SaaS An Easy Sell For This CIO
- 09 March, 2009 15:02
The tasks in Laef Olson’s working hours can be rather varied. Olson, who is the CIO at Software-as-a-Service vendor RightNow Technologies is on the one hand responsible for IT security and the organisation’s information systems, while on the other he spruiks the strategy and vision for the company's on-demand hosting platform. On many occasions Olson gets a direct audience with company CIOs. What makes it easier for Olson to get traction to the upper levels of management is his past. He has been group vice president of global technology operations of Travelport and Orbitz Worldwide. And before that CTO of cars.com. In these roles he was also a consumer of SaaS products. It is that experience that he uses to relate to customers when on the road. Olson briefly stopped over in Australia last month where CIO Magazine asked him about the maturity of SaaS.
Is SaaS for every CIO? Why so and why not?
You know I talk to a lot of CIOs…It is kind of opaque. You can’t really see exactly what it is. And one of the things I do is I try and demystify it for them. And what I usually talk about is that Software-as-a-Service -- they are probably already doing it. They are probably doing in ways they may not realise. A lot of people will use a co-location provider for data centre services. They don’t own the building but someone else takes care of the air conditioning, the power and maybe even the telecommunications. A lot of them do the same thing with their phone systems. And so they are already accustomed to working with organisations at a services level – what we call services management. They probably also do infrastructure management. But at the end of the day, what I try and point out is the first decision you make is ‘what’s the right solution for my business?’. Then well down the list of decisions that you need to make along enterprise architecture and strategy and everything else is you have this new choice around deployment. Do you want to have it deployed on premise, or on-demand?. There are differences in how you do that. So it can be for every CIO. But I think the real solution is ‘what is the right functional decision that I need to deploy for my business to move it forward?
And if you choose RightNow, for example, then you would have to adopt the deployment preference that we bring to the table. Which is on-demand.
What are some of the limitations for SaaS?
There are certainly a lot pf perceived limitations which are being knocked down pretty quickly. One of the ones that I hear about is, ‘well I have all this extensive integration work I need to do. I have got to connect you to my back office ERP system and I have got to connect to the front office system and I have this data warehouse over here’. So a lot of the times there is a bit of misunderstanding of what is possible from working in the cloud and again it comes down to demystifying it a little bit. And saying, ‘you know, you are probably running systems somewhere other than in your office building. Sometimes on the other site of the city, sometimes the other side of the world. So you are already connecting to things via networks.’ And there is really nothing functional about the RightNow solution and other Software-as-a-Service solutions that prevents you from doing that kind of integration.
The real question becomes, ‘do you have the visibility into their operation?’ One of the hats a CIO wears is the risk management hat. They have to do things cost-effectively but they also need to manage risk and some of that risk is operational, you know, ‘are the servers up? Will I actually be able to process during some peak times’ and that sort of thing. Well, when they can see all their servers and all the people who run them report to them, it seems easier to manage the risk that way. And we basically say that is something that a Software-as-a-Service company needs to bring to the table. That kind of transparency about their operations. The certifications and compliance they have and the overall security. So I am kind of answering your question in a round about way. So no I don’t think there are specific limitations that are technical in nature. I think there are limitations you will find with certain companies that have more to do with their maturity as an organisation.
Page BreakAs a CIO and spruiker of your company’s products, what do you need to say to CIOs to give your product a chance in their enterprise. You are wearing the same hat as they are. So how do you connect with them?
I have spent most of career as a CIO. I have actually bought and deployed RightNow. I have bought and deployed Salesforce. I have bought and deployed Oracle On Demand. So I am pretty familiar with how to do that. So that is usually what I end up taking to them about.
It probably has more to do with understanding what is required to be successful. And every solution has its own unique requirements. One of the things we talk about is you do have to make sure you are thinking about what you do in terms of the services you provide to your customer – the business unit, and less about the infrastructure management piece. You need to broaden your horizon. And maybe be a little more value add to the business. I started using this term a couple of years ago – ‘virtual CIO’ – and it is just a recognition that if you are going to give me some of the responsibilities that you have traditionally done in-house, then I have to be thinking in the same way you’re thinking in terms of how I run my operation. So making sure you have got visibility in my change windows when I do changes in the environment. How I handle incidents if there are issues. How I do problem management like a route cause analysis. And the investigation of that and how it gets documented, and when you can get access to that information. This is all stuff CIOs do internally. I just realise I have to do it on their behalf. I have to do it professionally. Usually it is a combination of talking to them about virtual CIO and that program we are running, what it provides them. And also talking to them about ‘well if you are going to run Software-as-a-Service, the benefit to you is to do more work at what I call the ‘business partnership’ -- the strategy, the configuration, the deployment and maybe some of the analytics work; a lot of the stuff where you are working very closely with the business on analysis work, architecture and solutions development, and not worry so much about keeping the lights on in the data centre. So it is hopefully an opportunity for a CIO to ship some of their resources to areas that they are probably already doing but would probably do more if they are not having to run everything on the back-end as well.
You have talked about how a recession is a good time to be thinking about Software-as-a-Service. Why?
I don’t just talk the talk, I walk the walk. So we use Software-as-a-Service to provide our Human Resources management system; we use a company called Workday. I use Taleo to do recruiting management. I use Concur to do my expense management. I use Orbitz for business to do my travel. So all of this stuff is somewhere other than from within my datacentres. At the end of the day, for me and probably most other companies in a tight economy, being able to provision capital and make strategic capital investments into the business sometimes can be something difficult to be achieved. You have to prove ROI that comes back at you within a 12 month cycle so you can see the impact within the current calendar year. When you are buying Software-as-a-Service a lot of times those time lines are extended. So you are really getting five years potentially worth of software benefits for the price you paid at any one point of time because of that the cost of entry is low.
The other thing we are able to do is provide a pilot because we can provision the software so easily out of one of our existing datacenters. We can stand up a pilot potentially in the e-services space, email management and actually demonstrate the ROI and say ‘see you are getting 10,000 emails a day and now 40 per cent of them are being self serviced in the knowledge base and because of that you are going to be able to slow the growth of your customer care organisation’ or something along those lines; we are able to do that with customers. So within 30-60 days we can really prove out the ROI which makes it easy for the CIO to go to there board and say ‘I want to make this investment because it helps me take care of customers’ which you want to do in a down economy ‘and it also helps us save money because I don’t have to go out and provision this large team and hire staff’ and do all those things which create permanent costs structures in your orgnsiation. That potentially makes you less nimble to manage your expenses.
The cost-cutting benefits of SaaS are what vendors talk about to lure clients. Is that too narrow a focus on the benefits of SaaS?
I am a pretty pragmatic guy. A CIO wears many hats. One of them is to deliver functionality to the business. Using technology in as much as it is critical to the business. If you don’t do that CIO means ‘career is over’. The second hat is efficiency. A lot of CIOs sign up for expense reduction year over year. One of the things I do in [RightNow’s] IT services [department] is we say every year we will take five per cent of the costs out of the IT services organisation. But efficiency, given the costs reductions associated with IT a lot of the times, is pretty important.
If the CIO says, ‘I want to deploy Software-as-a-Service and the primary reason I am doing it is because I want to take costs out of my business,’ I think it is legitimate. It probably doesn’t capture the full capability of it but I think the deployment mechanism and the choice that companies now have to use Software-as-a-Service vs on-demand is to a large extent about economics. We [RightNow] compete in the market on the best of breed service delivery like contact centre, marketing and sales force automation. And I think that is where people normally start. They are looking at ‘what tools do I need to solve problems at my business?’ But if they want to brings us on board because we are a lower cost alternative for them – that’s fair. I think that is a reasonable thing to do.
Is there anything innovative about SaaS
When I talk CIOs I tend to de-emphasise how revolutionary it is. It is great; we are doing things with multi tenancy and how we deploy software. In as much as it meets the definition of innovation, which is a step forward in customer value – that’s how I define innovation, if you are really moving the ball down the field and delivering more value -- then yeah, I really think it is innovative. Is it revolutionary? I don’t want to go too far there. At the end of the day there is a lot of companies that provide technology services via service relationship. We have moved up the stack a little bit in terms of doing that at the applications level. But I don’t make a lot of ground with CIOs by claiming the brave new world of SaaS. I gain more ground by saying ‘you know what, it runs the same way as your stuff runs. It runs in some remote data centre and it runs on your desktops. It is just that I am going to take care some of these things for you.’
We are doing innovative things but I don’t think the whole space is as innovative as people make it out to be.
What apps are ideal for being hosted and what are best keep in-house?
I think it would come down to the preference of business units. It comes down sometimes to security and how comfortable they are with having that stuff be outside the borders of their company and potentially outside the borders of the country. So that tends to drive some decision making there. But technically I guess I would argue that since there is nothing that unique about delivering software over a network there really is no limitations to the types of applications that you can develop and deliver as a service application.
You worked for Traveloprt and Orbitz. What have you taken from there into your new role?
Quite a bit. It is a much bigger company. We have a huge footprint. We manage 2 billion customer interactions a year.
What have I brought to the table? I ran systems for United Airlines. I ran all their reservations, baggage control, all their reservation kiosks around the world. We ran the booking engine for American Airlines. We ran the Web sites for Northwest Airlines. Lots of low cost carriers in Europe like EasyJet [with Travelport]. One third of all travel transactions globally went through our data centre in Denver. The thing about running a global organisation and the operational requirements associated in running infrastructure that large is you are pretty buttoned up. United Airlines doesn’t like it when their systems go down. You have a hard enough time staying in business when systems are up. When they are not flying planes they get pretty upset about that.
The space we [RightNow] are in is contact centre. We are in multi channel chat, email, voice, Web self service. You can’t really sell around IT. IT is going to be involved
Most of my really successful conversations with CIOs today are when the account executives are not in the room. I spent most of career buying and trying to build this stuff, not trying to sell it. What I will say is if you chose RightNow, I tell you what I think you need to do to be successful deploying us. Making sure the deployment is successful. How do you manage upgrades. It is helpful sometimes to have an IT to IT conversation about what works and kind of depressurize the sales environment aspect of it. I do joke that I am not a sales guy but I am on the executive team. At the end of the day it has got to work. And I think I can be pretty helpful in working with customers on how to do it successfully.