Nortel Networks’ CIO: How I divide my IT budget

All corporate enterprises go through periods of turbulence, but few experience the ups and downs of Nortel Networks.

Speaking on Tuesday at the Conference Board of Canada’s CIO Council, Nortel CIO Steve Bandrowczak discussed some of the pressures that come with working for one of the industry’s largest communications equipment vendors, his approach to IT-business alignment and his strategy to managing IT investments.

Bandrowczak took some time following his presentation to expand on his keynote speech with CIO Canada.

CIO Canada: A lot of people might look at you a bit differently as a CIO because you work at Nortel, compared to a non-tech company. To what extent do you think you encounter the same challenges as your counterparts in other vertical markets?

Steve Bandrowczak: There’s no question that whether it’s the auto industry or the finance industry or the pharmaceutical industry, we have many, many things in common. I spend about 40 per cent of my time speaking in front of IT executives and CIOs. In fact, I was doing a breakfast roundtable in New York City last week with executives from the finance industry. The challenges were the same: how do you drive IT value? That continues to be a big challenge, especially in these economic times and getting more productivity out of the assets you have.

CIO Canada: How do you react to the fluctuations, economic and otherwise, that affect Nortel? In other words, how do you ensure you can scale up or scale down if necessary?

SB: I think you do two things. From an IT perspective we’ve broken up the budget in two areas. I would call it just projects and new features and functionality for the business, and the second piece of it is the “run” part. That’s operations/expenses and you’re really driving those in two separate ways. You’re drive your operations expenses down as a percentage of something, whether it’s a percentage of revenue, a percentage of sales. And you increase it based on a percentage of revenue or sales. You have to have the flexibility to flex up and flex down. We do that in a variety of different ways, whether it’s near-shoring, offshoring, in-tasking, however your organization allows you to create the most flexibility so you can react to the business.

On the project side, you create a project portfolio pool, and you either turn up the number of projects or turn down the number of projects you do based on the state of the current capital within the company. I think you have flexibility on the operations side by making sure your service catalogues can get turned up or turned down, and you break the IT budget into projects which are really discretionary spending, based on the business needs.

CIO Canada: What would you identity as a couple of the key priorities for you as a CIO at Nortel in terms of advancing the business, as you talked about earlier?

SB: First of all, how do we use our IT organization to drive our cycle times and improvements across the organization, whether it’s cycle times in inventory, cycle times to design to getting the order out the door, et cetera. Second is how do we get more productivity out of the systems and out of the business that we have today? We’re very focused on unified communications. Specifically, how do we communications-enable our business processes? I think that if you have a good, solid UC strategy you should be able to get somewhere between 20 and 25 per cent more productivity in your business if you do that correctly. The last one is no different than any good business unit, which is how do we get more out of less? How do we get productivity through our green IT initiatives, virtualization? Then there are the decisions on our service catalogues, whether we should be doing things internally/externally, whether we should be doing things out of a low-cost location or whether we could be doing it effectively with less people in a high-cost location?

CIO Canada: A lot of people would probably expect you to be a case study for Nortel products, especially unified communications. How early do you tend to start playing around with or deploying early versions of your own tools? Do you ever sit back and wait, like other customers?

SB: If we manufacture it, if we develop it in our labs, I am starting to look at where it applies to the business. By the way, we don’t do anything in our labs or R&D office that doesn’t have benefits to our enterprise customers. I get to sit on a variety of internal boards that make those decisions that drive value for the corporation, so if I don’t accept it and I don’t use it internally, typically it’s not something that the market would be looking for. Once we make it and it gets close to GA, we try to implement it internally and try to use as many of those technologies as possible. This is for the very reason that if you look at, there is now something called Nortel on Nortel, which is how we’re communicating to customers how we’re using technology internally to solve business problems and get business benefits.

CIO Canada: The one area most people might assume you don’t have a challenge is getting executive buy-in and aligning technology with the business. Any advice for your counterparts that are?

SB: We have something called a project portfolio review board. Essentially that’s our CEO and his direct reports along with myself. We’ll look at all capital requests, and we make sure our requests are aligned with the business and with the IT strategy and most important, that we see a return on investment in less than one year. If you have that type of sponsorship and that type of CEO or executive review, by default they get a better understanding of what you’re trying to do. If you tell an executive, “I’m going to roll out a UC strategy,” they have no clue what that means. When I communicate to executives that I’m going to reduce his or her inventory by 20 per cent and I’m going to increase their productivity by 25 per cent, and I can provide a line item about how to actually take that cost out, that’s something that’s aligned with their understanding. All too many times IT executives try to communicate in Chinese when an executive wants to be spoken to in French. They just absolutely are talking across each other. The reality is, the CEO doesn’t care about five nines (of reliability) in a data centre. They don’t care about five nines on the network. They care about business metrics, and that’s where IT executives have to start communicating.

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