What New CIOs Should Know

When a company faces a crisis, CIOs often get replaced. Whether facing bankruptcy or simply a large-scale defection of top technology talent, company leaders must figure out who works out better: an insider moving up to fill the chief information officer position, or an outsider coming in with a fresh eye and a strong broom?

“CIOs don’t last too long anyway even if a company is doing well,” says Guy Creese, research director at Aberdeen Group, a Boston-based industry analyst firm. “But when a company is under stress, a new CIO first has to figure out what the business priorities are and what can be done to leverage whatever existing technology is left. A good argument can be made for either hiring a CIO from within the company or looking outside.”

Embattled retail giant Kmart, which filed for bankruptcy protection in January, spent eight months searching for a new replacement for outgoing CIO Randy Allen before eventually hiring from within. In mid-April, the company promoted 18-year veteran Karen Austin to the top information systems post and charged her with overhauling the company’s antiquated and inefficient technology.

Austin was not available to talk about her promotion or Kmart’s technology objectives, but others who have stepped in to similar circumstances offer insight on how to work out of the hole.

Polaroid CIO Cindy Micavich says she learned more in the past seven months under fire than she had in her entire career. After taking the reins from retired CIO Tom Hennigan in October when the instant camera and film manufacturer filed for bankruptcy, Micavich immediately began the painful process of reducing her staff and slashing the department’s budget.

“I prefer to call it ‘challenging,’ ” says Micavich, who was a Polaroid vice president before moving into the CIO role. “The first thing I had to do was focus our IT support on our restructuring plans, essentially making sure we could just maintain our day-to-day operations and put all the other long-term plans on hold. At the same time, I had to come to terms with our aggressive operating plan which meant consolidating our operations, reducing our head count and finding more creative and efficient ways to use the people who were still around.”

With so much controlled chaos around her, Micavich and the Polaroid executive-management team created a steering committee that meets on a monthly basis to streamline operations, eliminate unnecessary spending and find strategic ways to accomplish what the company used to accomplish with a larger budget and staff.

“Frankly, when this all began I didn’t believe it was possible,” she says. “We’ve cut our budget by at least 40% from last year and we’ve trimmed our staff by 60%. It hasn’t been easy by any means, but it’s amazing what can be accomplished when you have people committed to making it work.”

One of the first major projects jettisoned was a scheduled upgrade from business software producer SAP. Polaroid uses SAP’s R3 software as the backbone of its infrastructure, and while Micavich realizes Polaroid eventually will have to tackle the upgrade, it doesn’t have to be done immediately, and there is neither time nor money for it now.

Polaroid scrapped its frame-relay network in favor of a more cost-efficient, Internet-based virtual private network to keep all its employees on the same page. Separate information technology departments for specific business units have been eliminated in favor of one central helpdesk responsible for monitoring and servicing the entire company.

“It’s really important to educate the senior management about the value of IT and not let them view it simply as an operating expense,” she says. “Personally, I don’t ever want to go through this again. But you’d be surprised how much you can pull out of your costs without significantly impacting the business.”

Mike Connor, CIO of Exodus, now a business unit of telecommunications company Cable & Wireless, left the payroll and benefits services company Automatic Data Processing in October 2000 to oversee what was then a $6.5 billion merger between Global Center and Exodus. In May 2001, he assumed the role of CIO of Exodus Communications, a Web-hosting services provider, and five months later the company filed for bankruptcy protection.

Connor says the bankruptcy filing combined with the massive integration of Global Center and later Cable & Wireless was “extremely challenging” and forced his team to get back to basics.

“The first priority is to provide world-class service to our customers; otherwise, we’re just wasting our time,” he says. “While you’re right-sizing and cutting costs you can never, ever take your eye off the customer because that’s the whole point of it. It seems simple, but you can see time and time again where these distractions eventually cause some companies to lose sight of their biggest priority.”

One of Connor’s first mandates was to integrate all three companies’ existing information systems to a single set of business processes and systems and do it in a way that would be transparent to the customer. Second, he had to “leverage the heck” out of the systems already in place.

“We had lots of information that our customers could use already there,” he says.

After surveying customers through its call-response system, the company created the myExodus customer portal. The portal, which cost very little to build and integrate, allows customers to review their online bandwidth use in real-time, track their service history and even review and pay their bills online.

“Even when you’re in this kind of situation, you can’t save your way to prosperity,” he says. “It sounds very simplistic, yet what we’ve been forced to consider is how to do more with less. The amazing part about it is that we’re now able to offer better service to our customers because we’re using the best of the technology we have in ways we may not have considered before.”