Motoring past maintenance

When Rich Hoffman joined Hyundai Motor America, as CIO in early 2003, about 90 percent of the company's annual IT spending was going to maintenance and operations, and just 10 percent was earmarked for projects that were deemed important by its business leaders.

Hoffman immediately set a goal of driving half of all IT spending into discretionary projects.

By October of that year, 49 percent of Hyundai's IT spending was being pumped into new projects. How was Hoffman able to turn the ship around so quickly? Two ways: by tracking its internal and contract labor resources more effectively, and by enacting more stringent quality-control requirements around Hyundai's application-development projects, he says.

"A horrendous amount of unmonitored resources were going toward minor break-fixes that were unscheduled," says Hoffman. When he first joined Hyundai, 93 percent of applications that were developed internally required at least one bug fix. Now, he says, that figure has been whittled to 4 percent.

"Most IT organizations lack the discipline to run good business proc-esses," like tracking labor resources against projects, says Hoffman, a 25-year IT veteran.

In 2003, Hyundai didn't have an application-development organization per se. Each of the 40 or so people on the IT staff was responsible for developing and maintaining applications for the business units to which they were assigned. But in March of 2005, the company's IT organization was restructured as a stand-alone company, now known as Hyundai Information Services North America, with Hoffman as the president and CEO. Hoffman has challenged his managers to apply a much more rigorous approach to procuring hardware, software and services, and this has helped the new IT organization continue to lower its operating costs, he says.

Spend to save

Joe Trentacosta walked into a different situation when he became CIO at Southern Maryland Electric Cooperative (SMECO) in 2003. At the time, the electric utility "had a pretty neglected" IT infrastructure that hadn't been upgraded for about 10 years, he says. As a result, 80 percent to 90 percent of the company's IT spending over the next few years went toward updating its antiquated IT infrastructure, including the replacement of all 50 of its Windows and Unix servers and the creation of a state-of-the-art data center.

But the US$600,000 that SMECO pumped into its IT infrastructure investments has had a net positive effect on discretionary project spending. The newer systems have helped push down maintenance costs and free up project funding. And by outsourcing the company's help desk operations last year, SMECO was able to increase end-user support from 50 hours a week to 168 while lowering its help desk costs by 10 percent annually, says Trentacosta.

Now, SMECO is allocating about 32 percent of its annual IT spend to discretionary projects, he says, "and we're trying to drive that up."

Licensed to save

In 2000, IT managers at Burlington Resources Inc. were given an ultimatum by top brass: Cut its geological software licensing costs, or the company would outsource the management of those applications. "It's amazing what kind of motivation that can be," says Dan Shearer, manager of technology enhancement at the Houston-based energy company.

After hiring a consultant to help the company get its arms around its software licensing agreements, IT managers at Burlington Resources discovered that many of its licenses were underused or unused. In 2001, the company began deploying software from Open IT Inc. in Houston to monitor its use of high-end software for global oil and gas exploration.

The monitoring software has helped Burlington Resources pinpoint which geological software is being used in which offices and by whom, says Shearer, and that has highlighted opportunities for savings. For example, prior to deploying Open IT, Burlington Resources was licensing geological software only on a local basis, he says. By shifting to a mix of regional and global software licenses, the company was able to reduce its software expenses by $5 million between 2002 and 2005.

"It was quite shocking," says Shearer. "No one was prepared for this [license-monitoring tool] to work as well as it did."

Burlington Resources has been able to channel all the savings into discretionary projects, including the development of an environmental health and safety system and a learning management system that was on the verge of being abandoned. "That project never would have made it if the dollars weren't available," says Shearer. "It was at the bottom of the queue."