For Johnson & Johnson, ITIL Means No More I.T. Tears

By Rob Garretson  |  Posted 2007-02-07 Email Print this article Print

After federalizing its global IT operations, the global healthcare giant is cutting costs and improving service through its "Process Excellence" methodology.

Six years ago, Johnson & Johnson was among the world's oldest and most profitable heathcare companies. In 2001, profits hit nearly $5.7 billion on sales of $33 billion, and the far-flung enterprise surpassed 100,000 employees at 197 operating companies in 54 countries. But despite strong, double-digit growth in both sales and earnings—up nearly 16 percent that year—the New Brunswick, N.J.-based healthcare giant had a serious problem.

IT infrastructure costs were also growing at double-digit rates, while demand for services—servers, storage, applications, hardware and particularly end-user support—was growing just as rapidly. In 1996, the 120-year-old company had embarked on a wrenching shift to consolidate IT infrastructure under a single, centralized division, defying its heritage as a confederation of fiercely independent operating companies. The purpose was to corral uncounted millions in IT spending. (See Case Study: "Johnson & Johnson and Managing IT," December 2001.)

After federalizing its IT infrastructure, J&J could finally track technology costs across its globally dispersed and diverse operations. But the numbers still weren't pretty: With a global IT budget of $1.2 billion in 2001, double-digit growth in spending was not acceptable. In response, the company turned to its Networking and Computing Services division to provide IT services across J&J's global enterprise, and installed Michael Shea as president.

Among the key tools that Shea and his management team at NCS tapped to help control technology spending was a decades-old set of best-practice guidelines for IT service management called the IT Infrastructure Library, or ITIL. Originally developed by the U.K. government as a model for its outsourced service providers, ITIL is widely used by European companies as a framework for IT service management, and in recent years it has begun to gain momentum in the U.S. Its proponents often cite ITIL as a method of "running IT like a business."

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