Last fall, speaking at dell Computer Corp.s DirectConnect conference in Austin, Texas, Ford Motor Co. President and CEO Jacques Nasser sounded like a dot-com entrepreneur flush with excitement over the vast possibilities of e-business. Ford, Nasser told his audience, was rushing to transform itself into a customer-focused e-business. “Technology and networks in particular determine the shape of everything else,” he said.
Youd think Nassers tech-centric words would have warmed the hearts of Fords top IT managers. But, even as Nasser was poised to rev up the engine of change and slam Fords e-business initiative into gear, a nagging question was running through the mind of IT Services Director George Surdu and other IT execs: Did Fords IT organization, although massive, with some 6,000 people, have enough gas in the tank to deliver on Nassers ambitious vision?
After much soul-searching, they came up with a disturbing answer: No. The IT organization was not ready for e-business.
“When business [managers] got the message that they could transform the business using technology, they all went to IT, and IT told them, Were busy. Well get back to you in 2010 because weve got this big list of requirements, things we have to do,” said J. Stewart Caulfield, an IT services global manager at Ford. “The basic message from top management was, This is not going to work. We need Web sites. We need B2B. … [But] IT couldnt respond.”
Centralize to succeed
So Surdu, Caulfield and other execs launched a top-to-bottom overhaul of Fords application maintenance and development organizations.
Designed to allow Ford to crank out new applications at the speed of e-business while cutting costs and improving quality, the restructuring pulled Fords software development and maintenance units out of the key business functions to which theyd been dedicated and steered them into a new, centralized organization where they could, for the first time, be run as truly independent businesses, each with its own profit-and-loss responsibility.
The result has been dramatic and positive. While the recently completed IT rebuild took more than 18 months and was not free of political pain, its allowed Ford to more than double application development and deployment productivity while cutting costs by 23 percent.
“Were still not where we want to be, but theres a recognition in the company that output [from the IT organization] is far greater than it was in the past,” Surdu said.
Feeling the strain
Fords certainly isnt the only large IT organization needing to either tune up or get run over in the rush by brick-and-mortar enterprises to e-business. Inside the automotive industry, large OEMs such as General Motors Corp., as well as major Tier 1 suppliers such as Dana Corp., Delphi Automotive Systems Corp. and Visteon Corp., have been lighting fires under their IT groups, according to Steve Gregerson, a vice president at Automotive Consulting Group Inc., in Ann Arbor, Mich.
“Theyve all realized that traditional IT organization structures have had major weaknesses,” Gregerson said. “They arent fast enough, and theyre run by technicians, not business people.”
Outside the automotive industry, too, the pressure of revving up for e-business is causing IT to come close to overheating. As demand for new Internet-based applications skyrockets, the size of application portfolios under management is swelling, and IT professionals are sweating bullets trying to keep up, according to a worldwide IT benchmark and trend report issued last month by Meta Group Inc., of Stamford, Conn.
Working hours per year for U.S.-based IT pros were up by an average of 36 percent from last year, according to the report, based on input from 8,000 companies. In spite of this runaway work week, new application development productivity per staffer was down 47 percent in 2000 compared with 1999, the report said. Software quality also took a nosedive.
Before the overhaul, IT at Ford faced the same kinds of problems, many of them growing out of the way the group was organized. For years, Surdu said, software development and maintenance groups were structured and deployed around key, internally developed legacy systems. Larger systems such as Fords huge common manufacturing management system hogged most of the people and resources.
That setup made for some very happy low-level business managers. Unfortunately, it also made for an IT organization that was about as ready for e-business as elephants are ready for flight—at least those that arent named Dumbo. Because resources were allocated on the basis of the size of legacy applications being supported, new groups at Ford—including those pushing e-business initiatives—had trouble getting on ITs radar screen.
As at many brick-and-mortar companies, 80 percent of Fords software budget was spent on simply maintaining and enhancing legacy applications rather than creating new ones, said Lynn Phillips, manager of Fords Application Management Center, in Dearborn.
Whats more, because development groups were spread across the company, Ford IT managers attempts to introduce new, standard-development maintenance and deployment processes intended to speed application time to market usually hit a brick wall.
At the same time, the way software development groups were organized tended to stall projects, Phillips said. For one thing, IT teams in the old setup had responsibility for new development, maintenance and deployment. An unexpected problem in one spot—say, maintenance—often sucked resources from another —say, new development—which caused delays.
And, Caulfield said, under the old system, IT groups were not run like businesses—they had no profit-and-loss responsibilities—so they werent always motivated to get more efficient and eliminate unneeded projects.
In one project on which he participated, Caulfield said, business managers asked IT for a major system upgrade costing about $1 million. But, months later, when it came time for deployment, managers had changed their minds. The enhancements, though built and paid for, never got off the showroom floor.
“Essentially, we wasted a million dollars. But, because it was set up as an internal departmental budgetary matter, I made my budget and [business managers] made their budgets,” he said. “So nobody ever knew that we spent $1 million on functionality that nobody ever used.”
That sort of thing might fly when IT is viewed as a back-office support function. But when the CEO is touting e-business and business managers are asking for new Web-based applications tomorrow, slow and wasteful isnt going to cut it. “The company said, You guys are too slow,” remembered Caulfield. “They said, We want you to be faster. We want you to be more productive.”
Fords new IT organization structure represents a major break from the past. Largely under the watch of former CIO Jim Yost and lieutenants like Surdu, IT groups were split away from the groups to which theyd been dedicated. They were physically centralized in a new Dearborn facility where they were restructured into four competency centers, each focused on a key aspect of the software life cycle: development, maintenance, deployment and support. The centers communicate with the business units on requirements and other issues through a new go-between division called the Process and Technology Group.
Each center works like a business. Its resources—programmers, analysts, database administrators, deployment specialists and so forth—are shared by all of Fords business units, which contract with the centers on specific projects. Business units ask the centers to bid on a project. Center and business managers agree on a price and deliverables. Center managers like Caulfield, who runs the Accelerated Solution Center, which is focused on application development, and Phillips, who runs the Application Management Center, which is focused on maintenance, are responsible for showing a profit.
Restructuring around competency centers and running the centers as businesses, say Ford IT officials, has enabled the introduction of common development processes and business discipline to IT. Since the centers do only the work that business units are willing to pay for, theres less wasted effort.
“Youve added a lot of discipline because youve added a lot of tension from this being a business transaction,” Caulfield said. “Before, that wasnt there.”
Centralizing software resources and organizing them around specific competencies has also helped best practices take hold, Ford IT officials say. As each software group moved into new digs at its competency center, Phillips said, members were immediately sent for retraining, learning standard-development methodologies assembled from Ford groups and service providers such as IBM Global Services, of Somers, N.Y., and Compuware Corp., of Farmington Hills, Mich.
“We said, This is the way were going to do things from now on,” Phillips said.
In the Accelerated Solution Center, for example, Ford introduced techniques such as “time boxing,” by which new application functionality is delivered in projects that last no more than four months each. The 750-person ASC and the Application Management Center, with 1,000 people, also uniformly applied standard project management techniques such as milestone checks and readiness assessments.
The ASC also added new processes, including risk assessments. Analysts, using tools and techniques borrowed from IBM, assess major risk factors in a project before agreeing on a price or deadline.
With the new setup, Ford also applies similar standard processes to application deployment, a function that, under the old organization, was often overlooked. A separate competency center, the Accelerated Implementation Center, takes responsibility for training users on applications and even performing follow-up user satisfaction and use-level surveys.
Besides revamping the application development, deployment and maintenance side of IT, Ford has also plugged in major changes in buying and deploying technology hardware to satisfy the faster pace of e-business.
All of this wasnt accomplished without some fretting. Some business unit managers, accustomed to having their own dedicated IT development teams on-site, voiced concern that they wouldnt receive the same level of service now that IT had been moved from their turf, Ford IT officials acknowledged. And some in IT worried that all this change camouflaged an attempt to cut IT costs—and jobs, admitted Caulfield.
Those concerns were amplified by the fact that the reorganization followed major outsourcing deals with IBM and Compuware.
After initially underestimating the concerns of some in IT, however, supporters of the IT reorganization now say theyve won over most doubters. That was partly due to intensified communication efforts to explain the new structure. And, Caulfield said, it had a lot to do with the fact that no Ford IT jobs were cut.
“If we had handled it a little better from the beginning, we could have assured everyone that no one would lose their jobs, that everyone would have more interesting work and that there would be more opportunities. And thats what has happened,” he said.
Doubters in the business units, likewise, have for the most part been won over, Surdu said. Thats not surprising, considering the improved results IT is now achieving.
Through the end of last year, the organization had more than doubled development productivity as measured by function points produced per staff month. At 30 points per staff month, Fords software development group is more than twice as productive as the industry average, Caulfield said. And the new organization has achieved equally impressive speed-to-market, quality and cost improvements.
Those kinds of results have prompted managers at Ford business units—who at least theoretically have an option to go elsewhere—to continue to use the internal IT group for most key development projects, Caulfield said.
That includes such critical new e-business projects as CKS (Customer Knowledge System), a massive new customer information system that will combine information from Ford dealers, call centers, Web sites and other channels. CKS went from concept to first release in four months. It also includes Finance at the Speed of Thought, a project intended to give Ford managers centralized Web access to consolidated, up-to-the-second financial information.
The IT overhaul has produced impressive results for Ford. But, Surdu said, it isnt over yet.
While the new organization and standardized development processes have enabled IT to excel at popping out small and medium-size projects, finishing off very large projects—those that integrate information from multiple legacy systems—in a fast and predictable manner is turning out to be a bumpy road.
To help with that, Surdu plans to build a large internal lab where Ford developers can test large-scale systems before deploying them in the field.
Fords top IT managers have no choice but to continue to tinker, Surdu said. Thats because, while the economy may be slowing and the automotive industry may be entering a difficult market, CEO Nasser shows no signs of shifting into reverse when it comes to his commitment to e-business. On the contrary—any obstacle in his way stands a good chance of just getting run down.
“What were doing is asking how we can exploit this new technology to improve the capabilities of ourselves, our supplier partners and our dealers,” Surdu said. “I dont see anything thats going to get in the way of our continuing to do that.”