase in bandwidthand lower cost connectivity, now is the time forvideoconferencing.

If an organisation is considering a videocon-ferencing facility what would you highlight asthe key benefits?ML. The main benefits include:

Increases in productivity. As well as the benefitsof being able to meet face-to-face without havingto travel to physically be in the same location, it isnow possible to share just about any type of in-formation during a videoconference. This enablesdecisions to be made much quicker.Videoconferencing enables you to be in severaldifferent places at the same time, enabling you tokeep in closer contact with customers and staff.

Saving money. Videoconferencing provides asubstantial saving due to reduced travel costs,both in terms of fuel expense and the time taken

to travel, which could be more usefully usedcatching up on emails and contacting customers.

Better communication. Videoconferencing al-lows you to see the facial expressions and bodylanguage of conference members, important as-pects of conversation that are lost using a stan-dard telephone call.

Safety. Videoconferencing ensures the safety ofconference members by removing any concernssurrounding travel.

International business. It al-lows for multi-point meetingsacross time zones and interna-tional boundaries.

Environment. With the greenissue, videoconferencing is play-ing an increasingly importantpart in reducing carbon emis-sions and allowing businesses tostrive to be carbon neutral.

Can you give an example ofhow your products and ser-vices benefited a customerrecently?ML. Recently a managing di-rector was due to attend ameeting in Montpellier inFrance, which would have en-tailed all the hassle of bookingflights, arranging hotels and allthe time involved in travelling to the meeting.Instead, we were able to arrange for the installationof our Tempura Video system, which involves asimple software download together with an inex-pensive camera and speaker/microphone deviceand the customer was able to hold the meeting viavideoconference. The cost saving in terms of traveland time was phenomenal, and as the meeting

was on a Friday, the MD did not have to use anyof his weekend time travelling home.

What predictions do you have for the video-conferencing and communications sector inthe years to come and how will businesses beable to work quicker and smarter?ML. The increase in the bandwidth of broadbandconnections and leased lines, together with thefalling cost of these communication services,means that videoconferencing is now an easybusiness decision. Over the internet, videocon-ference calls are free. It will be just like picking up

the phone and speaking tosomeone as you do now,with the added advantage ofbeing able to share informa-tion from any applicationthat you are using on yourPC, and thus will increase thescope for further develop-ments in home working.However, people may chooseto congregate in a physicallyshared working environmentto benefit from the inter-change and flow of ideas andgeneral camaraderie. It is re-ally the combination of thePC/laptop and videoconfer-encing which is the key toworking quicker andsmarter. With so much worknow conducted using com-puters, the ability to stay in

touch with customers and colleagues visually viavideoconference means that you can be physical-ly located wherever you want, yet use your skillsto achieve your business goals at the same time.The latest systems provide higher quality andlower bandwidth. The evolution in videoconfer-encing technology will continue to make the en-vironment even more life-like and natural. �

Bringing videoconferencing to life With tough economic conditions, volatile fuel prices and organisations looking to

slash their carbon footprint, we hear from Matthew Light about the real differencevideoconferencing is delivering today.

90 www.cxo.eu.com

Matthew Light, MD of TempuraCommunications based inBasingstoke, has over 11 years’networking and videoconferencingexperience and works to advise UK,European and American businessesthrough their base of channelpartners, customers of SMEs,corporate and governmentdepartments and organisations. Thefocus and expertise spans networktechnologies and VOIP as well asvideoconferencing.

“It is now possible to share just

about any type ofinformation during a videoconference”

Tempura ed:20 July 13/8/09 09:45 Page 90

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www.cxo.eu.com 93

Cost is obviously a key area for consideration. What is your advice forcompanies finding it hard to calculate the cost benefits of virtualisation? Fredrik Sjostedt. There are two ways to calculate cost savings from virtuali-sation. The first is to examine the CAPEX (capital expenditure) savings thatcan be realised from consolidating servers in the data centre. We see cus-tomers that have achieved consolidation ratios of 80:1, where 80 physicalservers are converted into 80 ‘virtual machines’ running on just one physicalserver. Even with normal ratios of 20:1, there is still always a very clear andtangible cost benefit.

The second way to calculate cost savings is much more of a challenge andthat is to look at how you drive operational savings by using virtualisation.Many organisations fail to understandthat if you continue to use the sameprocedures you did when running aphysical infrastructure, most of yourCAPEX savings will be lost to OPEX(operating expenditure) increases.

My advice is to start off using theVMware TCO calculators to help givea view of your current cost base and tosee how much CAPEX can be savedalmost immediately. Then you need toengage with your normal systems in-tegrator or VMware’s PSO team to re-view the current processes you have inplace and develop new plans andprocesses to control operational ex-penditure and accelerate savings in thelonger term.

Business agility is a key concern for C-level executives right now. Doesvirtualisation offer the potential for enhanced enterprise agility andwhat benefits does it offer in this regard?FS. Virtualisation is often thought of as simply server consolidation and aCAPEX saving technology. This is far from the truth. C-Level executives needto understand the wider benefits that virtualisation can deliver, when the tech-nology is used well. Firstly, look at how long it takes to roll out a new IT ca-pability, such as a database server. After making the decision that thecapability is needed, you need to procure the hardware, take delivery of it, in-stall and test it, and then put it into pre-production, before it’s finally rolledout into the production environment. I’ve seen customers take as long as 27weeks to get through this process. If your competitor can deploy faster thanthis, then you have lost the competitive edge, as they would be able to go tomarket with their solution faster. Virtualisation can help you to slash the time

that the entire process takes, from decision-making to rolling out a produc-tion capability, down to just a few hours. Clearly, this is something that ap-peals to any C-level executive looking for agility. Secondly, virtualisation canalso help to maximise the availability of your IT resources. This is important,as there are very few organisations today that are not heavily dependant onIT for day-to-day operations.

Virtualisation allows organisations to transform an IT infrastructure thatis built on minimising downtime to one that is uninterrupted and 100 percentavailable at all times. Again, this is a very attractive benefit for business leaders.

In your opinion, what is the future of virtualisation? FS. Virtualisation is one of those really disruptive technolo-gies that come around every-so-often. As organisations con-tinue to look closely at how they manage their cash flow inorder to remain competitive in challenging market condi-tions, they also now need to start examining how they strate-

gically prepare for the mid-to-long term as well. The recessionwill end and organisations that have used the recession to suc-cessfully re-structure and streamline their processes will be farstronger and more competitive as the recovery picks up pace.IT is such an important component in most organisations

today, and therefore transforming IT from a ‘cost centre’ to a ‘business en-abler’ can have an absolutely massive impact on performance.

We have already seen some tremendous success stories where virtualisa-tion has delivered huge benefits to organisations in terms of cost savings, bet-ter processes and increased agility. However, as mentioned above, these havemainly been little more than server consolidation programmes. Over the next12-24 months, we will begin to see the other, wider, and potentially greater ad-vantages that virtualisation can bring about, both in terms of data centreprocesses and desktop management. Virtualisation really will allow organisa-tions to transform their IT and energise their entire business operations. n

VIRTUAL R E A L I T YVMware’s Fredrik Sjostedt offers his insight into the tangible

benefits of virtualisation.

EXECUTIVEINTERVIEW

Fredrik Sjostedt is Director for EMEA Product Marketing at VMware. Sjostedt has almost20 years of experience in the IT industry, gathered in both technical and marketing roleswith hardware/software vendors like Apple, 3Com and Symantec. He studied systemsanalysis and mathematics at Lund University in Sweden and holds a postgraduatediploma in Management from Henley Business School in the UK.

“Virtualisation allows organisationsto transform an IT infrastructurethat is built on minimising downtimeto one that is uninterrupted and 100percent available at all times”

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RETAIL

King Amazon’s CTO Werner Vogels is focused on transforming the internetbehemoth into the world’s most customer-centric organisation – andis using innovation to help him get there.

jungleBy Ben Thompson

of the

Amazon ed:20 July 13/8/09 09:26 Page 96

The Amazon rainforest contains the largest collection of living plant and animalspecies on the planet – and like its jungle namesake, the world’s largest e-com-merce platform holds a similar wealth of weird and wonderful specimens justwaiting to be discovered. As well as everyday items such as clothing, music andconsumer electronics, the internet explorer can also unearth a huge range of rarertreasures. Want to reduce your carbon footprint? How about a 400W self-as-sembly wind turbine to help get you started. Looking for that unusual gift? Check

out the original Andy Warhol screenprints in the ‘Everything Else’ department. Fancy getting married?Try the 10x18 wooden wedding chapel, complete with front porch and steeple (sorry, bride not in-cluded). Shopping has never been this easy.

Yet while some may still think of Amazon as simply an online retailer, the reality is very different.From its bookseller origins, the company has grown to become one of the world’s biggest technologyorganisations, a platform that attracted over 615 million visitors last year and on which more than onemillion active retail partners do business worldwide. An increasing number of diverse businesses arebuilt on the Amazon.com platform – including the online operations for Target, Lacoste, Marks &Spencer and Timex Corporation – and the company’s relentless focus on innovation helps Amazonmaintain its status as a high-tech pioneer. From new hardware development to the definition of newbusiness models, from building ultra-reliable storage services to a massively scalable computing cloud,from pervasive monitoring and performance control to revolutionary efficient software architectures,Amazon is recognised as being on the bleeding edge of technology development.

“We have three different businesses,” explains the company’s CTO Werner Vogels. “One isthe retail business, and that’s the one that people are most familiar with. Then there’s the sellerbusiness, which consists of three major streams – the seller-only Amazon website, the enterpriseservices business where companies launch e-commerce operations on top of our platform, andservices such as Fulfillment by Amazon that enable businesses to take advantage of one of the mostadvanced fulfillment networks in the world. And then there’s the developer business. For all ofthose, we take the same approach: we want to be the world’s most customer-centric company.”

For Vogels, this means focusing on continuous interaction with the customer-base – gener-ating what he calls a ‘feedback loop’ – to ensure that the services Amazon provides are the rightfit for its customers. “We have a process that we call ‘working from the customer backwards’ todevelop new technologies, where we start with what the customer needs and then work back-wards from that point to make sure that the technology we implement really does what we wantit to from a customer standpoint,” he explains.

Plotting a pathTake Amazon’s popular and much-copied product review system, for example. The site had re-

views from the outset, and the idea of letting the market decide what’s hot and what’s not has played akey role in helping to make the company such a trusted seller – even non-customers admit to check-ing out the user reviews before eventually buying elsewhere. But as other retailers jumped on the userreview bandwagon, Vogels and his team decided to take the concept a stage further. By adding asimple button asking ‘Was this review helpful to you?’, Amazon prioritised the most relevant re-views – those that had helped customers make a decision over whether or not to buy a particularproduct, both positive and negative – and provided a simple way for customers themselves to reg-ulate the quality of the reviews. A recent article in Business Insider suggests the move has had sig-nificant business benefits. In 2008, Amazon brought in €13 billion, of which 70 percent came frommedia products such as books, movies and music – products that also make the best use of the re-views feature. The study suggests that promoting the most helpful reviews has increased sales inthese categories by 20 percent (one out of every five customers decides to complete the purchasebecause of the strength of the reviews) – adding a projected €19 billion to Amazon’s top line.

It is often said that the best innovations are the ones that seem so obvious. And while Vogels is atpains to stress that such developments don’t just happen without a considerable degree of effort, hedoes concede that all Amazon’s technology improvements start from a very uncomplicated concept.

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Vogels maintains that this is only possible via constant monitoring of thecustomer experience. Consider the following example. A customer wishes todownload a movie to watch on the long Paris to New York flight, and sendsAmazon an email with a question about its video-on-demand service. Not onlydoes the service team answer within the hour, they also include a link to indicatewhether the answer solves the question or not. Choosing ‘yes’ takes the customerto a ‘Thanks for your feedback’ message, which not coincidently puts them backonto the Amazon site and contains a further link to provide additional feedback.If you respond ‘no’ to the original question, you are taken to a similar page torephrase the question. This simple feedback mechanism provides a number ofimportant benefits. First, it demonstrates Amazon actually cares whether theuser’s problem is resolved satisfactorily; it allows the customer to easily submitanother question if not satisfactorily resolved; it allows you to quantify the per-formance of the service department; it identifies areas where better answers areneeded; and finally it helps identify tricky problems that can be corrected.

Such attention to the minutiae of customer service interactions helps thecompany refine its offerings and continuously improve. And while concedingthat the management team makes most of the long-term big technology bets,Vogels insists that many of the ideas actually come up through the organisa-tion. “Amazon is very flat in terms of its organisational structure and we havea tremendous focus on innovation, so we’ve got all sorts of paths in which keyinformation and ideas can travel to those who actually make the decisions,” hesays. “I think most of the technologies as you see them in Amazon – whetherit is reviews, whether it is Listmania, whether it is Gold Box – have come outof the grassroots.”

www.cxo.eu.com 99

“I think you can have brilliant ideas,but taking them from the idea phase to the stagewhere they really mean something for yourcustomers is much more challengingthan I anticipated” Werner Vogels

“You have to find ways in which your customers can be more efficient at whatthey want to do,” he explains. “We have a number of high-level goals aroundhow quickly customers can find items, how easily they can browse, how theycan check out and how they can purchase things, and making that as efficientas possible for our customers is key for us.”

If you focus on the customer, continues Vogel, you take the long-termview. “You’re not looking at the next quarterly success; you’re looking at howyou can make sure that Amazon is the world’s most customer-centric com-pany over the long-term, and how you can innovate on behalf of the customerto make sure that the things you do really matter. In this sense, everythingfrom reviews to web services can be thought of as supporting tools for doingthe right thing for the customer. In terms of technology, it means seeingwhether we can take a more cost-effective approach or have better scalabilityand better reliability, or whether can we help our customers make sure theymake the right purchasing decisions.”

Of course, efficiency is one measurement of success, but there is also amore intangible quality that must be achieved for such a platform to be lovedby its user-base: ultimately, it must also provide an enjoyable experience.“Customers are very vocal with what they appreciate and what they don’t,” hecontinues. “So while our customer service is known for being excellent, cus-tomers also have the power and the tools to actually give feedback directly tothe technology teams. In terms of innovation, we make sure that all thesesmall experiments that are going on all the time with new technologies, withnew customer-facing functionality, can be continuously measured.”

Measuring valueAmazon has taken a number of steps to ensure any improvements to the

platform add real, measurable customer value, and has built a large infra-structure to ensure it can monitor and assess the impact of changes to the site.For instance, all Vogel’s teams have been given the instruction to innovate con-tinuously on behalf of the customer, constantly looking at where improve-ments can be made. What makes a particular service a best seller? Is it betterinformation, better presentation or different sources? “Our goal for customersis that they can find what they are looking for as fast as possible, in the most ef-ficient way, in the minimum number of steps,” he explains.


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neers and programme managers to build something that really works. Butthere are also legal implications, there’s an impact on tax, there’s impact onPR, on marketing – all of those functions make up a team, and you can onlybuild and deliver a product to your customers as a team.”

It is a challenge Vogels relishes. “I think you can have brilliant ideas,but taking them from the idea phase to the stage where they really meansomething for your customers is much more challenging than I antici-

pated when I was still in academia,” he continues. “Idid some startup work alongside my academicwork, but even so the path going from idea to actu-al implementation is a long journey, and when youhave to operate at the scale of Amazon that’s awhole different story again. Suddenly, issues like re-liability, performance, availability and cost-effec-tiveness play a major role in all of the decisions youmake along the way.”

And in contrast to Google, which famously en-courages developers to spend 20 percent of their time on

individual projects outside their day-to-day responsibilities, the team ethos rulesat Amazon. The motivation comes out of the idea that the things that you dohave a direct impact on the customer. “Doing things that matter to people istremendously motivating, and so most of our engineers and programme man-agers – and indeed everyone else that is working on our products – find re-markable reward in making sure that our customers have a better experience.We often have meetings where we start off with a ‘customer voice’ – a successstory, even sometimes a negative story, of a customer’s experience of buying onAmazon – and use those stories to drive our services to become better.”

Once again, it all comes back to the customer. “We don’t just want tobe the most customer-centric company on the web; we want to be themost customer-centric company on the planet, period,” concludes Vogels.“I think that if you look 10 years from now, you’ll see that many of the in-novations Amazon has implemented have had a tremendous impact onhow customer-centricity is viewed.” �

Such a meritocratic hierarchy, where the best ideas rise to the top, is es-sential to the company’s reputation as an innovator. Encouraging ideas thatadd value is a philosophy that is nurtured right through the company cul-ture, from the C-suite down to the recruitment of new hires, as Vogel elabo-rates. “In terms of our personnel, we look for a very particular individual: theyneed to be able to think in the way that the customer thinks,” he says. “It’s veryimportant to have a culture where everybody understands what the core val-ues of the company are. New starters are often sur-prised at how important focusing on the customer isto us and how good Amazon is at doing that. So hav-ing a core value throughout the company that every-body signs up to is essential.”

The importance of teamworkThe other essential trait that Amazon tries to instill

in all staff is the ability to collaborate effectively – some-thing that is particularly important in the technologyfunction, which by its nature involves small teams fo-cused on specific projects. “Our development teams talk to each other all thetime,” says Vogels. “Even though we work in very small teams, Amazon itself isa very large technology operation and it is essential that everyone co-operatesand collaborates all the time.”

According to Vogels, teamwork is key to delivering fully rounded ideasthat really work for the customer – whether that customer is internal or ex-ternal. Coming from a background in academia (prior to joining Amazonin 2004, he spent a decade as a research scientist in the Computer ScienceDepartment at Cornell University looking at scalable reliable enterprise sys-tems), Vogels admits to being energised by the way business organisationsapproach the issue of R&D. “In academia there’s a real focus on individualachievement,” he says. “Although there is some collaboration among facul-ty and there are student teams working together, the work is still rather in-dividual, as is the reward structure. In industry, however, building realtechnology is a multi-disciplinary activity. First of all, you need good engi-

Amazon.com FAST FACTS

FOUNDED: 1994

HEADQUARTERS: Seattle, Washington

AREA SERVED: Worldwide

CEO/CHAIRMAN: Jeffrey Bezos

REVENUE: $19.16 billion

OPERATING INCOME: $842 million

NET INCOME: $645 MILLION

EMPLOYEES: 20,500

WEBSITE: Amazon.com

“10 years fromnow, you’ll see that

many Amazoninnovations

implemented havehad a tremendous

impact”


ROUNDTABLE

PUTTING YOUR PROCESSES TO WORKWith organisations being forced to work smarter and more cost effectively in this economic slump, we ask a panel of industry experts how Business Process Management (BPM) is playing a vital role.

102 www.cxo.eu.com

Hans Hantson is Business Development Manager at Ascentn EMEA. Hantson works in close collaboration with the Ascentn customers and partners and has more than 19 years of IT and business development experience. He worked previously for global companies like Toyota Motor Marketing Europe and EMEA-based companies.

Herbert Kindermann is a member of the executive board at jCOM1 AG, responsible for sales and services. Prior to joining jCOM1 he was a member of the executive board at IDS Scheer AG and has more than 30 years of experience in IT business, with 10 years focused on BPM and SOA.

As one of the founders of inubit AG, Dr Torsten Schmale is now CEO. In this role he is responsible for company strategy as well as for the sales and marketing, fi nance, and development departments.

Peter Gérard has been CEO and President of IDS Scheer AG since September 2008. Gérard started his career at IBM in 1966. This was followed by appointments to the executive boards of Deutsche Bank (1996), Mannesmann AG (1999) and Karstadt Quelle AG (2000).

THE PANEL

How can BPM help companies to respond to and survive the economic downturn?Hans Hantson. Working in this economic situation means you need an agile or fl exible organisation, and be able to adapt to new opportunities and deliver end-to-end services to your cli-ents or prospects. Th e only certainty you have is that everything is changing continuously. Th is creates new opportunities and can make your company even stronger than before, at least if you’re able to organise yourselves to react to this situation. A lot of companies are using very rigid and infl exible ERP systems or custom developed applications to support their business. But, as processes are not longer static, they will need solutions to handle dynamic processes and even unpredictable situations. Dynamic BPM solutions will allow you to adapt easier to certain situations or make exceptions on running processes without the need for technical IT people to handle a business case.

Peter Gérard. Almost every company is facing challenging market conditions. Partners turn into competitors and vice versa. Customer demands are changing dramatically while mergers totally change the competitive landscape. Processes that have been proven in the past must be reassembled to adjust to the dynamic environment. How do you cope with this situa-tion? Of course, you need to save costs. But how do you ensure that your cost savings do not aff ect your customers? Successful companies know their core processes and how they distinguish them from their competitors. Th ey invest in these processes to stay ahead of the competition in diffi cult market conditions. Th ey also know their context processes that can be outsourced to save costs. Th ese companies document, analyse and control their processes, manage their business processes and with this, their business success.

“BPM for an enterprise has an eff ect similar to adrenaline for the human

body. It helps to sharpen the senses for important information and to react

in the most effi cient way when under stress”

Dr Torsten Schmale

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TS. We recommend introducing BPM step-by-step. Every step should demonstrate a clear improvement and a fast, predictable ROI of three to 12 months, depending on the current situation. Th is approach has to be strongly supported by the BPMS vendor.Four issues are critical success factors:

• Th e BPMS must support all BPM phases from modelling to supervi-sion in a homogenous and holistic manner and must provide the oppor-tunity to quickly integrate legacy systems. If the BPMS appears large, complex, like a bundle or not intuitive, then it is the wrong one for this

quick-win approach• You should look out for the availability of best practice solu-

tions on top of the BPMS. Such composite applications can be introduced within a few weeks while delivering very fast results

• Th e licence model has to be modular and fl exible to address exactly what you need in your incremental approach

• Th e implementation and consulting experience of the BPMS vendor is decisive for a successful BPM initiative. Th e best prod-uct could result in a failed project when it is introduced without suitable skills or suffi cient experience

HH. We strongly encourage companies to work in a baby-step approach when adapting BPM technology. Firstly, don’t look at BPM as a pure soft -ware package to solve all your problems. Handle this project as a business project, for which you will need IT support on some levels. A baby-step approach means not trying to go for a ‘big bang’ or too quickly. Start by au-tomating one or two processes you clearly know and are well understood by everybody. Th is will help you to learn in-depth how the BPM Solution is working and how it can help you even more than you expected at fi rst stage. You need to see the big picture and adapt step by step so you can easily correct when needed and move on forwards. A modern BPM solu-tion will help you to establish the fi rst processes in a couple of days, giving you the advantage to learn and fi ne-tune the solution. Solutions that take weeks or months before you see any result will probably give you a very low ROI.

What pitfalls must companies avoid when introducing BPM to their organisations?PG. BPM is not just a project. It must be a continuous approach to im-prove the processes of a company. When considering the current market conditions it is important to continuously measure the performance of your processes. If you fi nd out that the processes are not successful any-more you need to adapt to the new conditions. BPM is not a technology. It must be a management discipline. If you just stick to the technology layer you will only optimise your IT. But the purpose of technology is to serve the business. Because of this, you should start to optimise the busi-ness and then design your IT to support your business. Oft en, BPM starts in separated guerrilla projects. At a certain maturity level they must be integrated and professionalised. If you miss this part you will not be able to leverage the full power of BPM. For this, you need to establish BPM governance. Th e process of process management must be designed and implemented in the organisation.

Dr Torsten Schmale. BPM for an enterprise has an eff ect similar to adren-aline for the human body. It helps to sharpen the senses for important in-formation and to react in the most effi cient way when under stress. While adrenaline is dangerous for the body outside short-term critical situations, BPM is not for the enterprise, even if it is applied for a longer period. Nowa-days, more and more companies have recognised the role BPM can play for them to survive the economic downturn. Th ey use it to generate fast improvements regarding cost and effi ciency in their core processes. Once realised in small projects, companies quickly understand the value of BPM also on a wider scale and start strategic BPM initiatives.

Herbert Kindermann. Th e current motto is: save money strategically, not recklessly. BPM provides the best, indispensable and expeditious support possible, but only if the methodology involves all employees in creating the process description from the start. At jCOM1, we achieve this objective through our subject-oriented approach. Subject orientation means the focus is on the ‘subjects’, such as the people who are actively engaged in the process. In other words, the employees manage their own processes and are responsible for making sure those processes run in the proper sequence according to defi ned business objectives. Based on the process models, the soft ware needed to handle the processes is then created automatically. An intelligent BPM solution of this type helps to eliminate the communication gap between business and IT departments. Th is solution guarantees that corporate strategies can be put into prac-tice realistically and in compliance with rules while generating savings into the millions. Th e result is an excellent chance to come through the economic downturn stronger than ever.

BPM software can be costly. How fast will companies realise a return on investment from this technology?HK. Using the jCOM1 BPM SUITE, very fast. Th is soft ware allows you to introduce a new process in three steps:

• Employees in aff ected departments perform the modelling themselves• Participants use automatically generated dialogue soft ware to interac-

tively test and validate the process• Employees implement processes which have been adapted to their re-

quirements (exactly as modelled)• Our approach avoids useless interviews, countless individual and over-

all adjustments, and corrections during implementation and initial op-eration. Th e time and monetary investments needed to make changes decrease signifi cantly, helping companies to obtain a very high level of agility.

“Th e current motto is: save money strategically, not recklessly. BPM provides the best, indispensable and expeditious support possible, but only if the methodology involves all employees in creating the process description from the start”Herbert Kindermann

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We need decision makers who are responsible for the active processes to determine how these processes should evolve in the future. Using our subject-oriented methodology, we are able, to a certain extent, to make everyone accountable. Th is approach works because each of the em-ployees has the knowledge of where potential exists for improvement of processes. Th ese days, a common issue, which has become increasingly critical, is the absence of governance in business processes. Particularly in this context, it is important that all employees receive support through a personalised process portal as they perform their daily work and adhere to applicable governance and compliance specifi cations.

TS. BPM is not just another IT system to be introduced. BPM aff ects the IT architecture, the way business and IT people work together and changes the organisation up to the management level in the long run. Hence, there are many pitfalls that can only be avoided if the BPM ini-tiative has the right backing from the management, the due awareness by all involved stakeholders and necessary experience of the people in charge of this initiative. Fortunately, BPM can be introduced step-by-step in small projects, thus reducing the risk to fail on a large scale. Neverthe-less, companies must realise that BPM divides the staff and oft en also the management into friends and foes. While friends approve of the changes BPM brings, foes don’t. Th ey try to keep everything as it is for fear of re-duced responsibility, more transparency about their work and a machine taking control of their daily work. Th erefore, introducing BPM success-fully always requires some kind of active change management and buy-in activities in parallel.

There is a wide variety of BPM vendors in the market. How should companies go about choosing the right one?TS. Yes, but in the meantime BPM can be found on a lot of marketing

brochures. Most of the vendors have some BPM functionality in some form or another. However, companies should have a close look at these off erings. Some vendors talk of BPM but off er only BPA – process modelling but no automation, integration and su-pervision. Other vendors have complex heterogeneous BPM suites acquired out of several stand-alone components. Th ese BPMS puzzles are far from helping to optimise and automate business processes quickly, and in an agile and cost eff ective way.

With that in mind, you should write down your requirements and go for a short list of BPMS vendors. Additionally, you should think about your priorities regarding the processes that should be the fi rst to benefi t. Pick out one small process with signifi cant vis-ibility in your company. Before making your decision on a BPMS

vendor, you should go for a fi rst pilot project that proves that the system of choice is really working as expected.

HK. First, it is important to fi gure things out and develop a structured plan. Th e following questions need to be dealt with:

• Which processes should be automated?• How many changes are required annually?• Is a service-oriented architecture (SOA) already in place or should one

be established?

HH. Th e main pitfall in almost all companies today is the discovery of the business processes themselves. Companies in business for maybe 20 or 30 years are still having no exact idea what their business processes are today. Go inside a department and ask 10 people to describe their core businesses process and probably you will have 11 diff erent answers. Th e second pitfall is the adoption by people of new processes or new sys-tems. Human beings are by nature not very open to dealing easily with changes. Th ey are used to working in a certain way, which is working for them, so don’t want to change this. Make sure that people are involved in the process from an early stage, explain and show the benefi ts of the BPM. Adoption will come automatically if they see the benefi t and how it can help them in doing their daily job better and faster.

HK. BPM is supposed to help process participants to work more eff ec-tively and generate added value. Th e objective is to signifi cantly boost productivity and agility while drastically reducing costs. During the introduction of BPM, we proceed according to a fi xed pattern. First, the basic conditions need to be defi ned. In essence, we work together with the customer to specify the objectives, the starting situation and the risks. Furthermore, we divide the structure of the overall process roughly into sub-processes, defi ne which of these processes can be standardised and determine process owners. Th is strategic approach reduces the complex-ity and is necessary in order to avoid various ‘BPM stumbling blocks’.

“BPM is not just a project. It must be a continuous approach to improve the processes of a company. When considering the current market conditions it is important to continuously measure the performance of your processes.”Peter Gérard

According to IDS Scheer’s Peter Gérard, his customers achieve ROI though improvments in several business areas, as their responses demonstrate:“Reduced wait time for customers by half, increased the number of contracts that can be concluded without further inquiries by 28 percent, and reduced the number of complaints by 60 percent.” – CosmosDirect“More than 30 percent cost reduction in order-to-cash process and order confi rmation twice as fast as before project start” – Aleris“Total BPM project investment (including all external and internal costs) represents less than 20 percent of the identifi ed and validated savings potential” – CargoluxGérard says a business process is not just something your business is doing – a business process is your business. By optimising your processes you optimise your overall business performance.

ROI IN ACTION


Ascentn Ad P107.indd 1Ascentn Ad P107.indd 1 12/8/09 15:46:4712/8/09 15:46:47

108 www.cxo.eu.com

cesses? We recommend to use always the 80/20 rule, as you will not fi nd the ‘golden key’ solution on the market. If a solution is delivering you 80 percent of your requirements out of the box, make sure you can achieve the 20 percent by extending the solution. So it’s important to look for a fl exible and open solution within your main angle, being business or mainly technical.

PG. Under the current market conditions companies are following diff erent strategies to ensure business success. If you don’t know your processes you can’t control your business. Based on a company’s market situation and its BPM maturity level, diff erent BPM approaches can be leveraged. ARIS provides integrated soft ware tools for each BPM matu-rity level. Th is means ARIS can be used from the very start for process documentation, process cost and weak point analysis, quality assurance, soft ware implementation and many other use cases. ARIS Platform pro-vides integrated soft ware products that help enterprises to continuously improve their business processes. Th ese products cover every phase of a continuous BPM lifecycle – from strategy defi nition, process analysis and design to transferring the models into your IT systems and monitor-ing process execution. Based on this, companies can easily and quickly respond to new market demands with its products and services. Key for both strategies is business fl exibility. With ARIS, companies can be sure to get the right BPM product for all requirements from the BPM market leading soft ware vendor. With ARIS Platform you can prove the success of your BPM initiative based on process key performance indicators. Th is enables you to turn your organisation into a process and success-driven company.

• How extensive is human interaction?• How many companies must be involved in a data exchange to carry out

these tasks?• How prevalent is shadow IT?

Our solution is oriented toward giving employees a signifi cant amount of creative freedom. Nevertheless, it is imperative to comply with all company specifi cations and legal regulations. To this end, the BPM tool must be easy to use, other existing applications should be easy to integrate, and process participants should be able to execute their processes in the manner they themselves defi ned initially. Governance and compliance requirements must provide the foundation. Ideally, the BPM solution should enable employees to make improvements to their processes in a fast, eff ective and cost-effi cient way without having to go through the IT department. Th e result: motivated employees, coordina-tion between IT and non-IT departments, and a fast ROI.

HH. Companies should fi rst defi ne what they want to achieve and what eff ort they want to take for this. Mainly they can take two diff erent directions for this: looking from a purely technical angle or from a busi-ness point of view. Do they want more business control and fl exibility, to adapt process changes on the fl y or adapt them quickly to exceptional needs? Or are you looking for one-shot automation for very static pro-

“Th e main pitfall in almost all companies today is the discovery of

the business processes themselves. Companies in business for maybe 20 or

30 years are still having no exact idea what their business processes are today”

Hans Hantson

108 www.cxo.eu.com


Frost & Sullivan Ad P109.indd 1Frost & Sullivan Ad P109.indd 1 13/8/09 10:59:2313/8/09 10:59:23

When you’re in charge of technology for a logistics com-pany that claims to be Europe’s most punctual, ineffi-ciencies simply aren’t an option. And for Alex Pilar,CIO of DHL Supply Chain, the pursuit for procedur-al perfection is a full time job. A DHL veteran, having

started his career there in the 1990s, Pilar is constantly involved in projects tofurther streamline the business and cut costs. He says this is no easy task at a com-pany that is constantly adding new businesses to its existing portfolio. Most re-cently it completed the integration of the UK-based logistics giant Exel followingDHL’s acquisition of the firm in 2005. During such projects, Pilar says the biggestchallenge he faces is integrating the companies’ legacy systems and applicationsinto DHL’s own IT infrastructure without adding unnecessary applications or

layers of complexity. “Our group has been built to some extent on acquisitions,”he says. “This means always bringing in legacy systems such as platforms andtechnologies. So despite all our efforts, we are always facing new complexity aswe consolidate. It’s an ongoing process and there are major projects going oncurrently in Europe.”

Trimming the fatPilar describes how DHL successfully integrated Exel’s legacy systems

with its own – a process which involved a massive 900 separate projects. “Itwas a very successful integration programme and involved 110,000 peoplefrom Exel and 30,000 from DHL. There were 900 projects in different func-tions executed, which is a really signification programme.” He says the com-

110 www.cxo.eu.com

Acquisitions, cost cutting targets and a major outsourcing project are just some of thechallenges facing Alex Pilar, CIO of DHL Supply Chain. But, he tells Diana Milne,nothing will dent his passion for the job.

LOGISTICS

A LOGISTICALCHALLENGE

Alex Pilar ed:20 July 13/8/09 09:49 Page 110

www.cxo.eu.com 111

pany is currently in the process of “aggressively” streamlining its applicationsportfolio to cut costs: “We have, through the acquisitions we’ve made, far toomany applications and too much complexity and this is a sig-nificant challenge because of the costs.”

The drive to cut costs is greater than ever with the eco-nomic downturn having hit the European logistics markethard. DHL has suffered badly, having reported a slump innet profits of 71.4 percent for the second quarter of this yearwith sales nosediving by 17.7 percent, generating €11.1 bil-lion compared to €13.3 billion the previous year. Its aim is tocut its costs by €700 million by the second quarter of nextyear with IT a major part of the programme.

“Like everybody else we have been challenged a lot onadjusting our costs,” says Pilar. “We are formulating astrategy for all business areas to make sure that we min-imise the complexity and maximise the potential of the strategy applica-tions and avoid further investments in these. We must also continue the

brutal streamlining of our applications and leveraging all the opportuni-ties we have.”

One major cost cutting exercise, that preceded the cred-it crunch but continues today, is the centralising of DHL’ssupport services to three hubs in the Czech Republic,Malaysia and the US which started in 2004. The programmewas aimed at slashing 60 percent off its €700 million IT bud-get and involved establishing three global IS centres and oneIT infrastructure in Kuala Lumpur, Prague and Scottsdale. Itwas also done as part of a plan to have IT support available toits 120,000 users 24-hours a day. At the time Pilar was incharge of the European part of project, which he says has nowreached all DHL’s targets: “We have reached all the parame-ters we hoped for in terms of the cost efficiency and time andbusiness case but we continue to build that operation and

consolidate and optimise infrastructure in Europe.” He goes on to describethe benefits to DHL of having centralised its IT services, in terms of cost and

Alex Pilar


He says the challenges of the project are thesame as for any large scale outsourcing pro-gramme. However, he says he is confident thatDHL’s outsourcing partners are now strongenough to take on the weight of the firm’s com-plex telecoms infrastructure; a situation that hesays didn’t exist two years ago: “I think the in-dustry has matured. A couple of years ago wewere considering doing this, but the complexi-ty we have would have been hard for any of thepartners to accommodate. We feel much moreconfident these days.”

Staying simpleCost cutting is by no means the sole driver

behind the various IT consolidation projectsPilar and his team are embarking on. He says amajor aim of the organisation is to achievesimplicity, both in its own internal operationsand in the services it offers to its customers aspart of its 2015 strategy. Pilar acknowledges,however, that when it comes to IT simplicitycan be a difficult goal to reach compared toother industries. “Simplicity is something thatis very close to my heart as the CIO of a big

efficiency. “We have had three benefits. One is labour arbitrage.We had workers based in locations like the UK, Switzerland andBrussels. Consolidating meant there was the opportunity to op-timise or virtualise many services. The move also created acritical mass of IT experts all sitting together in oneplace, which helped to improve productivity too.So we were quite successful in executing this pro-gramme.”

Pilar now hopes to build on the success of DHL’sown successful internal shifting of IT services to a centralhub by embarking on the outsourcing of its telecoms infra-structure. To date it has signed deals with Telefónica O2 in

Europe and AT&T in the US and it is currently working on finding out-sourcing partners in Asia Pacific, Latin America and the emerging markets.The project is, he says, a team effort between the CIOs of all DHL’s various di-visions. “These programmes will bring significant savings into our telecomscost. We are working together across all divisions and we have a coreprogramme called Telecoms Optimisation where CIOS from each di-vision are steering the different programmes for each region.

112 www.cxo.eu.com

About DHL

DHL is the global market leader of the

international express and logistics

industry and was founded in the US 40

years ago. Today its parent company,

Deutsche Post, employs 300,000 staff

around the world. Its network spans

over 220 countries. There are four

specialist divisions: Access DHL Express

services Global, Forwarding and Freight;

Access DHL Freight services,

incorporations Supply Chain and

Corporation Information Solutions;

Access DHL Supply Chain for mail and

Access Mail Services.

“The automotive industry is 20 yearsahead of IT in the way it manages tohide the complexity of a sophisticatedcar behind an interface, which issimple and doesn’t irritate you”

FAST FACTS

EMPLOYEES:Over 500,000 – one ofthe biggest privateemployers worldwide

LOCATIONS:18,500 worldwide

OFFICES: 220 worldwide


company. If you compared IT to other industries, such asthe automotive industry it is very behind. Indeed I

would say the automotive industry is 20 years aheadof IT in the way it manages to hide the complexi-

ty of a sophisticated car behind an interface,which is simple and doesn’t irritate you. IT still

has a long way to get to go to that level of simplicityand sleekness of operation.”

Achieving simplicity is a key goal behind the logis-tics and supply chain projects, which DHL takes on for

its customers. These include the likes of the NHS in theUK for which DHL has provided supply chain ser-

vices for two years, and British Airways with whichit has recently won a deal to provide logistics to

parts of its business. Selling these solutions tocompanies wanting to improve the efficiency of

their operations means the pressure is on for Pilar toprove DHL can also manage its own IT as smoothly as possible. He

says too that as DHL is both a provider of IT services and heavily relianton IT for the running of its own business, technology is very closelyaligned with the company’s business objectives. Indeed, Pilar says he be-

lieves that if it didn’t play a key role in boardroom decisions, he would befailing in his role as CIO. ”The innovation of the business and IT’s abilityto support that in the contracts logistics business is very important. Weare working very closely with our business partners and interactions be-tween CEOs and CIOs are very intensive and regular. We aim to bring ITas close to the business as possible. We are looking at the ways that thebusiness is thinking so that we can work together to create the right solu-tions for our customers. Business and IT at this stage and in this centurymust be intimately close. You should not even be able to put a piece ofpaper between the two. It should be one entity. I keep saying that if ITdoesn’t bring value in the boardroom it doesn’t belong there.”

Pilar is helped in his aim by the fact that he worked for five years asManaging Director of Country Operations in the Czech Republic. He says:“Because I’ve spent some time in the business as well as in IT, I know that ITis the business. It is part of it and if it’s not, it’s set to fail. I’m absolutely pas-sionate about the fact that IT is absolutely part of the business.” It’s this mis-sionary zeal for IT that has spurred Pilar on throughout countless efficiencydrives and IT transformation projects. And with DHL about to embark on thecomplex outsourcing of its telecoms infrastructure, coupled with taking onthe supply chain and logistics services of several major European organisa-tion, he’ll need even more passion for the job in the months to come. �

www.cxo.eu.com 113

About Deutsch Post DHL

ProfileDeutsche Post DHL is the world’s leading postaland logistics group. Its integrated DHL andDeutsche Post brands offer services ininternational express, air and ocean freight, roadand rail transportation and contract logistics.Deutsche Post DHL is Germany’s only provider ofpostal services and delivers mail and parcels inGermany and the world. It is also a provider ofdialogue marketing and press distributionservices as well as corporate communicationssolutions. The group generated revenue ofmore than €54 billion in 2008.

HistoryDeutsche Post DHL was transformed from agovernment-controlled, deficit-ridden nationalagency, Deutsche Bundespost in 1990, to aprofitable European mail and parcel serviceprovider. Deutsche Post AG went public inNovember 2000 and has been listed on the DAX30 since March 2001. At the end of 2005 itacquired Exel. A minority stake in DeutschePostbank AG (22.9 percent) was sold to toDeutsche Bank AG in February 2009


From which industries are you currently seeing the great-est demand for fibre optic cables?Phil Edwards. Typically we see a lot of cable demand from thevoice and data service providers such as France Telecom,Telefonica or Deutsche Telecom. In the US we’re working withthe large incumbents and in China we’re heavily involved therein terms of rolling out the 3G network infrastructures. We see agreat demand rising in fibre to the home projects. Looking tofibre to the home networks, in Europe frontrunners areScandinavia, particularly Finland, Sweden, Denmark, theNetherlands, France and surprisingly Slovenia. We’re heavily in-volved in helping these fibre to the home deployments, eitherbeing the large incumbents or new entrances like utility compa-nies in Scandinavia or the new operator Reggefiber in theNetherlands. Optical fibre technology is obviously the next gen-eration from traditional telecom copper networks to provide highspeed, low cost, reliable, integrated services to the consumers.

What are the main challenges associated with putting infibre optic cables?PE. The big advantage of optical fibre now is that it brings thehigh bandwidth requirements into the home environment.There’s a genuine green theme about this because it’s enablingpeople to have access to masses of data, which is enabling themto work from home or access diagnostic services online. Thechallenge is making a reliable, non-limited point-to-point connection betweenthe home and the central office, where most of the information is captured andthen, via a digital frame, is actually connected to the individual user. Using afibre optic cable for this last mile is sensible, but it comes down to costs. So theissue is about having very smart network designs and very cost effective de-signs so the cost of ownership for the network provider is low both in terms oforiginal capital injection and in the running cost of that network. We can de-sign you a network that will be at the lowest cost of installation, which will be

an efficient green sensitive solutionwhich will give you huge access to dataservices directly to the home or the of-fice or government buildings.

Why is fibre optic cabling a cost ef-fective solution for companies?PE. The future is all about improvingthe return on investment and beingable to provide these high powered,huge tunnels of information at lowcost. What we mean by total cost ofownership is that we aim to provide avery high quality level of service, withan effective original investment andmore significantly to be able to overlayadditional services without having tocontinually upgrade the network be-cause of the fundamental capacitywhich this network has. The opera-tional cost of registration and bringingnew services and new connectionsinto new environments is kept to thebare minimum. It’s all about enhanc-ing bandwidth capability and making

cabling the driver for bringing innovation into network solutions. This is alsoa low energy consumption solution, which makes it environmentally friend-ly and allows more people to work from home. This is where Draka can help.

What is the latest technology that is being developed to benefitcompanies?PE. We now provide the latest generation of bend-insensitive fibres whichmeans that you can handle fibre like copper, mechanically abuse it or if youlike tie it in a knot without actually compromising the transmission charac-teristics of the fibre. This means that failure rate during the installation ofthe network becomes very low which is making it a lot cheaper. In addition,you can miniaturise the components in which you manage the fibre, so it’sa smaller footprint. It requires less energy to support it and the connectivi-ty is more reliable. Nobody wants to have the internet suddenly unpluggedfrom their home or their office because we’re so dependent on it. So build-ing resilience in and miniaturising the solution addresses this challenge in acost effective way. n

Making the right connection

114 www.cxo.eu.com

We quiz Philip Edwards on why fibre optic cables have transformedthe way we communicate and access data.

EXECUTIVEINTERVIEW

Philip Edwards is the Group President of Draka Communications. He is an engineeringgraduate born and educated in Wales. He started his career with ITT and has since workedfor Northern Telecom,Pirelli, Marconi and for the last seven years, Draka. During this timehe has looked after the global optical fibre activities.

“Optical fibre bringshigh bandwidth

requirements into thehome environment”

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You could say Chris Viehbacher has been around. Hestarted his working life at PricewaterhouseCoopers,then in 1988 he moved into the pharmaceutical indus-try with GlaxoWellcome, which later became GSK. Heholds both Canadian and German passports, and haslived and worked in the US and Canada, as well asGermany, France and the UK.

But it’s his latest move that is big news. Last December he left his posi-tion as President of GSK’s Pharmaceutical Operations North America – afterbeing passed over for the top job in favor of Andrew Witty – to become CEOof its French rival, sanofi-aventis. The move caused shock waves throughoutthe industry – the previous CEO, Gerard le Fur, had been in the position foronly 18 months.

The company’s share prices dropped in 2008, following the rejection inthe US of Acomplia, a treatment for obesity, which had once been seen assanofi’s most-promising drug. And last July, sanofi and partner OxfordBioMedica said their TroVax medicine had failed to meet the target of a kid-ney cancer study. Investors became understandably disgruntled and the com-pany obviously felt that a change was called for.

When Viehbacher’s appointment was announced, there was a wide-spread view that he was being brought in as a kind of savior, to turn around atroubled company. Immediately after the announcement, sanofi’s shares rose6.8 percent, their biggest gain in more than two years.

Building upWhile he admits that sanofi-aventis has recently suffered from a bit of

an image problem, Viehbacher insists he has a strong foundation to build on.“I had two months between leaving GSK and starting at sanofi, and as part ofthe analysis I carried out during that period I found a number of strengthscoming into the company I would not have known about. When we present-ed our fourth quarter results, where we talked a bit about the strategy, evenpeople in France who’ve known the company for a long, long time discov-ered new things.

“The first was that we have a leadership position globally. We’re oftenperceived as being a company which is very franco francais, very French, butactually this is the company that’s got the number one position outside theUS and Europe. It was the first company into China, it has a major positionin India, big positions in Latin America, and a major position in Africa.

“When you think that in the future more than 50 percent of global phar-maceutical market growth is going to come from outside of traditional mar-kets, sanofi is positioned with not just the market share, but also with the

116 www.cxo.eu.com

When Chris Viehbacher arrived to take up the reins as CEO of sanofi-aventis, hefound a company with an image problem that had forgotten how to

communicate. Now he plans to change all that, as Marie Shields finds out.

PHARMACEUTICALS

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SANOFI-AVENTIS:20 July 13/08/2009 10:41 Page 116

there; it’s just a question of now building upon those and turning them intosomething.”

There also needs to be more emphasis on external growth, Viehbacherexplains. He says he wants to see the company open up more to the outsideworld. “We were a company that was more focused internally; a company thatlived within its own walls. We didn’t embrace enough of a customer perspec-tive, we didn’t embrace enough of a partnership perspective on looking fornew products. We were looking principally inside at our own research for newproduct opportunities, and we weren’t spending a lot of time communicat-ing with the outside world.

“One aspect of my plan is to bring the outside world into the companyand open it up to what’s out there. We have just carried out a pipeline reviewwithin our research and development organisation, and we examined it notjust from the traditional point of view of safety and efficacy, but we also lookedat the value to customers. Cutting 14 of our 65 projects was clearly a strongsignal that we’re only going to progress those medicines that are not only safeand efficacious, but also add value to patients. So there is a need to change theculture.”

Viehbacher has also been looking at R&D structure. He says it’s impor-tant to keep in mind that there is a lot of fantastic science going on outsidethe company. “The model – if there is such a thing – is to say you’re going tobe doing some research inside, but you’re also going to be doing a lot of re-search through collaboration. To a degree, outside research is still seen asadding to internal efforts, and to that I say, ‘There are plenty of companiesoutside and they’re doing plenty of things. Why replicate that?’”

Companies still need to do enough of their own research to be able to un-derstand the research being carried out externally, and big pharma compa-nies will always have some depth of expertise that smaller outside companiesdon’t. Viehbacher stresses, however, that for him, the discovery researchmodel is very much one of osmosis, and not so much about creating smallerunits and organising the structure. He believes in moving money and re-sources across a range of projects and teams, some of which may be internaland some of which may be external.

Time to collaborateIt’s for this reason that Viehbacher is willing to allocate up to 50 per-

cent of his research resources to outside collaborations. He gives the fol-lowing example: “When we put forward a proposal to build a biotechnologyfactory in France, I said, ‘I’d like to make sure that this factory is also avail-able to other biotech companies who might want to use the facility.’ That’san interest for us because we might be able to partner with some of thosecompanies.

“Right now a lot of those companies are forced to subcontract the man-ufacturing to people who specialise in manufacturing, but who aren’t nec-essarily interested in partnering. They’re just doing it to make as muchprofit as they can. Traditionally business development has centred on theidea of adding something to the company, where we don’t think the pipelineis enough. But when we think our own internal pipeline is enough, then itbecomes harder to bring in new products to the company.

“After 20 years, I can say with certainty that you can never have enoughpipeline. There isn’t a company in this industry that has enough pipeline, andenhancing that and working collaboratively outside has got to be a way oflife – and a constant way of life, not just something you do on an ad hoc basis

www.cxo.eu.com 117

people, resources, local market knowledge and government contacts to ben-efit from this period of growth.

“We’re also a lot more diversified than people realise. We’ve obviouslygot a leadership position in vaccines, and a position in OTC that I don’t thinkanybody realised we had, either inside or outside the company. It provides abasis on which one can build. We have fledgling operations in generics, whichwe have since reinforced, and we have quite a significant older product rangethat continues to grow, and which really supports the business globally.”

Let’s talkWhat then, was the problem? Viehbacher feels that one of sanofi’s mis-

takes in the past has been a lack of effort to communicate with investors andthe general public. “Sanofi is a company that experienced significant suc-cess for many years, and didn’t pay attention to the need to communicate.It’s when you run into difficulty that you suddenly realise that you’ve gotto explain where your strategy is and where the strengths of the companyare,” he says.

“Management didn’t focus enough attention on it, and we never ex-pressed a vision about where we wanted to go. We had the building blockslying on the ground, but there was no plan to make the house and no real ex-planation of what house we were going to build. There’s been some workneeded on architecture and construction. But at least the fundamentals were


“Nobody has really gone far enough, in my view, of saying, ‘We’re goingto address this.’ We’ve been taking baby steps, when we need to be a little bitmore radical.”

Diagnosis mergerThe industry has recently seen a spate of mega mergers – Pfizer/Wyeth,

Roche/Genentech, Merck/Schering-Plough. What does Viehbacher think ofthis trend, and is it one he’s considering buying into himself?

“One way or another, we all have to think about where we’re going to getsustainable growth from, and everybody starts off with a different set ofcards.” he explains. “You have some companies that have become almostpurely small molecule-based in Europe and the US, and when you’re facing a

patent cliff and you don’t have an awful lot of other things in your hand, youpretty much have to do something to continue to survive. Pfizer has said, ‘Weneed to be more diversified. We need more biologicals and vaccines, for ex-ample, and OTCs,’ which they didn’t have, and so it was a way of getting that.

“Merck’s Peter Kim recently said in an interview that they want morepipeline. Everybody starts with a different position. For us, we’ve got a lot ofelements upon which we can grow. I don’t necessarily need to do a big dealto seek that out; and in fact if you are trying to get away from dependence on

to supplement your own. The model we must move away from is this no-tion of ‘We’re going to just keep throwing money at a black box’ – which isthe way I often perceived research and development in my past years – andhope that we can do everything from A to Z, from discovery through to com-mercialisation.”

With external collaboration, there’s obviously a process of competitionthat doesn’t occur with internal projects. It’s through this competitive processthat some of the best ideas come out, and weaker projects often get weededout. Companies don’t always put the same level of due diligence and rigourbehind the choice of internal projects, because they’re committed to sites andcommitted to teams.

“This might mean we need to bring a lot more rigour to deciding whichare the best ideas to invest in,” Viehbacher says. “Then we need to get behindthem, make sure the teams have passion and conviction, and give them thelatitude to decide. The construct of a team may differ from one therapeuticarea to another, but at the end of the day we are betting on teams and theirideas. It’s a question of how do you identify those, encourage them and putsome stress on the testing of those ideas? You have to let them run and try tokeep as little process and bureaucracy as you can from impeding those efforts.Then after three or four years, you see what results they have come up with.That’s also something that in our industry we haven’t been good enough at –looking for the results early on. As an industry, we do development prettywell; it’s the discovery research piece that we’ve got to go back and look atfrom a people point of view.

“You’ve got to be able to voice a problem before you can solve it. To a de-gree, we’ve been dancing around a number of issues in this industry andhaven’t wanted to face up to them. We do need to acknowledge, for example,that we don’t have enough new products to replace the ones we’re going tolose. And we probably have not been realising an appropriate return on themoney we have been spending on this area, and we probably do need to spenda lot more on research and development in terms of how we restore the cre-ativity and productivity there.

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“One of the reasons the industry ishaving difficulty in discovery is thatwe’re still pursuing the same targets.

At some point you have to branch outand go after some new frontiers”


blockbusters you want to focus on those businesses that have different com-petitive profiles and different barriers to entry. And they’re not necessarilygoing to be easy businesses either, but they’re going to have a differentlongevity and a different perspective in terms of growth.

“My first objective is to continue to build on this notion of a globalhealthcare company as opposed to a pharmaceutical company based in theUS and Europe, and therefore have an acquisition strategy that builds uponthose things where we already have a strong presence. Like vaccines, likeemerging markets, like OTCs and generics, where we’ve been weak but wherewe can strengthen ourselves. I don’t think the size of the acquisition neces-sarily matters. It’s a question of us all looking to strengthen our companies aswe face patent expiries, and some of us, like sanofi, have things upon whichwe can build internally; some of us have to seek more externally.”

Viehbacher says that the big question, whether you’re buying big, medi-um or small, is still going to be around innovation. He believes most compa-nies are struggling with the question of how to come up with an innovationmodel that is sustainable. He doesn’t think anyone has found the solution, buthe stresses that innovation is something that needs to be worked hard at, andthat you can’t let merger and acquisition activity completely dominate that.

Diversify and multiplySince becoming CEO, one of Viehbacher’s constant refrains has been that

he aims to turn sanofi-aventis into a diversified health-care company with amore global reach. What exactly does this mean?

“If you think about strategy you essentially start off with a certain num-ber of things,” he says. “The first is: where is there an attractive market, andyou come down to that by looking at what are some of the mega trendsamongst consumers? What are some of the disease areas of unmet need?What’s the evolution in the marketplace in terms of payers and insurancecompanies and regulations? And you try to then marry that with where you’vegot some sort of capability, presence or experience, and try to focus in onthose market areas that are the most attractive.

“On the pharma side, we’ve gone too long where we start with a medi-cine and go look for a customer. If you look at the fundamentals of the health-care market, it’s huge. There is going to be economic growth at some point;we do have the economic crisis, but even in the economic crisis you’re stillseeing quite a number of markets growing, although not as much; for exam-ple, in countries like China who suddenly decided that they need to signifi-cantly increase the level of investment they have behind healthcare.

“If you look at the aging population as a mega trend, if you’re looking atobesity, you’re looking at a trend for wellbeing, you’re looking at time com-pression, you’re looking at urbanisation of populations. You’re suddenly see-ing that there is going to be a focus on healthcare, but on a certain type ofhealthcare, and that our style of living is creating new healthcare issues. Tome, healthcare – especially if you don’t define it too narrowly – is fundamen-tally a strong area. And you’ve also got major diseases that still are not welltreated – such as diabetes, oncology, Alzheimer’s disease.

“Therapeutically you’ve got some very interesting areas, but then ofcourse not everybody can afford the same level of healthcare. We’re seeingan increased presence of government regulation trying to go after some of theprivate sector in terms of over-the-counter, or in countries where there’s noreal social security or health insurance today – which is true of most coun-tries in Asia – and you have to ask, can you get into more services, OTCs,generics, some devices? There are all kinds of growth opportunities out there,and the strategy is around going after those versus just saying well, we’re apharmaceutical company.”

Another constant lament within the industry is the lack of new block-busters. Viehbacher points out that blockbusters are unlikely to disappear com-pletely. “The model that didn’t work was betting on the blockbusters; relyingupon them for your success. There will still be blockbusters, you just can’t counton them in terms of timing. You’ve got to also then organise yourself, becausethere’s no question that there’s no better business in terms of profitability, withlow levels of resources needed, than when you’ve got a blockbuster. If you’vegot one you’re in a great place, but you can’t always count on those.”

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The sanofi-aventis group head office.

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www.cxo.eu.com 121

Increasing productivityAnother area that Viehbacher feels the industry should be looking at is

the strength of its R&D. With this in mind, sanofi recently carried out a port-folio review. “Our intention was to do what a lot of other companies had al-ready recognised, and that is that you can’t develop a new medicine unless itadds value to patients,” he explains. “In so doing we’ve established newprocesses where the market is represented at the decision table as to when weadvance a product – nothing revolutionary there. The next step is to ask fivequestions of R&D. The first two we’ve already answered: do our products addvalue, and who needs to be at the table when we make decisions?

“The third, fourth and fifth questions are: how do we restore creativityand productivity back into our organisations? How do we make sure our or-ganisation is as interested in seeking science outside the company as inside?And, what are the new technologies and areas for investment that we want tobe in? Science is moving on – where do we want to place our bets?

“I’m not going to define all those; we do know we have some issues. I’mmeeting with some of our scientists right at the bottom of the company. Wehave anywhere from nine to 10 hierarchical levels between the head of R&Dand the scientist. That means a lot of our best people have become managers,and you get a promotion in the compa-ny by becoming a manager, not bybeing a great scientist. We’re not doingenough to recognise innovation. We’vegot some great people, but it’s very hardsometimes to get a project advanced ifyou really believe in something, becauseyou’ve got to go through so many steps.

“We’re trying to go back and havea very basic look from a human point ofview at who are the people who can suc-ceed, how do we test whether they’re going to succeed, and how do we givethem a chance in our organisation and give them enough latitude? We’ve be-come quite risk-averse as companies, and you’ll very often hear that we’re try-ing to manage the risk of the companies. And to a degree that makes sense –certainly when you get to development you want to manage risk.

“One of the reasons we’re having difficulty in discovery is that we’re stillpursuing a lot of the same targets, and at some point you have to branch outand go after some non-validated targets, some new frontiers of science. Wehaven’t allowed enough of a risk profile at that level of the organisation tobranch out into new areas. If you look at the targets in oncology, in metabol-ic disease, and in CNS, and you compare how many companies are going afterthe same target, it’s incredible.”

Recession-proof?It is unlikely that any industry will emerge completely unscathed from

the current recession, and recent rounds of job cuts among pharmaceuticalcompanies are an indication that they too are feeling its effects. ThePfizer/Wyeth merger resulted in the loss of nearly 20,000 jobs. GSK eliminat-ed 800 research positions late last year, and recently announced it could shedup to 6000 more jobs across its global operations. AstraZeneca also said inFebruary that it would cut its workforce by about 6000 positions. Sanofi-aven-tis, while it hasn’t yet made major reductions to its R&D staff, has cut nearly1000 sales jobs in France, and several hundred more in the US.

When asked about the possibility of further job reductions as part of cost-cutting measures under his leadership, Viehbacher refuses to be drawn. “Wewill certainly go through a process of looking at how we can reallocate andreorient our resources, and that may end up in fewer resources. But nobody’sgoing to invest in this company because we cut costs. One of the lessons I’velearned in the last 20 years is that if you want to provide shareholder returnyou have to present a company that’s got a sustainable growth prospect. If youjust go through endless rounds of cost cutting you end up with an organisa-tion that becomes very distracted and very demotivated.

“We’re becoming more of a global company. We’re going to focus a lotmore of our growth into emerging markets and places like vaccines and OTC.Those all have ripple effects within a company; if you’re suddenly in gener-ics, the manufacturing organisation has got to be able to support 100 launch-es a year versus 15; a launch being the launch of an SKU, not a new molecule.And so you’re going to have a different organisational model – you don’t nec-essarily want to smother your generics businesses.

“You want to provide some different perspective. You’re going to bedoing a lot more outside collaboration. What is the type of person, what is thetype of competency you need for that? I think we’ll probably end up saving

some cost, and this company has done that very ef-fectively over the years.

“We’ve got the lowest SG&A ratio in the phar-maceutical industry. Sanofi has never stood up andbeat its chest and said, ‘We’re going to eliminate allthese jobs.’ It has just quietly and effectively man-aged its costs, and we did that again in the firstquarter. To me cost management is just part ofgood management. We’ll continue to do that, andthere are certainly opportunities to take some costsout of the business.

“An endless round of cost cutting is not necessarily helpful, and it does-n’t create value longer-term. It has to be to get the company growing on itsfeet again.”

Optimistic outlookDespite the challenges his company and the entire industry are facing,

Viehbacher is optimistic about the future. In his opinion, there is too muchfocus on the patent cliff, when the future is in healthcare. “In our companywe’ve got a lot of talented people and we’ve got a lot of financial resources.There are a lot of patients out there, and we’ve got the medicines and vaccinesto help them.

“We’re going to be a company that grows well on into the next decade.We need to get past the blockbuster phase, but the base business that we haveand our ability to partner and do acquisitions gives me an awful lot of excite-ment for the future.

“Healthcare is still something that matters more than anything else –there is huge unmet need out there. It’s a massive marketplace, and if we’rea little bit creative and a little bit flexible in how we go after it there are bigopportunities.”

Despite the initial controversy surrounding his appointment, Viehbacherseems to be settling nicely into his new role. As he looks forward to the restof his family joining him in Paris this summer, perhaps this ‘man on the move’will decide to stay put for a while. n

“An endless round of costcutting is not helpful, and

it doesn’t create valuelonger-term”


EXECUTIVEINTERVIEW

Will the global recession impact on organisa-tion’s ‘green IT’ efforts or do you take the re-verse view that this is the ideal opportunity asCFOs look to slash expenditure? Neil Rasmussen. With many customers defer-ring major IT deployments and focused on con-trolling costs, this is an ideal time to undertakeefforts to reduce energy expenses. Adjustingpower and cooling infrastructure, retiring olderservers, and driving server standards often have ashort payback time and can recover data centrepower, cooling, and physical space capacities, cre-ating a solid foundation for future IT projects. Formany customers, server virtualisation provides alarge additional opportunity to free-up capacitiesand reduce power consumption. For most cus-tomers, reductions of 20 percent in IT relatedelectrical consumption are easily obtained, andsavings of 50 percent or more are commonlyachieved.

What are the common mistakes people makewith their attempts to reduce their technolo-gy carbon footprint?NS. Due to the immaturity and lack of standardsfor assessing carbon footprint, IT professionals

should, for now, focus on measured electrical en-ergy savings. Success requires that an effectivebaseline energy consumptionstudy be performed or it be-comes difficult to assess ac-complishments. Clarifying theboundaries between IT andnon-IT energy consumptionremains a point of confusionfor most customers, and anyassessment needs to be explic-it on this. Server virtualisationprojects should always addresspower and cooling infrastruc-ture in parallel with the ITchanges; we find many virtu-alisation projects achievemuch less energy savings thananticipated when the powerand cooling infrastructure hasnot been adapted to the virtu-alised environment, and im-provements that could havebeen easily made at low costcan be difficult or expensive after a virtualisationproject is completed.

How are your products and services aidingcompanies to boost their ‘green’ credentials? NS. We are proud to offer the most electrically ef-ficient power and cooling equipment available;nevertheless, customers typically obtain thelargest energy efficiency gains from the help wecan provide in planning the infrastructure of newdata centres and assessing and improving exist-ing data centres. Simple choices in deploymentgeometry, sizing, power distribution, or con-figuration can result in dramatic changes in en-ergy consumption. One of our goals is to ‘buildin’ efficiency to our data centre reference de-signs to ensure that organisations operatingsmaller data centres on a small budget can bejust as efficient and ‘green’ as enterprises likeGoogle that have expert staff and operate verylarge data centres.

What are your predictions for this sector in thenext few years and which industries willemerge ahead of the curve with their ‘green’efforts? NS. Green efforts in the IT space will focus onelectrical energy consumption in the short-term,because this is where the most substantial andcost effective environmental impact benefitscan be obtained. Many existing data centreswill undergo significant efficiency improve-

ments that will extend theirpractical life. For new datacentres, the fundamentally in-efficient traditional raised-floor cooled data centredesign will disappear, as hot-aisle containment and free-aircooling become standard prac-tice. Over the next few years, asthe efficiency of data centresimproves dramatically, we cananticipate a focus on the nextkey green IT objectives, whichare water consumption andequipment end-of-life dispos-al. Improvements in all of theseareas will be driven by vendors,and the most effective IT userswill be those who adopt emerg-ing green management stan-dards such as ISO-50001Energy Management Standard

rather than attempting to develop their own inter-nal standards. �

With organisations looking to improve their efficienciesand slash their carbon footprint, Neil Rasmussen offershis expert advice on going ‘green’.

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Neil Rasmussen is the SVP ofInnovation for APC by SchneiderElectric. His current research isfocused on next generation highefficiency data centres. He holds 17patents related to data centrearchitecture and has published over50 papers on that subject. Rasmussenreceived his BS and MS degrees inelectrical engineering from MIT.

GREEN CREDENTIALS

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The road ahead We are building the future, today. And it is clear that those who

take the lead will have a fi rst mover advantage in developing the sustain-able technologies for a rapidly growing world market. Th e need to build a resource-effi cient, low carbon economy is no longer an issue for debate. Th e question now is how we are actually going to make this happen. And eco-innovation is one of the keys, not only to meeting the EU’s environ-mental objectives but also to its future competitiveness. By 2020, we must cut our greenhouse gas emissions by at least 20 percent of 1990 levels, we need to improve our energy effi ciency by 20 percent and increase the share of renewables in our energy mix to 20 percent.

Achieving these targets will require a fundamental change in the way we produce and consume goods. Improving the environmental per-formance of products over their lifecycle is essential. Th is is at the heart of our Sustainable Consumption and Production Action Plan.

Th is brings me to the role of the Executive Agency for Cometitive-ness and Innovation (EACI). Its members are key partners in helping us achieve the goals of the Lisbon Strategy for jobs and growth and the ambitious targets we have set in the climate and energy package. Th e CIP budget for eco-innovation may appear modest in view of these objec-tives (and I would hope that it is substantially increased in the future). But through synergies with other programmes – like Intelligent Energy Europe (IEE) and the Marco Polo initiative for sustainable transport – it is able to deliver very substantial results.

We look forward to the eco-innovation projects the agency cur-rently manages leading to new products on the market that can bring tangible benefi ts for the environment. I am particularly pleased to see that we are working with SMEs in important areas such as recycling and construction. Th is work will play a part in building the new low carbon industrial revolution. And with the second call for proposals about to be launched, we can look forward to many more green solutions for sustain-able growth. Th anks to the agency’s work, we are on the road to a greener future, where business meets the environment.

GREEN GOVERNANCE

It is no secret that innovation and competitiveness go hand in hand. What is less well understood is that the health of the environment and the health of the economy are also fun-damentally linked. Sustainable economic growth needs to be based on a sustainable natural environment. We are cur-

rently facing multiple global crises – a severe economic downturn, the ecological crises of climate change and the loss of biodiversity. Each of these crises needs urgent political action. But there is one fundamental diff erence: our economies will recover in a few years but the environmental damage we are causing will take generations to repair.

It is an encouraging sign that protecting the environment is no longer seen as a luxury that can only be aff orded during the good times. Leaders everywhere have recognised that meeting environmental chal-lenges off ers opportunities to stimulate the economy and create new jobs. Th e US, South Korea, China and Japan are among those already realising that this is a triple win scenario – well designed measures can boost sustainability, jobs and growth.

Th e Competitiveness and Innovation Framework Programme (CIP) is Europe’s engine for green growth. It is the EU’s main tool to increase Europe’s productivity and innovation while balancing envi-ronmental concerns. It is a key to implementing our Environmental Technologies Action Plan (ETAP) and the Lead Market Initiative, which together help remove the fi nancial and institutional barriers to eco-innovation. It is worth noting that half of the lead markets that have been identifi ed to date are related to eco-technologies.

Eco-industries are one of the fastest growing sectors of the EU economy and they are an area where Europe is a global leader. In-vestment in clean technologies now represents around 18 percent of all venture capital in Europe. Th e market for green jobs is expanding rapidly. According to the UN, up to 20 million new jobs could be cre-ated worldwide in the renewable energy sector by 2030. Th e UN has also concluded that improved energy-effi ciency in buildings has the potential to create up to 3.5 million green jobs in Europe and the United States.

EU Environment Commissioner Stavros

Dimas on the rise of eco-industries and eco-innovation in meeting carbon emission targets.

“We are building the future, today”

Stavros Dimas

“According to the UN, 20 million new jobs could be created worldwide in the renewable energy sector by 2030”

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A change of focus

The world’s undisputed king of photography, Eastman Kodak, recently made a successful transition into the digital age. A huge part of that transformation was down to the way the company’s CMO, Jeff Hayzlett, changed how the company communicates with its customers. By Rebecca Goozee

MARKETINGFOCUS

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By comparison, less than half of the revenue came from digital products four years ago.

Why did marketing play such a huge part in the turnaround? Ac-cording to Hayzlett it is because the Fortune 500 giant is an extremely market-centric company-meaning that marketing is the only function that can bridge an idea all the way through from production and deliv-ery to the customer. “Marketing is very much like the chief customer offi cer in the respect that marketing strategy is involved in the evolu-tion of Kodak. It’s really leading the eff ort to move beyond the US into critical markets like the UK, Russia, China, Australia, Germany and France – marketing is the Cavalry offi cer that’s out front leading the horse charge,” smiles Hayzlett.

An unconventional approachMarketing is clearly key at Kodak, and Hayzlett is renowned for his

love of alternative and innovative marketing techniques. So why has he chosen to embrace so many social media tools? “Because they work!” he laughs. “Social media has been around forever but its recent transi-tion to the internet has made it a great way to communicate with customers.” By shift ing the discussion from a one-sided sell it has been possible to engage, educate and excite potential customers with new and improved products. Rather than calling an 800 number, customers can directly interact with Kodak and share their ideas or problems.

“We’ve been opening up dialogs in diff er-ent ways and they’ve helped us spread the word. It’s amazing to watch conversations on Twitter for instance. Someone will say they are looking at an HD video camera and then immediately people will reach out to this person and give them advice about the best product. It’s exciting and it’s helping to fan the fl ame of the fi re that’s already taking hold.”

Aside from Twitter, Hayzlett is involved with Facebook and Flickr, as well as a number of tools to monitor and participate in diff erent ways, such as TwitterBerry and TweetDeck. “I use a number of tools and it’s really amazing, because I wrote something yesterday in one of my tweets regarding TwitterBerry, and then someone said, have you heard of UberBerry, so now I’m checking that tool out too. All of them are great for getting the message out there.”

Hayzlett originally started using social media to keep in contact with his family and let

them know where he was. And he soon fi gured out that Facebook was a great way to keep in contact with employees. “Social media was just such a great way to be connected and share our lives,” he explains. “And then I found out, wow, I’ve got this great big Kodak community at my fi ngertips, with 20 percent of our employees on Facebook alone, which

As one of the most visible and active social-media fans in the CMO business, Jeff Hayzlett believes that social media has the power to grow a brand, strengthen rela-tionships with audiences and keep a fi nger on the pulse of what’s happening with the business. And nowhere

has this been more evident than at Kodak. When Kodak was going through it’s transformation from a fi lm and

print company to a digital one, many functions in the company played a role in making that transition a successful one, including decisions to downsize, cut jobs and increase focus on B2B customers; marketing came into its own, particularly the use of social media.

“Overall marketing itself has changed,” explains Hayzlett. “At the same time that Kodak was going through its transformation, market-ing was going through a big shift – mostly driven by the internet ghav-ing more and more of an impact on the way in which we reach out to people online. We’ve seen a real shift away from traditional television ads to more viral types of campaigns, which has been a fundamental transfer. And at the same time, Kodak was getting its mojo back, making for an exciting time quite frankly.”

Th ere were undoubtedly challenges in moving from a fi lm and print company into a digital one, but by putting a program in place it was possible to change the mood of the company and align goals to ensure everyone was working together and in the same direc-tion. By leveraging a number of themes it was possible to generate a great deal of energy and enthusiasm in Kodak. “One of the themes we focused on was around spend,” explains Hayzlett. “When you’re a company the size of Kodak you have hundreds of millions of dollars that you spend in the marketing area. What we’ve done is got much smarter in the way in which we spend it, so we reduced our supplier spend, but we’ve increased our exter-nal investment in making Kodak much more visible to our marketplace.”

Hayzlett put forward the idea of FAST, standing for focus, accountability, simplicity and trust, which also denotes speed. “When you go through a lot of change inside a com-pany sometimes people become afraid to act because they want to be sure they are doing the right thing. Th e FAST mantra was that even if we mess up, let’s do it and let’s do it faster. It got employees focused on what their jobs were and what they needed to do.”

By changing the mood of the company it was possible to achieve one of the biggest turnarounds in business history. Sixty percent of business today is B2B compared to four years ago when it was around 30 percent. Eleven digital product lines now provide around two thirds of the rev-enue and more than half of those products didn’t exist four years ago.

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“Kodak has a better bond with customers than ever before and that’s because

of the way in which we are able to communicate

with them”

Jeff Hayzlett

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which is great because it enables us to go about fi xing them, as opposed to before when we wouldn’t have known about those things,” says Hayzlett. “Kodak has a better bond with customers than ever before and that’s because of the way in which we are able to communicate with them. Nobody wants to be treated like a number and we don’t want to treat our customers like that because they’re people and they’ve got special information or memories, and we want to help them whether they’re a B2C or B2B customer.”

Looking aheadIn terms of moving forward, Hayzlett is looking to continue build-

ing customer relationships in a much more intensive way, by “turning up the volume”. He hopes to focus on a few key messages and get the entire marketing organisation and all the external partners executing those key ideas. “We’re re-energising our marketing communication and evolving into a truly social organisation. You’ll see it through the appearances on [TV show] Celebrity Apprentice and you’ll see it more on our blogs and through other social media.”

Internally, Hayzlett is working on mykodakworld.com, an internal website for the company’s 27,000 employees, to engage and activate the workforce to become brand ambassadors for Kodak. He is also looking to improve training around cross-promotion. “We’re starting to do a lot more cross-promotion than we’ve ever done before, because you know that if a customer buys a camera then they will want a printer. Th ey’ve made a decision that Kodak’s the best brand, so therefore we can sell them other products under the same umbrella.”

Th e Kodak transformation has been one of the biggest turnarounds in business history, successfully combining elements from HR to R&D to marketing, to make a stronger and more relevant company to today’s market. “We’ve been doing the best to get the word out and integrated our products to make Kodak a part of the story, and we’ve done that eff ectively in a number of markets, in Celebrity Apprentice for example, where we’ve used branded content to get the word out to those viewers.” When you look at the success that the company has seen, it seems obvious that social media is a truly eff ective way to spread the word.

was phenomenal. It gave me direct access to them, without any fi lters, and I started getting all these followers and it’s just taken off from there, it’s just I’m doing a little bit more of it.”

Th at said, Hayzlett is unsure to how much time he devotes to social media. “I just don’t keep track of it,” he admits. “I just know I do all of it myself, nobody else does it for me, and that I spend enough time to get what you need to get done done. Th at’s the best way to describe it, and you know, I used to spend a lot more time on the telephone and I don’t do that anymore and I see myself doing more along these lines than I do now by email.”

Hayzlett is a fi rm believer in the power of narrowcast marketing and admits that it has had an impact on the types of media that he continues to use today. “Narrowcast marketing is very much in line with one of the best marketing techniques that we can use. So while direct mail is an older media type it provides a 13 to one ratio on your return on invest-ment,” he says. By applying the same kind of rules to newer media types, Hayzlett is able to help customers focus in on customising and individu-alising products. “It’s all about recognising the individual customer and narrowing your message down to meet the individual needs of that in-dividual person. What we try do is make the experience as personalised as possible.”

Th e use of social media has certainly played a part in making Kodak’s communications more personalised. Indeed, Hayzlett believes that having conversations with individual customers is vital to forging a relationship and providing a personalised service. And that conversa-tion doesn’t always have to be a good one for that relationship to fl our-ish. “We fi nd that social media has helped us fi nd customer complaints,

Sheryl Kingstone, Director of Yankee Group’s Enterprise Research group with an expertise in customer centric strategies, believes that 2009 is the year that social

media will solidify its place within the realm of traditional business applications. In her report, Enterprises Need to Say ‘I Do’ to the Marriage of CRM and Social Media, Kingstone says that although social media is a disruptive technology, its real benefi t will come when businesses incorporate it within day-to-day customer lifecycle processes to engage in real-time customer conversations.

She reports that social media is forcing enterprises to make substantial changes to sales, marketing and service. Now companies are using social networking sites such as LinkedIn and Plaxo – which started as professional networking communities – to create their own enterprise social graph to improve sales opportunities. Kingstone cites reduced sales and support costs and increased richness of the customer relationship resulting in CRM software independent software vendors as having to embrace the changes social media is bringing or else face becoming less strategic to corporate goals.

Source: www.yankeegroup.com

WHAT THE ANALYSTS SAY

Biz Tech Daily named Hayzlett a top 20 Twitter All-Star for business and he is one of the few executives followed on ExecTweets, but what does this mean to him?

“It’s both scary and exciting,” he explains. “It’s exciting to be included in such great company as Sir Richard Branson, but it’s also a great honour and it’s refl ective of the new spirit of Kodak. Social media has helped put a human face on Kodak, and usually with such a big company you don’t always have a face to reach out to, so we have people, as well as myself, that are using social media tools to connect and engage with customers.

“It’s a great honor to be seen as somebody who’s really on the cutting edge, and I think that’s a great thing for Kodak.”

A HUMAN FACE

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What is driving this growth in Web 2.0 technologies?André Bonvanie. In a study conducted by McKinsey, Clay Shirky, an adjunctprofessor at New York University, calls the underused human potential atcompanies an immense ‘cognitive surplus’ and one that could be tapped byparticipatory tools. Corporate leaders are, of course, eager to find new waysto add value to their organisations. Because traditional tools were tradition-ally too hierarchy oriented and didn’t do anything to stimulate people shar-ing their knowledge profile, this IQ surplus never surfaced. Web 2.0 allowsfor people to be in control of their knowledge profile beyond organisationalboundaries and facilitate in creating pockets of knowledge that can be (re)usedby everyone. They allow for participation of the entire organisation in har-vesting new ideas to improve the overall organisation’s performance.

What advice would you offer organisations looking to deploy Facebookand/or Twitter as a business tool and what challenges does this throw up?AB. The seismic success of Facebook, Wikipedia, Twitter and other socialcomputing tools often creates soaring expectations for viral adoption of so-cial computing in business settings. While the ‘just build it and they will come’strategy works in the consumer world, it’s a dangerous approach for business:users may never come, or they may come and waste their time. That’s whyimplementing a business social network like social sites offers a much betterfit in terms of getting new employees on board, making sure confidential con-tent stays confidential and that you allow for identifying your corporate cham-pions. We’ve seen Facebook change its application a few times already, andyou may not like these changes at all, and these could actually break some ofthe processes you have set up on these consumer-oriented platforms.

Do you have an example of where you recently helped an organisationby supplying your products and services?AB. Universal McCann (UM) is a global media communications agency de-livering the ‘Next Thing Now’ to the world’s leading marketers and strate-gic thinkers. UM selected NewsGator Social Sites and UM employees cannow quickly browse through the company’s intranet and find the latest con-tent headlines, view the most relevant/popular portal content and easilylearn about other employees at any office in the world. The social com-puting platform also enables employees to discover colleagues and sub-ject matter experts, form social networks, and buildcommunities based on areas of interest,rather than geography or project teams. Thesocial computing platform enables UM to en-hance each person’s effectiveness within the col-lective wisdom of the worldwide organisation –driving significant business value and customer sat-isfaction.

Looking into your crystal ball, what are your predictions for how Web 2.0technologies will evolve in the future and what will it mean for business?AB. I’m quoting Gartner’s Nicos Drakos in saying that the goal of an integrated

portal with a social networking system is to simplify the process of per-sonalising, finding and exploring information via social filtering —

that is based on how information relates to people (who wroteit, who subscribes to it, what my colleagues read, what they

rate highly and so on).” So by using these Web2.0 tools, and even tools that will besurfacing in the next year or so, our

view is that people will have a socialfingerprint that describes them and makes

it easy for other people to find them for col-laboration on shared projects and tasks. n

Taking Web 2.0 to the next level

130 www.cxo.eu.com

With the next few years expected to see a surge in the use of Web 2.0 technologies,we sit down with André Bonvanie to discuss their benefits to organisations andthe role social sites can play.

EXECUTIVEINTERVIEW

André Bonvanie leads NewsGator Technologies’ Europeanoffice. NewsGator provides social computing solutions

including NewsGator Enterprise Server and Social Sites. Formore information contact him at [email protected] or

+31 (20) 561 7038.

“The seismic success of Facebook,Wikipedia, Twitter and other socialcomputing tools often creates soaringexpectations for viral adoption of socialcomputing in business settings”

NEWSGATER EXEC:20 July 13/08/2009 10:40 Page 130

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132 www.cxo.eu.com

One of the most common questions that I am asked ishow can companies leverage and improve their CRMpractices during the recession? How can they weath-er the storm and keep their most valuable asset, thecustomer, during this time and continue to add newbusiness to their customer base? I start off answering

the question by using the analogy of the yellow caution flag in a Formula 1race, where the flag signifies a hazard and all cars must slow down and holdtheir position until it is safe to resume.

Holding the position is one thing but there is a lot to be gained duringthat time, especially during a pit stop. My point is what you do during thisslow down will affect how you will proceed when the green flag signifiesthe end of the slowdown. Companies need to take a look at their CRMstrategies during the pit stops of this slowdown and make adjustments thatwill allow prospects and customers to engage with you more efficiently andeffectively.

I have heard that 80 percent of your business revenue is from the top20 percent of your customer base. If this is true then reaching out to the top20 percent is where you should focus your time. Take the time to pull themin and get their input and feedback. They too are struggling during this time

and acknowledging this by discussing ways of how your company and so-lution can assist them in weathering the storm will earn their loyalty andadvocacy. This open collaboration and conversation will set the stage forfuture trusted communications. I feel that there are two major areas to ad-dress that will position your company in a positive light during this reces-sion: focusing on the social customer and understanding that the socialcustomer is a mobile customer.

The social customerCompanies that have been speeding along at a steady pace will slow

down to find that a lot has changed. The need for foundational CRM strate-gies will always be there but customers and prospects are now in the driver’sseat in their interactions with you. Companies now will have to engage withthem on their terms. The customers are now in control and are known associal customers and a new strategy called social CRM will need to be inplace to meet them on their terms.

Paul Greenberg, bestselling author of CRM at the Speed of Light definesthe social CRM customer this way: “CRM is a philosophy and a businessstrategy, supported by a technology platform, business rules, workflow,processes and social characteristics, designed to engage the customer in a

A social approachMichael Thomas offers his opinion on using the recessionto add social CRM practices to your business strategy.

CRMFOCUS

MICHAEL THOMAS:20 July 13/08/2009 10:40 Page 132

www.cxo.eu.com 133

collaborative conversation in order to providemutually beneficial value in a trusted and trans-parent business environment. It’s the compa-ny’s response to the customer’s ownership ofthe conversation.”

The “ownership of the conversation” givesthe power to the customers because the fact thatthey have the tools to express themselves canhurt, as well as help, your company’s image.Another component focuses on the wayprospects find out about you. It usually beginswith a search and the ability to show up in afavourable way in the search results which willset the pace of how and if they will engage withyou. Social tools such as blogs, social network-ing sites and Twitter are some of the tools ofchoice for customers to spread the good, bad orindifferent about your company. These sametools can be used by companies to open up newlines of communication with their audience.

I will use the three components of CRM toaddress some social CRM practices companiesshould implement to engage their audience:

Marketing: SEO (Search Engine Optimisation)plays a major role here. Adding a social channelto your marketing efforts may be as easy as set-ting up a Twitter account or Facebook group tostart out with but the key is to have activity around your company and brandso that people can find you. In addition to adding this channel is the abilityto monitor what is being said about your brand, utilising something as sim-ple as Google Alerts as well as other listening platforms such as Radian6 tomonitor those conversations in order to engage or diffuse effectively. Do youhave a ‘follow me’ tab for social media avenues you have in place? Sales: Once your company and products are found, how are you engagingwith the prospect to make sure lead scoring strategies are in place to routeto the proper sales person or to make sure they go to the shopping cart? Doyou know the right behaviour, web clicks and actions to keep their inter-ests and to entice them to buy? This could be as simple as tracking whatthey are looking at and if there is an area on your site where people cancomment and rate your product. Taking the time to monitor this behav-iour will assist in integrating the action into your lead generation process-es. Is your sales team on board with interacting with their prospects withsocial media tools? Service: This is one of the key areas to address with social media becausecustomers are known for expressing their opinions and frustrations overthe web. Having a method to address their concerns early will prevent badinformation from spreading quickly. Monitoring Twitter and engaging withcustomers on updates, solutions, new features and other pertinent infor-mation will keep them in the loop and give them the confidence that youare aware of what is being discussed.

Self help areas on your site with FAQs, solutions and promotions willalso lend a hand in service as well as marketing and sales. Customers look-

ing to do business with you will seek out this area and information to seehow issues are addressed and resolved.

The mobile customerWhile addressing the social media component of CRM, it is equally im-

portant to understand that the social customer is also a mobile customer.Your company’s communications will need to be flexible in order to reachtheir desktop or mobile device. Giving them practical options of engage-ment will make it easy to communicate and do business with you. Now isthe time to embrace this new media and put social CRM practices into play.You will have to adapt to your customer or face losing them. n

Michael Thomas is National President and National Board Member of the CRMAssociation.

“Companies need to take a look attheir CRM strategies during the pit

stops of this slowdown and makeadjustments”

MICHAEL THOMAS:20 July 13/08/2009 10:40 Page 133

As the global recession continues towreak havoc on sales and profits, cor-porate executives are facing the chal-lenge of leading rapid change. Onlythose organisations which quickly

transform will likely survive much beyond the end ofthe decade. This means mobilising and empoweringteams on a wide range of projects, for example: re-in-venting the sales process, transforming to a leaner sup-ply chain, innovating new products or processes,driving cost out of operations, or collaborating withsuppliers in new ways. In this environment, increaseddelegation is mission-critical. Delegation provides away to “scale” the management team to get more donein a shorter timeframe. And delegation is the key toempowering individuals and teams to improve theparts of the business they know best. In some cases, thismeans breaking down cherished work systems thatrepresent the core of their job identity. In other in-stances, it means finally having permission to destroyprocedures that everyone knew were inefficient inorder to implement a better or easier way of doingthings. In either case, change and innovation cannotoccur in a command-and-control culture. This is whyold-fashioned micro-managers fail in times of rapidchange. Effective delegation is required.

Delegation explainedWhat is delegation? What are the secrets of effec-

tive delegation? These are questions that I hear fromseasoned executives as well as new managers. Forstarters, a quick look at a dictionary tells us that, as averb, to delegate means to transfer power or authorityto someone. Well, this seems a little different from theway I hear it used in the workplace, where people oftensay things like “we should delegate the presentation toPaul” or “I delegated the cost calculations to Julia”.There are a lot of managers who consider delegationto be the transfer of tasks rather than the transfer ofpower or authority. True delegation is not telling peo-ple what tasks to do (or how to do them), but rather it

Successful delegation in timesof transformationGreg Kinsey, Managing Director for Europe at BreakthroughManagement Group International (BMGI), outlines how managerscan talk their way out of a crisis in times of economic strife.

INTHE BACKLEADERSHIP134

LEADERSHIP:13 July 13/08/2009 10:39 Page 134

is entrusting them with a broader responsibility for outcomes. It means giv-ing someone the authority to make decisions, solve problems, lead teams andtake actions to get results. In this light, there are two important pre-condi-tions of delegation: clarity of mission/purpose/direction and unconditionaltrust. Don’t delegate if your strategic direction is unclear. And don’t delegateif you can’t deliver the trust.

But the act of delegation is usually the easiest part. Thetrickier aspect of delegation is found on the side of the receiver;not everyone can accept delegation and run with it. More oftenthan not, I have seen that delegation is easy for the giver to give,but hard for the receiver to accept. In general, those who do notreadily accept delegation are more likely to fail with the re-sponsibility. Not everyone is a good candidate to receive dele-gation. So how do you know to whom it is best to delegate?Good leaders tend to know this instinctively. There has alsobeen significant behavioural research pointing to two key fac-tors which determine a person’s likeliness to perform successfully under del-egation: (1) task competency, and (2) emotional commitment. Taskcompetency (also referred to as “level” by behavioural scientists) is the apti-tude to perform the kind of work being delegated. In other words, does he orshe have the ability (intelligence, skills, etc.) to do the job? The second factor,emotional commitment, refers to the person’s willingness to do the job. More

than just motivation, it is about raw determination. A person with a high de-gree of task competency and a strong emotional commitment is a good can-didate for delegation. Otherwise there is a risk of failure, because the personis either unable or unwilling to perform the delegated mission. And to makematters more challenging, the competencies and commitment level of an in-dividual are not fixed. Both attributes can vary over time (month-to-monthor year-to-year) or change according to situation.

Problem solvingAll people can be effective problem-solvers, given the right level of com-

mitment and competency for the task at hand. However, not all people havethe same style of problem-solving. What is not typically known or well un-derstood is how a person’s cognitive style can determine their success.Research suggests that there is a range of problem-solving styles, runningalong the continuum from adaptive to innovative. Adaptors are good at solv-ing problems within the established paradigm, while innovators excel at out-of-the-box thinking. Those at the adaptive end of the spectrum are usuallycomfortable with rules, have patience for details and have a practical, conser-vative approach to risk. Those at the innovative end of the spectrum often dis-

regard established rules, are impatient with details and tend to generate asteady stream of ideas without too much concern over practical implemen-tation. Successful transformation projects require both types of cognitive style.Therefore, teams with both adaptors and innovators are usually the most suc-cessful. Leading such mixed teams requires a person who is in the middle ofthe range, with an ability to connect with people on both extremes of the con-

tinuum. This approach has proven so suc-cessful, that some organisations havestarted using a powerful tool to measurecognitive style, called the Kirton Adaption-Innovation (KAI) Inventory. Developedby psychologist Dr. Michael Kirton, theKAI provides a rapid and reliable methodof measuring an individual’s cognitivestyle. For further information on thismethodology, see: www.kaicentre.com.

In summary, delegation is a powerful leadership tool, which is indis-pensable in times of rapid change. The art of delegation requires clear strate-gic direction (expressed in mission and objectives) and the practice ofunconditional trust. Both of these elements stem from the style of the indi-vidual leader, as well as the culture of the organisation. The other importantaspect, often overlooked, is to carefully choose the people to whom you del-egate. Only those individuals with a high degree of task competency andemotional commitment will be successful recipients of delegation. Beyondthat, it is important to understand the cognitive style of individuals and as-sign roles according to cognitive style. Some activities are more adaptive innature and some activities are more innovative in nature. Most projects area mix, requiring different styles of problem-solving at different phases of im-plementation. This is why the highest performing teams are usually a mix ofadaptors and innovators, led by a strong “bridger” who relates well to bothends of the spectrum. n

INTHE BACKLEADERSHIP 135

About BMGIBMGI works with leading companies aroundthe globe to help to transform their businesses.Founded in 1999, BMGI has developed a clientbase that today exceeds 200 organisations inindustries as diverse as biotechnology,healthcare, finance, retail, manufacturing,energy and communications. BMGI has officesin 12 countries and has more than 150employees worldwide. For more informationon services, visit www.bmgi.eu or [email protected]

“Those who do not readilyaccept delegation are more likely

to fail with the responsibility”

Five keys to effective delegation

• Delegate to a person with a high degree of task competencyand a strong emotional commitment to the organisation

• Understand that true delegation is not telling people whattasks to do but rather entrusting them with a broaderresponsibility for outcomes

• Recognise your team members’ different problem solvingskills. Are they good at solving problems within theestablished paradigm or do they excel at out-of-the-boxthinking?

• Delegate in times of rapid change. Do not micro-manage aschange cannot occur in a command-and-control culture

• To delegate successfully requires clear strategic directionand the practice of unconditional trust

LEADERSHIP:13 July 13/08/2009 10:39 Page 135

INTHE BACKBUSINESS DOCTOR136

Dear Business Doctor,

My company has been struggling during the recession and was

bought out by a rival. Those who wish to carry on working for

the business have been told that they will have to commute or

relocate to the parent firm’s headquarters which are situat-

ed more than one-hour’s drive away. I am the manager of 26

staff and around half of the team are looking to take the

voluntary redundancy on offer because they don’t want the

upheaval. I will persevere with the commute but I feel demor-

alised that I could lose a great bunch of hard-working individ-

uals. Can a manager in this situation do anything to persuade his

staff to stay on without being too pushy. Or will I be fighting

a losing battle in this situation?

Pete Wills

Amsterdam, Holland

vidual, what it would take to make it actually seemmuch better to stay with you and commute,rather than the lesser gain of redundancy. It is re-ally all about understanding their motivation pat-terns as the equation may be different for eachone. Often people take redundancy because theywere feeling a little stale anyway and it seems likea nice payout. Often they later regret it when theycannot find other work which suits them as wellas what they were doing. Your staff will all need toconsider this for themselves. You will gain little bybeing “pushy” – unless this is a style you haveused with them before and they respond positive-ly to being pushed. You may benefit from reallyunderstanding their motivation to choose onething or the other, so that you can influence theirthinking appropriately.

Dear Pete,Wouldn’t it be great if you could have the

best of both worlds – be bailed out, as times havebeen tough, by another company AND keep yourold staff with whom you feel comfortable andwhose work you clearly valued greatly in the past.However, it is clear that for many, their loyalty toyou and their commitment to their old job is nothigh enough to balance out the inconvenience ofan hour’s drive each day – plus it sounds fromyour choice of the word “upheaval” that change isnot a comfortable concept for them. If you wishyour staff to stay with you, you would need to un-derstand from each individual exactly what arethe benefits that the redundancy will give themand what exactly is the “pain” of changing loca-tions. Then you need to figure out, for each indi-

July Business Doctor:13 July 13/8/09 09:31 Page 136

Dear Business Doctor,I am CEO of a mail order company and in two months I

have the unenviable task of telling my staff, during their

annual reviews, that this year they won’t be receiving a

bonus. It will be the first time in five years that bonuses

won’t be handed out and I know this will come as a big blow

to my staff, many of whom are longstanding and have

stuck with the company through thick and thin.I’m sure, given economic conditions, that this won’t

come as a surprise to them. What I fear though is that it

will breed resentment. How can I prevent a negative

reaction and possible walkouts?Barbara HillsteinReading, UK

INTHE BACKBUSINESS DOCTOR 137

Dear Barbara,Bonuses used to be the exception, based on

exceptional performance and exceptional results– recently however they has come to mean an ex-pected top-up to salary and people mentallyspend the money before it has even been agreed.Resentment is born of anger, usually when peopleperceive – or choose to perceive – that they havebeen unfairly treated. If you are transparent, if thesame applies to all and not just to some, if every-one can clearly see that you are being fair to them,then resentment would be unusual. They may,however, be disappointed – which would be a fairand reasonable response and all you can do whenpeople are disappointed is to explain the circum-stances so that they understand how the decisionwas reached and ask for their understanding. Ifsome staff choose to be resentful, they will bedoing this, despite anything you may have doneto show that you are being fair and reasonable.There is little you can do to prevent this – exceptnot respond with anger or resentment yourself,but to be understanding and accept that they aresimply being human. They may walk out (al-though to what end?) but if, as a leader, youknow you are sticking to your values and princi-ples, if you are sure that you are being fair andreasonable, then you should let them. Staff whoare unfair and unreasonable are no great loss.

Meanwhile, be planning for the year ahead.Make sure you show your staff that you valuethem and their efforts, reward them in small waysall year round so that the bonus is not the only re-ward they feel they ever receive. Offer coaching anddevelopment so that they increase their skills andhave a stronger CV, so they feel they are gettingvalue from you in other ways. Create and sustainthe kind of work environment that they want tochoose to belong to, so that they feel they have a bet-ter future with you than they would without you. �

July Business Doctor:13 July 13/8/09 09:31 Page 137

IN THE BACK138 IN REVIEW

How I Caused the Credit CrunchAn Insider’s Story of the Financial Meltdown, by Tetsuya Ishikawa

How I Caused the Credit Crunch is inspired from Tetsuya Ishikawa’s seven years at the forefront of the credit markets. A vivid, personal and realistic account of the banking world, this book tells the story of how a novice to the mysteries of hedge funds, subprime mortgages and CDOs, fi xed complex deals worth millions in the exclusive bars, clubs and trading fl oors of London, New York, Frankfurt and Tokyo. Th en the bubble burst.

CXO says: A true expose of the human failings behind the credit crisis, this book deft ly explains the intricacies of the arcane fi nancial instruments which are now grimly associated with the credit crunch. An interesting read.

Job Hunting for RookiesFrom Rookie to Expert in a Week, by Dr Rob Yeung

With layoff s continuing to soar as the recession bites deeper, this handbook by Dr Rob Young, psy-chologist and TV presenter, off ers advice on hunting down and landing the right job. Young claims this 176-page book will lead you towards a job that matches your ambition and interests, to ensure you end up with the right job for you. It also includes useful ‘Rookie Buster’ tips and examples of job adverts and how to tailor your CV when applying to diff erent posts.

CXO says: An interesting read, albeit a little on the short side due to an abundance of cartoons littered throughout. Th ough short on words the book is informative and full of handy advice. A must-have weapon in any jobseeker’s armory.

More Sex is Safer SexThe Unconventional Wisdom of Economics, by Steven E. Landsburg

In More Sex is Safer Sex, Professor Landsburg off ers readers a series of stimulating discussions that all fl ow from one unsettling fact: combining the rational decisions of each of us oft en produces an irrational result for all of us. Claims include; avoiding causal sex can actually encourage the spread of diseases and to solve population pressures we need more people. In his entertaining narrative, Landsburg guides us through these shocking notions by the lights of compelling logic and evidence.

CXO says: An entertaining read, with surprises on virtually every page. Th is book will make you think about your decisions in unforgettable ways and spark debate over much that we all take for granted.

On the shelfFrom hunting down the perfect job, to the unconventional wisdom of economics and an insight into the credit crunch, CXO reviews the best of this quarter’s business book releases.

Book reviews.indd 138Book reviews.indd 138 13/8/09 09:30:1513/8/09 09:30:15

CXOTechnology leadership is merging with strategic andfinancial leadership, and senior management is being calledinto a partnership for the future.

CXO brings together a range of voices with oneshared vision: to develop a strategy thatconsiders business needs and technology’s rolein moving your company forward.

Your World. Covered

gdsinternational www.gdsinternational.com

From the people you hire to the products you sell, if you’re in business, we’ve got it covered...

Executive Healthcare ManagementThe healthcare industry is changing. Understanding how toimprove clinical processes, meet industry standards andmerge the maze of disparate systems is vital.

EHM combines unbiased industry news with thoughtleadership from the most respected executives inhealthcare, providing a platform for strategy and learning.

Available for: US

Find out more: www.executivehm.com

HRManagementHR needs three eyes: one on the past – don’t lose sight ofthe systems that generate value; one on the present –determine if current processes are efficient; and one onthe future – be proactive in meeting new challenges.

HRManagement concentrates on the development of HRstrategies, directions and architectures.

Available for: US

Find out more: www.hrmreport.com

NextGen Power & EnergyA poll of 4000 utility executives posed the simple question:what keeps you up at night? The answers were costs, newtechnologies, ageing infrastructure, congestedtransmission and distribution, viable renewables andinadequate generation capacity.

NextGen P&E covers them all.

Available for: US

Find out more: www.nextgenpe.com

Financial Services TechnologyProviding for its customer’s needs and demands is the goalof financial institutions now more than ever. But it is atricky remit to fulfill. Your customers want it all – security,cost-efficiency, speed, added functionality and, most of all,convenience.

Can it be done? Read FST to find out…

Available for: Europe, US

Find out more: www.fsteurope.com

Available for:

EUROPE

Business ManagementWhat business processes work? What are the proven,successful strategies for taking advantage of domestic andinternational markets?

Business Management is about real, daily managementchallenges. It is a targeted blend of leadership and learningfor key decision makers in government and privateenterprise.

Available for: Europe, US, Middle East, Russia

Find out more: www.bme.eu.com

Next Generation PharmaceuticalApproximately 50% of new drug development fails in thelate stages of phase 3 – while the cost of getting a drug tomarket continues to rise.

NGP is written by pharmaceutical experts from thediscovery, technology, business, outsourcing, andmanufacturing sectors. It is committed to providinginformation for every step of the pharmaceuticaldevelopment path.

Available for: Europe, US, Asia-Pacific

Find out more: www.ngpharma.eu.com

Find out more: www.cxo.eu.com

CATALOGUE PAGE CXO:aug09 13/08/2009 10:30 Page 139

AboutWith a population of more than eight

million, Bangkok is Thailand’s largest cityand one of the most popular destinations inSoutheast Asia for overseas visitors.Thailand has been dubbed the ‘land ofsmiles’ and Bangkok is no different so ex-pect a warm and friendly welcome on yourvisit. Famed for its stunning temples andtraditional architecture blended with mod-ern skyscrapers, Thailand is a unique loca-tion with plenty to see and do. However, thecity’s hot and humid conditions can be toomuch for some so be prepared.

From the airportOpened in 2006, Bangkok’s Suvarnabhumi International Airport became

the main hub, replacing Don Mueang. Located in the Bang Phli district about25 km east of downtown Bangkok, Suvarnabhumi is an ultra-modern airportand one of the busiest in the region. For transfers to your hotel, theSuvarnabhumi Airport Express – a high-speed rail link due to be completedlater this year – will offer a fast and convenient journey into the centre of thecapital. Until then you will have to make do with the airport buses or numer-

ous taxis hawking for your custom outside themain terminal. When taking a taxi, insist that themeter is switched on and expect to pay aroundB500 (about US$14) to the centre.

Getting aroundBangkok’s gridlocked roads are legendary so

the clean and modern Skytrain, which whizzesaround the city and provides a welcome respitefrom the searing heat outside, is a great alternative.It is inexpensive and covers a good part of the city,although the network is earmarked for expansion.Another option is to do what the locals do andtravel by water taxi. For a few baht you can take aboat along the main Chao Phraya River and stopoff at a number of key tourist attractions. If you

have to go by road, flag down a taxi – the city is full of them and they arecheap. If you are feeling adventurous, hop into the back of a three-wheeledtuk tuk for a noisy and dusty, but exhilarating ride through the streets.

RelaxGetting out and about on the streets is the best way to really absorb the

sights, sounds and smells that make Bangkok a unique destination. It’s famed

Bangkok is a buzzing metropolis and an assault on the senses for a first-time visitor.CXO checks out what the Thai capital has to offer during the day and night.

INTHE BACKCITY GUIDE140

Time: +7hrs GMT | Currency: Baht | Dialling code: +66 | Airport code: BKK

DO’S AND DON’TS • Thais do not normally shake hands when

they greet each other, but instead presstheir palms together in a prayer-likegesture called ‘wai’.

• Make sure you barter hard when buyingsouvenirs, especially in the touristy partsof town.

• Don’t insult the monarchy. Thais love theirking and any disrespect shown to theRoyal Family is seriously frowned upon.

• It is considered rude to show the soles ofyour feet or use your foot for pointing.

Bangkok

Grand Palace Chao Phraya RIver

CITY GUIDE:13 July 13/08/2009 10:32 Page 140

for its street food, which is both cheap and tasty, while the night markets selleverything from fake designer handbags to charred-locusts. The nationalsport of Thailand is Muay Thai, kickboxing to the rest of us. Regular boutstake place at an atmosphere-charged Lumpini Stadium. If you are not intoraw pugilism, take a daytrip to the traditional floating market where you canfind Thais paddling flat boats filled with fresh produce. Don’t forget to hag-gle hard. At the end of a packed day of sightseeing venture up to the Sirocco

Sky Bar for a breathtaking view of the teeming city below.

SeeA must see for any visitor is a trip to the Grand Palace –

a huge complex of buildings that served as the official resi-dence of the Kings of Thailand from the 18th century on-wards. Its stunning architecture houses the Temple of the

Emerald Buddha – Thailand’s most sacred site. A strict dresscode applies: Men must wear long trousers and shirts with

sleeves; women should be moderately dressed and both sexesshould wear closed shoes. Other impressive sights across town in-

clude Wat Pho, home of the 46 metre-long, gold-plated Reclining Buddha,Wat Intharawihan (Standing Buddha) and the Temple of Dawn. In fact,Bangkok boasts more than 400 temples dotted around the city.

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SleepMandarin Oriental HotelThis colonial-style hotel has been a favourite ofthe elite since 1876. Indeed, all 393 rooms are assignedwith personal butlers. In 2006, the Mandarin Orientalunderwent a face-lift with its new spa touted as one of thebest in the world. Facilities have been updated to include alarge gym, tennis and squash courts and two outdoorswimming pools. Rooms: 393 Rates: Around B15,000 (US$427) a night

Peninsula BangkokLocated on the banks of the Chao Phraya River, this 39-storey, five-star hotel includes six dining outlets, a 60-metre pool, a tennis court and access to the Thai Club golfcourse. A helipad on the roof awaits airport transfers forthose wishing to experience a birds-eye-view tour of thecapital. Rooms: 370 Rates: Around B10,500 (US$300) a night

EatBed SupperclubOne of Bangkok’s hippest restaurants and bars withits minimalist interior and ultra-futuristic décor,including beds suspended from the walls. Set dinners: B1850 (US$52) Friday and Saturday.B1450 (US$41) other nights

Vertigo Grill & Moon BarPerched 61 floors above the Bangkok streets, thisopen-air restaurant is the place for that special meal.But make sure you have a head for heights. Four courses: B2700 (US$76) per person

Thai New Year(Songkran) is

celebrated every yearfrom April 13 to April 15.Expect to see the localsdousing each other in

water and flour.

Tuk-tuk

Muay Thai

Mandarin Oriental Hotel

CITY GUIDE:13 July 13/08/2009 10:32 Page 141

ITALYHotel Caruso, RavelloLocated on a cliff 1200 feet above sea level, Hotel Caruso’s open-airheated pool overlooks the magnificent Amalfi Coast. With views ofmedieval ruins facing one side of the pool and endless stretches ofblue sky on the other, Hotel Caruso’s pool has attracted a host ofcelebrities to its crystal waters including Greta Garbo, HumphreyBogart and Jackie Kennedy.

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Dive inThis issue we dip into Europe’stop swimming pools.

ICELANDBlue Lagoon, GrindavikOnly a short bus ride from some ofthe region’s most luxurious hotels,such as Hotel Nordica, Iceland’smagnificent geothermal resort is abreathtaking sight. This man-madepool is situated amidst lava fields,as well as winter snow, and offers acomplete natural spa experience.The seawater ingredients within thepool – minerals, silica and algae –provide deep relaxation, and offer aswimming pool experience with adifference.

FRANCEHotel du Cap Eden-Roc, AntibesThis saltwater swimming pool located in the south of Francehas long been a favourite with the celebrities who frequent thisprivate resort. Built in 1870, it has entertained the likes of ClarkGable, Brigitte Bardot and even Egypt’s King Farouk. The pool’sspectacular view is second to none; its overflow cascades downthe rocky seaside cliffs against the panoramic backdrop of theFrench Mediterranean.

THE KNOWLEDGE:13 July 13/08/2009 10:43 Page 142

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GREECEPerivolas Hotel, SantoriniOften gracing the cover of luxury travel magazines, the poolsituated within Perivolas Hotel gives the appearance of infi-nite stretching waters. The pool-edge is designed to meetwith the Aegean sea level and Greek skyline to produce acalming and serene effect. It is interconnected to the hotel’sspa, which boasts a steam bath and hydrotherapy massagepool, via a series of arched doorways.

UKThe Berkley, LondonThe only London hotel with a rooftop swimming pool, TheBerkley is situated in Knightsbridge and offers panoramicviews of the city and Hyde Park below. The pool area is brightlylit and cased in turquoise, whilst the loungers and flowers addsplashes of colour. The pool is only open to hotel guests andclub members, although day memberships are also available forpurchase.

GREECEAthens Life GalleryPart of the Leading Small Hotelsof the World group, the AthensLife Gallery hotel is a boutique,serene setting, situated in theuber-chic suburb of Ekali. Themodern décor of the hotel extendsto the swimming pool where atwin-set of pools is separated by avery arty glass walk to create aminimalist feel.

FRANCEThe Ritz, ParisThe indoor-pool locatedwithin The Ritz in Paris hasreceived endless reviews forits opulent interior. Inspiredby the ancient Romanbaths, the unique poolsideambience is createdthrough rising columns,frescoes and mosaics, re-sulting in a serene setting.The pool also encompassesa mezzanine bar so guestscan reward themselves witha cocktail after their swim.

THE KNOWLEDGE:13 July 13/08/2009 10:44 Page 143

>>> Samsung 8000 LED While LCD (liquid crystal display) televisions have become de rigueur in living rooms, Samsung ispushing LED (light emitting diode) as the future for creating that in-house cinema experience.Samsung’s 8000 series has LEDs mounted around the bezel which means this TV is wafer-thin atjust 2.1 inches thick – ideal for sticking it on a wall. This set, which comes in 40 and 46-inch ver-sions, has a 240Hz mode for smoother, judder-free images. Another trick up this set’s sleeve is itsability to connect to the internet and display on-screen widgets, although you will need to purchasea separate dongle to go online. Four HDMI sockets means this LED TV just keeps on giving.

Desirability rating

Technology for today’s executiveA trawl through the latest gadgets on the market.

INTHE BACKOBJECTS OF DESIRE144

>>> Apple iPhone 3GSApple is at it again with yet another upgraded version of its ubiquitous iPhone.Aesthetically, the 3GS looks pretty much identical to previous incarnations with its hugescreen, sleek lines and minimalist features. Inside, however, there have been some sig-nificant tweaks, the most notable being a beefed up CPU. The RAM has also been doubledfrom 128MB to 256MB. Indeed, the S in 3GS stands for speed and its zippier innards allow forquicker web browsing and slicker running of software and applications. There is also the ability to cut, copyand paste while the camera is now three megapixels, which is OK but not great. The 3GS comes with either 16GB or32GB of storage. Overall, this is a welcome upgrade but it’s still not quite perfect.

Desirability rating<<< Panasonic HDC-TM10With most mobile phones now boasting the ability to shoot video everyone, it seems, is filming even the mostmundane of incidents and uploading their amateur footage to the internet. However, if you are after vastlysuperior pictures and sound then you need a full HD camera. Once the preserve of professional film makers,HD-quality home movies are now available to the masses. Japanese electronics firm Panasonic has uppedthe ante with the HDC-TM10 – the world’s lightest AVCHD camcorder at a feather-light 227 grams. It sports8GB of built-in flash memory but if you slot in a 32GB SDHC card it can boost capacity to eight hours of HDfootage. This diminutive device houses a flip-out 2.7-inch LCD screen and offers an impressive 16x opticalzoom. The HDC-TM10 is compact, light and produces superb images for budding Steven Spielbergs.

Desirability rating

<<< Sony Reader Digital BookIf you are fed up with lugging dog-eared paperbacks around with you on holiday Sony could havethe answer. The Reader Digital Book holds about 160 eBooks or hundreds more with optionalremovable memory cards. Its portable size makes it the perfect travel companion, allowing youto read a variety of books whenever and wherever you want. With thousands of eBook titles avail-able at the eBook Store from Sony, you can choose to download new releases, classics and popu-lar book titles. It’s available in silver, dark blue and red. Despite its advantages however, somecritics argue that it takes the romance out of physically reading a good book.

Desirability rating

GADGETS:13 July 13/08/2009 10:38 Page 144

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