HP Discover Case Study: Vodafone Ireland IT Group Sees Huge ROI By Emphasizing Business Service Delivery

Transcript of a BriefingsDirect podcast in conjunction with HP Discover 2011 in Vienna on how a major telecom provider has improved service to customers by shifting from a technology emphasis to business service delivery.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: HP.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you in conjunction with the HP Discover 2011 Conference in Vienna.

We’re here in the week of Nov. 28, to explore some major case studies from some of Europe’s leading enterprises. We'll see how a series of innovative solutions and an IT transformation approach to better support business goals is benefiting these companies, their internal users, and their global customers.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions and I'll be your host throughout this series of HP-sponsored Discover live discussions.

Out next customer case study interview highlights how a shift from a technology emphasis to a business services delivery emphasis has created significant improvements for a large telecommunications provider, Vodafone.

To learn more, we’re here with Shane Gaffney, Head of IT operations for Vodafone Ireland in Dublin. Welcome to the show, Shane.

Shane Gaffney: Thank you, Dana.

Gardner: Tell me what was the challenge that you faced when you decided to switch from a focus on technology purely to one more of a business user mentality? Why did you think you needed to do that?

Gaffney: Back in summer of 2010, when we looked at the business perception of the quality of service received from IT, the confidence was lower than we’d like in terms of predictable and optimal service quality being provided.

There was a lack of transparency. Business owners didn’t fully understand what quality was being received and they didn’t have simple meaningful language that they were receiving from IT operations in terms of understanding service quality: good, bad, or indifferent.

Within IT operations, as a function, we also had our own challenges. We were struggling to control our services. We were under the usual pressure that many of our counterparts face in terms of having to do more with less, and downward pressure on cost and headcount. We were growing a dynamic complex IT estate, plus customers are naturally becoming ever more discerning in terms of their expectations of IT.

Transactional and reactive

As a large multinational, we specified a fragmented organization, some services being provided centrally vs. locally, some offshore vs. onshore. With that, we had a number of challenges and the type of relationship we had with our customers was transactional and reactive in nature.

So with that backdrop, we knew we needed to take some radical steps to really drive our business forward.

Gardner: And before we learn more about that, Shane, tell me a little bit about Vodafone Ireland? Tell us the extent of your services and your reach there?

Gaffney: Vodafone is Ireland’s leading telecommunications operator. We have in excess of 2.4 million subscribers, about 1,300 employees in a mixture of on-premise and cloud operations. I mentioned the complex and dynamic IT estate that we manage. To put a bit of color around that, we’ve got 230 applications, about 2,500 infrastructure nodes that we manage either directly or indirectly -- with substantial growth in traffic, particularly the exponential growth in the telecom data market.

Gardner: When you decided to change your emphasis to try to provide more of that business confidence, the services orientation, clearly just using technology to do that probably wasn't going to be sufficient. There are issues around people, process, culture, and so forth. How do you, at a philosophical level, bridge the continuum among and between technology and these other softer issues like culture?

Gaffney: That's a really important point. The first thing we did, Dana, was engage quite heavily with all of our business colleagues to define a service model. In essence what we were looking at there was having our business unit owners define what services were important to them at multiple levels down to the service transactions, and defining the attributes of each of those services that make them successful or not.

We essentially looked to align our people, revamp our processes, and look at our end-to-end tool strategy, all based around that service model.

Once we had a very clear picture of what that looked like across all business functions, we used that as our starting point to be able to measure success through the customer eyes.

That's the focus and continues to be the core driver behind everything else we do in IT operations. We essentially looked to align our people, revamp our processes, and look at our end-to-end tool strategy, all based around that service model.

The service model has enforced a genuine service orientation and customer centricity that’s driven through all activities and behaviors, including the culture within the IT ops group in how we service customers. It’s really incorporating those commercial and business drivers at the heart of how we work.

Gardner: Shane, I've heard from other companies that another important aspect of moving to the shift on services delivery is to gain more awareness of the IT products in total. It involves, I suppose, gaining insight and then analysis, not at the point-by-point basis in the products themselves, but at that higher abstraction of how the users themselves view these services? Has that been important for you as well?

Helicopter view

Gaffney: We’ve taken the service view at a number of levels. Essentially, the service model is defined at a helicopter view, which is really what’s important to our respective customers. And we’ve drilled down into a number of customer or service-oriented views of their services, as well as mapping in, distilling, and simplifying the underlying complexities and event volumes within our IT estate.

Gardner: In order to get that helicopter view and abstract things in terms of a process level, what have you done in terms of gaining insight? What has become important for you to be able to do that?

Gaffney: There are a number of things we’ve considered there. Without having a consolidated or rationalized suite of tools, we found previously that it's very difficult to get control of our services through the various tiers. By introducing the HP Application Performance Management tools portfolio, there are a number of modules therein that have allowed us to achieve the various goals that we’ve set to achieve the desired control.

Gardner: Before we go into any detail on products and approaches, let’s pause and step back. What does this get for you -- if you do it right? What is it that you've been able to attain by shifting your emphasis to the business services level and employing some new approaches in culture? What did you get? What’s the payoff?

Gaffney: First of all for IT, we build confidence within the team in terms of having a better handle on the quality of service that we’re offering. Having that commercial awareness really does drive the team forward. It means that we’re able to engage with our customers in a much more meaningful way to create genuine value-add, and move away from routine transactional activity, to helping our customers to innovate and drive business forward.

Without having a consolidated or rationalized suite of tools, we found previously that it's very difficult to get control of our services through the various tiers.

We’ve certainly enjoyed those type of benefits through our transformation journey by automating a lot of the more core routine and repeatable activity, facilitating focus on our relationship with our customers in terms of understanding their needs and helping them to evolve the business.

Gardner: Have you done any surveys or presented key performance indicators (KPIs) against some of this? Is it still early? How might we look to some more concrete results, if you're able to provide that?

Gaffney: In terms of how we measure success, Dana, we try to take a 360 view of our service quality. So we have a comprehensive suite of KPIs at the technology layer. We also do likewise in terms of our service management and establishing KPIs and service level agreements (SLAs) at the service layer. We've then taken a look at what quality looks like in terms of customer experience and perception, seeking to correlate metrics between these perspectives.

As an example, we routinely and rigorously measure our customer net promoter score, which essentially assesses whether the customers, based on their experience, would recommend our products and services to others.

To give a flavor of the type of KPI improvements at an operational level that we’ve seen improve over the last year, we measure "customer loss hours," which is effectively due to any diminished performance in, or availability of, our services. We measure the impact to the end customer in terms of the adverse impact they would suffer.

Reduction in lost hours

We’ve seen a 66 percent reduction in customer lost hours year on year from last summer to this. We’ve also seen a 75 percent reaction in mean time to repair or average service restoration time.

Another statistic I'd call out briefly is that at the start of this process, we were identifying root cause for incidents that were occurring in about 40-50 percent of cases on average. We’re now tracking consistently between 90-100 percent in those cases and have thereby been able to better understand, through our capabilities and tools, what’s going on in the department and what’s causing issues. We consequently have a much better chance of avoiding repetition in those issues impacting customers.

At a customer satisfaction level, we’ve seen similar improvements that correlate with the improved operational KPIs. From all angles, we’ve thankfully enjoyed very substantial improvements. If we look at this from a financial point of view, we’ve realized a return on investment (ROI) of 300 percent in year one and, looking solely at the cost to fix and the cost of failure in terms of not offering optimal service quality, we’ve been able to realize cost savings in the region of €1.2 million OPEX through this journey.

Gardner: Let me just dig into that ROI. That’s pretty amazing, 300 percent ROI in one year. And what was that investment in? Was that in products, services, consulting, how did you measure it?

At a customer satisfaction level, we’ve seen similar improvements that correlate with the improved operational KPIs.

Gaffney: Yes, the ROI is in terms of the expenditure that would have related primarily to our investment in the HP product portfolio over the last year as well as a smaller number of ancillary solutions.

The payback in terms of the benefits realized from financial perspective that relate to the cost savings associated with having fewer issues and in the event where we have issues, the ability to detect those faster and spend less labor investigating and resorting issues, because the tools, in effect, are doing a lot of that legwork and much of the intelligence is built in to that product portfolio.

Gardner: I suppose this would be a good time to step back and take a look at what you actually do have in place. What specifically does that portfolio consist of for you there at Vodafone Ireland?

Gaffney: We have a number of modules in HP's APM portfolio that I'll talk about briefly. In terms of looking to get a much broader and richer understanding of our end-user experience which we lacked previously, we’ve deployed HP’s Business Process Monitors (BPMs) to effectively emulate the end-user experience from various locations nationwide. That provides us with a consistent measure and baseline of how users experience our services.

We’ve deployed HP Real User Monitoring (RUM), which gives us a comprehensive micro and macro view of the actual customer experience to complement those synthetic transactions that mimic user behavior. Those two views combined provide a rich cocktail for understanding at a service level what our customers are experiencing.

Events correlation

We then looked at events correlation. We were one of the first commercial customers to adopt HP’s BSM version 9.1 deployment, which gives us a single pane of glass into our full service portfolio and the related IT infrastructure.

Looking a little bit more closely at BSM, we've used HP’s Discovery and Dependency Mapping Advanced (DDMa) to build out our service model, i.e. effectively mapping our configuration items throughout the estate, back up to that top-down service view. DDMa effectively acts as an inventory tool that granularly links the estate to service. We’ve aligned the DDMa deployment with our service model which, as I mentioned earlier, is integral to our transformation journey.

Beyond that, we’ve looked at HP’s Operations Manager i (OMI) capability, which we use to correlate our application performance and our system events with our business services. This allows our operators to reduce a lot of the noisy events by distilling those high-volume events into unique actionable events. This allows operators to focus instead on services that may be impacted or need attention and, of course, our customers and our business.

We’ve gone farther and looked at ArcSight Logger, software which we’ve deployed to a single location that collects logged files throughout our estate. This allows us to quickly and easily search across all logged files for abnormalities that might be related to a particular issue.

By integrating ArcSight Logger with OMI -- and I believe we’re one of the first HP customers to do this -- we’ve enriched operator views with security information as well as the hardware, OS, and application layer events. That gives us a composite view of what’s happening with our services through multiple lenses, holistically across our technology landscape and products and services portfolio.

A year ago, we were to a degree reactive in terms of how we provided service. At this point, we’re proactive in how we manage services.

Additionally, we’ve used HP’s Operations Orchestration to automate many of our routine procedures and, picking up on the ROI, this has allowed us to free up operators’ time to focus on value-add and effectively to do more with less. That's been quite a powerful module for us, and we’ve further work to exploit that capability.

The last point to call out in terms of the HP portfolio is we’re one of the early trialists of HP’s Service Health Analyzer. A year ago, we were to a degree reactive in terms of how we provided service. At this point, we’re proactive in how we manage services.

Service Health Analyzer will allow us to move to the next level of our evolution, moving toward predictive service quality. I prefer to call the Service Health Analyzer our “crystal ball,” because that’s essentially what we’re looking at. It’s taking trends that are occurring with the services of transaction, and predicting what's likely to happen next and what may be in jeopardy of breaking down the line, so you can take early intervention and remedial action before there’s any material impact on customers.

We’re quite excited about seeing where we can go there. One of the sub-modules of Service Health Analyzer is Service Health Reporter, and that’s a tool that we expect to act as our primary capacity planning capability across a full IT estate going forward.

Throughout our implementation, partnership was a key ingredient to success. Vodafone had the business vision and appetite to evolve. HP provided the thought leadership and guidance. And, Perform IT, HP's partner, brought hands-on implementation and tuning expertise into the mix.

Gardner: That’s very impressive. You’re certainly juggling a lot of balls and keeping them in the air. One of the things that I've seen in the market when it comes to gaining this sort of pane of glass view into operations is they’re starting to share that as sort of a dashboard, or a graphical representation as a scorecard perhaps we could refer to it, with more of the business leadership.

Have you been able to take some of the analysis, and insights and then not just use that in the context of the IT operations, but provide it back to business, so it would help them manage their strategy and operational decision making?

Full transparency

Gaffney: Absolutely. One of our core principles throughout this journey has been to offer full transparency to our customers in terms of the services they receive and enjoy from us. On one hand, we provide the BSM console to all of our customers to allow them to have a view of exactly what the IT teams see, but with a service orientation.

We’re actually going a step further and we’re building out a cloud-based service portal that takes a rich feed in from the full BSM portfolio, including the modules that I've called out earlier. It also takes feeds in from a remedy system, in order to get the view of core processes such as incident management, problem management, change management.

Bringing all of that information together gives customers a comprehensive view of the services they receive from IT operations. That's our aim -- to provide customers with everything they need at their fingertips.

It's essentially providing simple and meaningful information with customized views and dynamic drill-down capabilities, so customers can look at a very high level of how the services are performing, or really drill into the detail, should they so desire. The portal, we believe, is likely to act as a powerful business enabler. Ultimately, we believe there's opportunity to commercialize or productize this capability down the line.

The portal, we believe, is likely to act as a powerful business enabler. Ultimately, we believe there's opportunity to commercialize or productize this capability down the line.

Gardner: We’re about out of time, but Shane, now that you've gone through quite a bit of this, and as an early adopter, I wonder if you could share some 20-20 hindsight for those users around the world who are examining some of the products and services available, thinking about culture, re-emphasizing the business process issues, rather than just pure technology issues. What would you tell them as advice when they get started? Any recommendations now that you've been through this yourself?

Gaffney: For customers embarking on this type of transformation initiative, first off, I would suggest: engage with your customers. Speak with your customers to deeply understand their services, and let them define what success looks like.

Look to promote quick wins and win-wins. Look at what works for the IT community and what works for the customer. Both are equally important. Buy-in is required, and people across those functions all need to understand what success looks like, and believe in it.

I would recommend taking a holistic approach from a couple of angles. Don’t just look at your people, technology, or processes, but look at those collectively, because they need to work in harmony to hit the service quality sweet spot. Holistically, it's important to prepare your strategy, but look top down from the customer view down into your IT estate and vice versa, mapping all configuration items back into those top level services.

Rationalize and automate

Rationalize and automate wherever possible. We had a suite of over two dozen tools, acting as a cumbersome patchwork solution for operators. We’ve vastly rationalized those tools into a much more manageable single console that the teams use now.

We’ve automated all resource-intensive and transactional activities wherever possible, which again frees up time to allow engineers to focus on the business relationship.

I’d also recommend the people incrementally build on success. We started out with modest budget, but by targeting early wins through that investment, and by building subsequent business cases, particularly with the service model, we were easily able to get the buy-in from stakeholders, because the story was compelling, based on the commercial advantages and the broader business benefits that were accrued from the earlier investment.

Lastly, for IT teams I would strongly suggest that you look to establish a dedicated surveillance capability, whether that’s round the clock or whatever is appropriate for your business model. Moving from a traditional support model to this type of service-oriented view, the key to success is having people managing the eyes and ears across your services at all times. It really does pay back in spades.

We’ve automated all resource-intensive and transactional activities wherever possible, which again frees up time to allow people focus on the business relationship.

Gardner: Excellent. A big thank you to you Shane Gaffney, Head of IT Operations at Vodafone Ireland. This has been a great story, and thank you for sharing it on how a shift from technology emphasis to a business services delivery emphasis has created some significant improvements and has set the stage for yet greater business productivity from IT.

I also want to thank our audience for joining us for this special BriefingsDirect podcast coming to you in conjunction with the HP Discover 2011 Conference in Vienna. I hope you have a great show. I appreciate your time, Shane.

Gaffney: Thank you, Dana.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this series of HP-sponsored Discover live discussions. Thanks again for listening and come back next time.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: HP.

Transcript of a BriefingsDirect podcast in conjunction with HP Discover 2011 in Vienna on how a major telecom provider has improved service to customers by shifting from a technology emphasis to business service delivery. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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Germany's Largest Travel Agency Starts a Virtual Journey to Get Branch Office IT Under Control

Transcript of a sponsored podcast discussion from VMworld 2011 in Copenhagen on how DER Deutsches Reisebüro virtualized 2,300 desktops to centralize administration.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: VMware.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you from the VMworld 2011 Conference in Copenhagen. We're here in the week of October 17 to explore the latest in cloud computing and virtualization infrastructure developments.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I’ll be your host throughout this series of VMware-sponsored BriefingsDirect discussions. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Our next case study focuses on how Germany’s largest travel agency has remade their PC landscape across 580 branch offices using virtual desktops. We’ll learn how Germany’s DER Deutsches Reisebüro redefined the desktops delivery vision and successfully implemented 2,300 Windows XP desktops as a service.

Here to tell us what this major VDI deployment did in terms of business, technical, and financial payoffs is Sascha Karbginski, Systems Engineer at DER Deutsches Reisebüro, based in Frankfurt. Welcome to the show, Sascha.

Sascha Karbginski: Hi, Dana.

Gardner: Why were virtual desktops such an important direction for you? Why did it make sense for your organization?

Karbginski: In our organization, we’re talking about 580 travel agencies all over the country, all over Germany, with 2,300 physical desktops, which were not in our control. We had life cycles out there of about 4 or 5 years. We had old PCs with no client backups.

The biggest reason is that recovery times at our workplace were 24 hours between hardware change and bringing back all the software configuration, etc. Desktop virtualization was a chance to get the desktops into our data center, to get the security, and to get the controls.

Gardner: So this seemed to be a solution that’s solved many problems for you at once.

Karbginski: Yes. That’s right.

Gardner: All right. Tell me a little bit about DER, the organization. I believe you’re a part of the REWE Group and you’re the number one travel business in Germany. Tell us a little bit about your organization before we go further into why desktop virtualization is good for you.

Karbginski: DER in Germany is the number one in travel agencies. As I said, we're talking about 580 branches. We’re operating as a leisure travel agency with our branches, Atlasreisen and DER, and also, in the business travel sector with FCm Travel Solutions.

IT-intensive business

Gardner: This is a very IT-intensive business now. Everything in travel is done though networked applications and cloud and software-as-a-service (SaaS) services. So a very intensive IT activity in each of these branches.

Karbginski: That’s right. Without the reservation systems, we can’t do any flight bookings or reservations or check hotel availability. So without IT, we can do nothing.

Gardner: And tell me about the problem you needed to solve in a bit more detail. You had four generations of PCs. You couldn’t control them. It took a lot of time to recover if there was a failure, and there was a lot of different software that you had to support.

Karbginski: Yes. We had no domain integration no control and we had those crashes, for example. All the data would be gone. We had no backups out there. And we changed the desktops about every four or five years. For example, when the reservation system needed more memory, we had to buy the memory, service providers were going out there, and everything was done during business hours.

Gardner: Okay. So this would have been a big toll on your helpdesk and for your support. With all of these people in these travel bureau locations calling you, it sounds like it was a very big problem.

There were some challenges during the rollout. The bandwidth was a big thing.

To what degree have you fully virtualized all of these desktops? Do you have a 100-percent deployment or you face deployment across these different organizations and these different agencies?

Karbginski: We have nearly about 100 percent virtualization now. We have only two or three offices, which are coming up next. We have some problem with the service provider for the VPN connection. So it's about 99 percent virtualization.

Gardner: That's pretty impressive. What were some of the issues that you encountered in order to enable this? Were there network infrastructure or bandwidth issues? What were some of the things that you had to do in order to enable this to work properly?

Karbginski: There were some challenges during the rollout. The bandwidth was a big thing. Our service provider had to work very hard for us, because we needed more bandwidth out there. The path we had our offices was 1 or 2-Mbit links to the headquarters data center. With desktop virtualization, we need a little bit more, depending on the number of the workplaces and we needed better quality of the lines.

So bandwidth was one thing. We also had the network infrastructure. We found some 10-Mbit half-duplex switches. So we had to change it. And we also had some hardware problems. We had a special multi-card board for payment to read out passports or to read out credit card information. They were very old and connected with PS/2.

A lot of problems

So there were a lot of problems, and we fixed them all. We changed the switches. Our service provider for Internet VPN connection brought us more quality. And we changed the keyboards. We don’t need this old stuff anymore.

Gardner: And so, a bit of a hurdle overcome, but what have been some of the payoffs? How has this worked out in terms of productivity, energy savings, lowering costs, and even business benefits?

Karbginski: Saving was our big thing in planning this project. The desktops have been running out there now about one year, and we know that we have up to 80 percent energy saving, just from changing the hardware out there. We’re running the Wyse P20 Zero Client instead of physical PC hardware.

Gardner: How about on the server side; are there energy benefits there?

Karbginski: We needed more energy for the server side in the data center, but if you look at it, we have 60 up to 70 percent energy savings overall. I think it’s really great.

Gardner: That’s very good. So what else comes in terms of productivity? Is there a storage or a security benefit by having that central control?

The data is under our control in the data center, and important company information is not left in an office out there.

Karbginski: As far as security, we've blocked the USB sticks now out there. So the data is under our control in the data center, and important company information is not left in an office out there. Security is a big thing.

Gardner: And how about revisiting your helpdesk and support? Because you have a more standardized desktop infrastructure now, you can do your upgrades much more easily and centrally and you can support people based on an access right directly to the server infrastructure. What’s been the story in terms of productivity and support in helpdesk?

Karbginski: In the past, the updates came during the business hours. Now, we can do all software updates at nights or at the weekends or if the office is closed. So helpdesk cost is reduced about 50 percent.

Gardner: Wow. That adds up.

Karbginski: Yeah, that’s really great.

Gardner: How big a team did it take to implement the virtualized desktop infrastructure activity for you? Was this a big expenditure in terms of people and time to get this going?

Few personnel

Karbginski: We built up the whole infrastructure -- I think it was in 9 or 10 months without the planning -- with a team of three persons, three administrators.

Gardner: Wow.

Karbginski: And now we're managing, planning, deploying, and updating it. I really think it's not a good idea to do with just three people, but it works.

Gardner: And you’ve been the first travel organization in Germany to do this, but I understand that others are following into your footsteps.

Karbginski: I've heard from some other companies that are interested in a solution like this. We were the first one in Germany, and many people told us that it wouldn't work, but we showed it works.

Gardner: And you're a finalist for the TechTarget VMware Best Award because of the way in which you’ve done this, how fast you’ve done it, and to the complete degree that you’ve done it. So I hope that you do well and win that.

We built up the whole infrastructure with a team of three persons, three administrators.

Karbginski: I received an email that we are one of the finalists, and it would be a great thing.

Gardner: Tell me now that we understand the scope and breadth of what you’ve done, a little about some of the hurdles that you’ve had to overcome. The fact that you're doing this with three people is very impressive. What does the implementation consist of? What is it you’ve got in place in terms of product that has become your de-facto industry stack for VDI?

Karbginski: I can also talk about some problems we had with this, because with the network component, for example, we have another team for it.

Gardner: I was actually wondering what products are in place? What actual technology have you chosen that then enabled you to move in this direction so well? Software, hardware, the whole stack, what is the data center stack or set of components that enables your VDI?

Karbginski: We're using Dell servers with two sockets, quad-core, 144-gigabyte RAM. We're also using EMC Clariion SAN with 25 terabytes. Network infrastructure is Cisco, based on 10 GB Nexus data center switches. At the beginning the project, we had View 4.0 and we upgraded it last month to 4.6.

The people side

Gardner: What were some of the challenges in terms of working this through the people side of the process? We've talked about process, we've talked technology, but was there a learning curve or an education process for getting other people in your IT department as well as the users to adjust to this?

Karbginski: There were some unknown challenges or some new challenges we had during the rollout. For example, the network team. The most important thing was understanding of virtualization. It's an enterprise environment now, and if someone, for example, restarts the firewall in the data center, the desktops in our offices were disconnected.

It's really important to inform the other departments and also your own help desk.

Gardner: So there are a lot of different implications across the more traditional or physical environment. How about users? Have they been more satisfied? Is there something about a virtual desktop, perhaps the speed at which it boots up, or the ability to get new updates and security issues resolved? How have the end users themselves reacted?

Karbginski: The first thing that the end users told us was that the selling platform from Amadeus, the reservation system, runs much faster now. This was the first thing most of the end users told us, and that’s a good thing.

The next is that the desktop follows the user. If the user works in one office now and next week in another office, he gets the same desktop. If the user is at the headquarters, he can use the same desktop, same outlook, and same configuration. So desktop follows the user now. This works really great.

The desktop follows the user. If the user works in one office now and next week in another office, he gets the same desktop.

Gardner: Looking to the future, are you going to be doing this following-the-user capability to more devices, perhaps mobile devices or at home PCs? Is there the ability to take advantage of other endpoints, perhaps those even owned by the end users themselves and still deliver securely the applications and data that you need?

Karbginski: We plan to implement the security gateway with PCoIP support for home office users or mobile users who can access their same company desktop with all their data on it from nearly every computer in the world to bring the user more flexibility.

Gardner: So I should think that would be yet another payoff on the investments that you’ve made is that you will now be able to take the full experience out to more people and more places, but for relatively very little money to do that.

Karbginski: The number of desktops is still the same, because the user gets the same desktop. We don’t need for one user two or three desktops.

Gardner: Right, but they're able to get the information on more devices, more screens as they say, but without you having to buy and manage each of those screens. How about advice for others? If you were advising someone on what to learn from your experience as they now move toward desktop virtualization, any thoughts about what you would recommend for them?

Inform other departments

Karbginski: The most important thing is to get in touch with the other departments and inform them about the thing you're doing. Also, inform the user help desk directly at the beginning of the project. So take time to inform them what desktop virtualization means and which processes will change, because we know most of our colleagues had a wrong understanding of virtualization.

Gardner: How was it wrong? What was their misunderstanding do you think?

Karbginski: They think that with virtualization, everything will change and we'll need other support servers, and it's just a new thing and nobody needs it. If you inform them what you're doing that nothing will be changed for them, because all support processes are the same as before, they will accept it and understand the benefits for the company and for the user.

The most important thing is to get in touch with the other departments and inform them about the thing you're doing.

Gardner: We’ve been talking about how DER Deutsches Reisebüro has been remaking their PC landscape across 500 in 80 branch officers. They're part of Germany’s largest travel agency and they’ve been deploying desktop virtualization successfully, but very broadly up to 100 percent across their environment. So it's very impressive. I’d like to thank our guest, Sascha Karbginski, Systems Engineer there at DER Deutsches Reisebüro. Thank you so much, Sascha.

Karbginski: Thank you, Dana.

Gardner: And thanks to our audience for joining this special podcast coming to you from the VMworld 2011 Conference in Copenhagen. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of VMware-sponsored BriefingsDirect discussion. Thanks again for listening, and come back next time.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: VMware.

Transcript of a sponsored podcast discussion from VMworld 2011 in Copenhagen on how DER Deutsches Reisebüro virtualized 2,300 desktops to centralize administration. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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Case Study: Southwest Airlines' Productivity Takes Off Using Virtualization and IT as a Service

Transcript of a BriefingsDirect podcast on how travel giant Southwest Airlines is using virtualization to streamline customer service applications.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: VMware.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you in conjunction with a recent VMworld 2011 Conference.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I’ll be your host throughout this series of VMware-sponsored BriefingsDirect discussions.

Our next VMware case study interview focuses on Southwest Airlines, one of the best-run companies anywhere, with some 35 straight years of profitability, and how "IT as a service" has been transformative for them in terms of productivity.

Here to tell us more about how Southwest is innovating and adapting with IT as a compelling strategic differentiator is Bob Young, Vice President of Technology and Chief Technology Officer at Southwest Airlines. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Welcome to BriefingsDirect, Bob.

Bob Young: Well, thank you very much. I appreciate the opportunity to speak with you.

Gardner: We have heard a lot about IT as a service, and unfortunately, a lot of companies face an IT organization that might be perceived as a little less than service-oriented, maybe even for some a roadblock or a hurdle. How have you at Southwest been able to keep IT squarely in the role of enablement?

Young: First off, as everybody should know already, Southwest Airlines is the customer service champ in the industry. Taking excellent care of our customers is just as important as filling our planes with fuel. It’s really what makes us go.

So as we are taking a look and trying to be what travelers want in an airline, and we are constantly looking for ways to improve Southwest Airlines and make it better for our customers, that's really where virtualization and IT as a service comes into play. What we want to be able to do is make IT not say, "Oh, this is IT versus something else."

People want to be able to get on Southwest.com, make a reservation, log on to their Rapid Rewards or our Loyalty Program, and they want to be able to do it when they want to do it, when they need to do it, from wherever they are. And it’s just great to be able to provide that service.

We provide that to them at any point in time that they want in a reliable manner. And that's really what it gets right down to -- to make the functions and the solutions that we provide ubiquitous so people don’t really need to think about anything other than, "I need to do this and I can do it now."

At your fingertips

Gardner: I travel quite a bit and it seems to me that things have changed a lot in the last few years. One of the nice things is that information seems to be at your fingertips more than ever. I never seem to be out of the loop now as a traveler. I can find out changes probably as quickly as the folks at the gate.

So how has this transfer of information been possible? How have you been able to keep up with the demands and the expectations of the travelers?

Young: One of the things that we like to do at Southwest Airlines is listen to our customers, listen to what their wants and desires are, and be flexible enough to be able to provide those solutions.

If we talk about information and the flow of information through applications and services, it really starts to segment the core technical aspects of that so the customer and our employees don’t really need to think about it. When they want to get the flight at the gates, the passenger is on a flight leg, etc., they can go ahead and get that at any moment in time.

Another good example of that is earlier this year we rolled out our new Rapid Rewards 2.0 program. It represents a bold and leading way to look at rewards and giving customers what they want. With this program, we've been able to make it such that we can make any seat available on any flight for our Rapid Rewards customers for rewards booking, which is unique in the industry.

What we want to be able to do is provide it whenever they want it, whenever they need it, at the right cost point, and to meet their needs.

The other thing it does is allows our current and potential members the flexibility in how they both earn miles and points and how they use them for rewards -- being able to plan ahead and allowing them to save some significant points.

The same is true of how we provide IT as a service. What we want to be able to do is provide it whenever they want it, whenever they need it, at the right cost point, and to meet their needs. We've got some of the best customers in the world and they like to do things for themselves. We want to allow them to do that for themselves and be able to provide our employees the same areas.

If you've been on a Southwest flight, you've seen our flight crews, our in-flight team, really trying to have fun and trying to make Southwest a fun place to work and to be, and we just want to continue to support that in a number of different ways.

Gardner: You have also had some very significant challenges. You're growing rapidly. Your Southwest.com website is a crucial and growing part of your revenue stream. You've had mergers, acquisitions, and integrations as a result of that, and as we just discussed, the expectations of your consumers, your customers, are ramping up as well -- more data, more mobile devices, more ways to intercept the business processes that support your overall products and services.

So with all those requirements, tell me a little bit about the how. How in IT have you been able to create common infrastructures, reduce redundancy, and then yet still ramp up to meet these challenging requirements?

Significant volume

Young: As you all know, Southwest.com is a very large travel site, one of the largest in the industry -- not just airlines, but the travel industry as a whole. Over 80 percent of our customers and consumers book travel directly on Southwest.com. As you may know, we have fare sales a couple of times a year, and that can drive a significant volume.

What we've been able to do and how we have been able to meet some of those challenges is through a number of different VMware products. One of the core products is VMware itself, if we talk about vSphere, vMotion, etc., to be able to provide that virtualization. You can get a 1-to-10 virtualization depending on which type of servers and blades you're using, which helps us on the infrastructure side of the house to maintain that and have the storage, physical, and electrical capacity in our data centers.

But it also allows us, as we're moving, consolidating, and expanding these different data centers, to be able to move that virtual machine (VM) seamlessly between points. Then, it doesn’t matter where it’s running.

That allows us the capacity. So if we have a fare sale and I need to add capacity on some of our services, it gives our us and our team that run the infrastructure the ability to bring up new services on new VMs seamlessly. It plugs right into how we're doing things, so that internal cloud allows us not to experience blips.

It's been a great add for us from a capacity management perspective and being able to get the right capacity, with the right applications, at the right time. It allows us to manage that in such a way that it’s transparent to our end-users so they don’t notice any of this is going on in the background, and the experience is not different.

It's been a great add for us from a capacity management perspective and being able to get the right capacity, with the right applications, at the right time.

Gardner: I understand that you're at a fairly high level of virtualization. Is that a place where you plan to stay? Are you going to pursue higher levels? Where do you expect to go with that?

Young: I'll give you a little bit of background. We started our virtualized environments about 18 months ago. We went from a very small amount of virtualization to what we coined our Server 2.0 strategy, which was really the combination of commodity-based hardware blades with VMware on that.

And that allowed us last year in the first and second quarter to grow from several hundred VMs to over several thousand, which is where we're at today in the production environment. If you talk about production, development, and test, production is just one of those environments.

It has allowed us to scale that very rapidly without having to add a thousand physical servers. And it has been a tremendous benefit for us in managing our power, space, and cooling in the data center, along with allowing our engineers who are doing the day-to-day work to have a single way to manage it, deploy, and move stuff around even more automatically. They don’t have to mess with that anymore, VMware just takes care of the different products that are part of the VMware Suite.

Gardner: And your confidence, has it risen to the level where you're looking at 70, 80, 90, even more percent of virtualization? How do you expect to end that journey?

Ready for the evolution

Young: I would love to be at 100 percent virtualized. That would be fantastic. I think unfortunately we still have some manufacturers and software vendors -- and we call them vendors, because typically we don’t say partners -- who decide they are not going to support their software running in the virtualized environment. That can create problems, especially when you need to keep some of those systems up 24 x 7, 365, with 99.95 percent availability.

We're hoping that changes, but the goal would be to move as much as we can, because if I take a look at virtualization, we are kind of our internal private cloud. What that’s really doing is getting us ready for the evolution that’s going to happen over the next, 5, 7, or 10 years, where you may have applications and data deployed out in a cloud, a virtual private cloud, public cloud if the security becomes good enough, where you've got to bring all that stuff together.

If you need to have huge amounts of capacity and two applications are not co-located that need to talk back and forth, you've got to be much more efficient on the calls and the communications and make that seamless for the customer.

This is giving us the platform to start learning more and start developing those solutions that don’t need to be collocated in a data center or in one or two data centers, but can really be pushed wherever it makes sense. That could be from wherever the most efficient data center is from a green technology perspective, use the least electricity and cooling power, to alternate energy, to what makes sense at the time of the year.

That is a huge add and a huge win for us in the IT community to be able to start utilizing some of that virtualization and even across physical locations.

It allows us to deploy that stuff within minutes, whereas it used to take engineers manually going to configure each thing separately. That’s been a huge savings.

Gardner: So as you've ramped up on your virtualization, I imagine you have been able to enjoy some benefits from that in terms of capital expense, hardware, and energy. How about in some of the areas around configuration management and policy management. Is there a centralization feature to this that also is paying dividends?

Young: That’s a huge cornerstone of the suite of tools that we've been able to get through VMware is being able to deploy custom solutions and even some of the off-the-shelf solutions on a standard platform, standard operating systems, standard configurations, standard containers for the web, etc. It allows us to deploy that stuff within minutes, whereas it used to take engineers manually going to configure each thing separately. That’s been a huge savings.

The other thing is, once you get the configuration right and you have it automated, you don’t have to worry about people taking some human missteps. Those are going to happen, and you've got to go back and redo something. That elimination of error and the speed at which we can do that is helping. As you expand your server footprints and the number of VMs and servers you have without having to add to your staff, you can actually do more with the same number of or fewer staff.

Gardner: I wonder how you feel about desktop virtualization. Another feature that we've seen in the field in the marketplace is those that make good use of server virtualization are in a better position to then take that a step further and extend it out through PC-over-IP and other approaches to delivering the whole desktop experience. Is that something that you're involved with or experimenting with? How do you feel about that?

Young: This has been going on and off in the IT industry for the past 10-15 years, if you talk about Net PCs and some of the other things. What’s really driven us to take a look at it is that around our environment we can control security on virtual desktops, etc., very clearly, very quickly and deliver that in a great service.

New mobile devices

The other thing that’s leading to this is, not just what we talked about in security, is the plethora of brand new mobile devices -- iPhones, iPads, Android devices, Galaxy. HP has a new device. RIM has a new device. We need to be able to deliver our services in a more ubiquitous manner. The virtual desktop allows us to go ahead and deliver some of those where I don’t need to control the hardware. I just control the interface, which can protect our systems virtually, and it’s really pretty neat.

I was on one of my devices the other day and was able to go in via virtual desktop that was set up to be able to use some of the core systems without having all that stuff loaded on my machine, and that was via the Internet. So it worked out phenomenally well.

Now, there are some issues that you have to do depending on whether you're doing collocation and facility, but you can easily get through some of that with the right virtualization setup and networking.

Gardner: So you have come an awfully long way. You say 18 months ago you were only embarking on virtualization, but now you're already talking about hybrid clouds and mobile enablement and wide area network optimization. How is that you have been able to bite off so much so soon? A lot of people would be intimidated, do more of that crawl-walk-run, with the emphasis on the crawl and walk parts?

Young: Well, I am very fortunate. I might come up with the vision of where we want to go and this is where IT is going, and I am very fortunate to have some very good and phenomenal engineers working on this, working through it, all the issues, all the little challenges that pop up along the way in order to do this.

It’s what our team would say is pretty cool technology, and it gets them excited about doing something new and different as well. I've got a couple of managers -- Tim Pilson, Mitch Mitchell -- and their teams, and some really good people.

So I really have to give credit to the teams that are working with me, my team who gets it done, and VMware for providing such a great product.

Jason Norman is one of the people, and Doug Rowland also has been very involved with getting this rolled out. It’s amazing what a core set of just a few people can do with the right technology, the right attitude, and passion to get it done. I've just been very impressed with their, what we call warrior spirit here at Southwest Airlines -- just not giving up, doing what it takes to get it done, and being able to utilize that with some of the VMware products.

It extends beyond that team. Our development teams use Spring and some other of the VMware products as well. If we run into an issue, it’s just like VMware on the development side of the house and product side of the house is really part of our extended team. They take it, they listen, and they come back with a fix and a patch in literally a day or two, rather than some other vendors with whom you might wait weeks or months and it might never make it to you.

So I really have to give credit to the teams that are working with me, my team who gets it done, and VMware for providing such a great product that the engineers want to use it, can use it, and can understand it, and make huge amounts of progress in a very short period of time.

Gardner: Well, great. It’s a very interesting and compelling story. We've been talking with Southwest Airlines and how they are continuing to innovate and adapt and using IT as a compelling strategic differentiator.

Our guest has been Bob Young, Vice President of Technology and Chief Technology Officer at Southwest Airlines. Thanks so much, Bob.

Young: Well, thank you.

Gardner: I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of VMware-sponsored BriefingsDirect discussions. Thanks again for listening, and come back next time.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: VMware.

Transcript of a BriefingsDirect podcast on how travel giant Southwest Airlines is using virtualization to streamline customer service applications. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

You may also be interested in:

• From VMworld, Cosmetics Giant Revlon Harnesses the Power of Private Cloud to Produce Impressive Savings and Cost Avoidance
• From VMworld, NYSE Euronext on Hybrid Cloud Vision and Strategy Behind the Capital Markets Community Platform Vertical Cloud
• VMware's vSphere 5 Hits the Streets
• VMware Launches a Developer Edition for Cloud Service
• Priming the Private Cloud Pump, HP Releases VirtualSystem for VMware at VMworld

OSU Medical Center Gains Savings and Productivity Wins Through Ariba Cloud Procurement System

Transcript of a BriefingsDirect podcast on how The Ohio State University Medical Center has streamlined their procurement process with cloud-based tools from Ariba.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Today, we present a sponsored podcast discussion on how businesses are using cloud commerce and automated procurement to dramatically improve how they source and manage the buying process.

In doing so, we'll see how they improve cash management and gain an analytical edge to constantly improving these processes. We will examine how The Ohio State University Medical Center (OSUMC) has moved its procurement activities to the cloud and adopted strategic sourcing, dramatically increasing efficiency across the purchases managed. We'll learn more about how a large medical enterprise is conducting its business better through collaborative cloud commerce.

Please join me now in welcoming our guest, Karen Sherrill, Senior Commodity Manager at The Ohio State University Medical Center in Columbus. Welcome to the show, Karen. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Karen Sherrill: Why, thank you.

Gardner: What was wrong before? What did you need to change in how you sourced and procured that led you to adopt more automation and more of these cloud-based services?

Sherrill: The Medical Center is a government agency. So as you can imagine, it’s tied down with a lot of bureaucracy and paper. But as we moved into the year 2010, we were receiving a lot of pressure to do things faster and more efficiently. The only way to do that was some type of technology to allow our current staffing levels to support the needed growth to be able to support our customers faster.

We were processing about 422 bids a year, and that equated to about the same number of contracts. We had only 26 buyers who were able to support the business that was projected to grow significantly with our medical center expansion and the growth of our ambulatory site.

Some of the limitations that we were running up against was that our resources were spending a lot of time providing technical support to the old legacy system. In addition, the legacy system was supporting static documents. So we were posting PDFs, and suppliers were mailing in bids, which was not an efficient way to analyze them on the back-end.

We were manually tracking supplier contract terms, conditions, and modifications, and that was taking a significant amount of time in order to execute the final agreement.

We had no repository for contracts. So when people were seeking agreements, we were looking on shared drives and peoples’ desks and were having to go to external storage. Contracts were expiring. We were not aware of them and not renewing them in a timely fashion.

No framework

In addition, we had counterparts with the university and we weren't able to collaborate with them and have visibility into what bids they were doing and what bids we were doing. So there was no framework to support that type of collaboration that was essential for us to be successful going forward.

Those were some of the limitations and concerns that we were trying to address and we therefore implemented technology in order to help us meet or relieve some of these concerns.

Gardner: When you decided that you were no longer able to scale this effectively, and that your existing processes were breaking down under complexity and load, how did you go about seeking a solution? What were the requirements that you had in mind when you were seeking to improve on this situation?

Sherrill: One of the requirements was that it had to be an automated technology and it had to be easy to use. The provider of the technology would need to provide the technical support, primarily not for the buyers, but for the suppliers, who would be interacting with the system and would need training and guidance to navigate the system in order to submit an effective bid result.

Gardner: Tell me a bit about The Ohio State University Medical Center. For those who aren't familiar, let us know the breadth and depth of the organization there.

Those were some of the limitations and concerns that we were trying to address and we therefore implemented technology in order to help us meet or relieve some of these concerns.

Sherrill: The Ohio State University Medical Center is located in Columbus, Ohio. We consist of five hospitals. The main hospitals are the James Cancer Hospital, the Ohio State University Hospital, the main campus, and then we have Ohio State University Medical Center Hospital East.

We have about 58,000 inpatient admissions and about one million outpatient admissions, and we do about 15,000 inpatient surgeries, about 19,000 outpatient surgeries, and about a 120,137 visits to our emergency department.

We consists of about 450 beds, and that does not include our one million square foot expansion construction project that we currently have underway, and is expected to be completed in fiscal year 2014.

Gardner: So clearly it's a very big and busy place. Are you managing all the procurement for medical supplies and office supplies? What's the extent of the purchasing and buying that you're involved with?

Divided into two sections

Sherrill: We're divided into two sections. I head up the indirect products and services, which means that anything that's non-clinical or not related to a patient's care. So that would be marketing, advertising, linen, landscaping, anything that's not directly related with patient care.

I have a counterpart who handles all the clinical types of purchases, which would be mammography equipment, needles, drug-eluting stents, all the medical type related supplies and services.

Gardner: So there you were just a few years ago, looking at this problem, knowing where you wanted to go, knowing that you needed to automate and outsource a significant portion of this, and with a very big organization that doesn't just stop in order for you to bring in a new system. You need to keep the plane flying while you change the engine, so to speak.

So, Karen, tell us a little bit about how this unfolded. How did the journey begin, and where have you come in just a fairly short amount of time?

Sherrill: Initially they did an RFP for the e-sourcing technology. Ariba was selected. That was done prior to my coming on board, but when I came on board they said, "This is the technology we have selected and you need to implement this."

The first thing for me was to build relationships internally, and I did that by just taking the time to stop, listen to the way they currently did business, and why they did it that way.

As a result, being a new person in the organization, I didn't really know how the organization operated, because I came from the private sector. This was a public sector entity. I was a new person, and no one knew who I was.

The first thing for me was to build relationships internally, and I did that by just taking the time to stop, listen to the way they currently did business, and why they did it that way. Sometimes they may be doing things for a good reason or maybe there was a legal reason. There were other things they were doing because they did it for 50 years, and maybe we didn't need do it that way any longer. So that was the first step.

The second step was that the leadership heads agreed to lay out a significant amount of investment in this particular technology, and my only assignment was to implement it. So we created this analogy that the locomotive is out of the gate. The financial investment had been made. Then you have Karen Sherrill, who is trying to prove something, and my only assignment is to get this implemented.

The rule was that you have three choices: you can get on the locomotive and enjoy the ride, you can step aside and let the train pass you by, or you can try to get in front of the train and stop the progress.

That was the analogy or the vision that we put in place, and they could decide where they wanted to fall. We had individuals who chose three different areas.

Enjoy the ride

Most of them decided to get on the train and enjoy the ride, because they were really itching for change and becoming more efficient. Others were nonbelievers, saying that this is never going to stick, so I am going to let the train pass me by. And there were a few who were afraid of technology changing, afraid of the processes changing, afraid of the shift in power as a result of the processes changing, and they feared visibility. So they tried to stop the train.

Because we had leadership support, whenever we ran across those individuals, we could run it up the chain. We had an endearing term that they would then get the smack down or be smacked back in line so the train can continue on.

We had to do that several times, but in the end we knew what the destination was and the locomotive was going to get there. We were not going to be one of those organizations that bought the technology, and when the subscription expired, we had not had one bid go through the tool.

One of my personal objectives was that a year was not going to go by without one bid going through the tool. One year sounds like a long time, but they didn’t have any processes documented. So we had to step back a few months to document the processes in order to effectively communicate how we wanted this technology to be configured.

But it was not going to take more than a year to get one bid through the tool. Then, when we had the one success, the goal was to build upon that success and continue to get more and more momentum. That’s how we were able to drive this locomotive to conclusion very quickly.

We consciously made the decision not to integrate. There was really no need to do it at this point.

Gardner: It's so important when you're dealing with technology shifts not to underestimate the importance of those people issues and to provide the time for those transitions to take place. So that’s clearly a big deal.

Was there something about the way that the service delivery, the software as a service (SaaS), or cloud delivery helped in that regard? Did people feel like they were getting support? How would you characterize the way that a cloud delivery transition may have affected this people, or behavioral, aspect of things?

Sherrill: One of the key reasons we selected the cloud on-demand version versus something hosted behind our firewall, or even deciding to integrate it with our systems behind our firewall, is that you have to get IT support internally, get their approval, and that would have delayed the implementation of this significantly.

We consciously made the decision not to integrate. There was really no need to do it at this point. And they wanted to see if we would use the technology. Why invest in integrating something that’s never going to be adopted?

So one of the benefits of using the on-demand solution in the cloud is that you don’t have to build that interface behind a firewall and you do not have to use internal resources to implement or execute the system. So that was one benefit to using the cloud solution.

Assisting suppliers

One of the problems we were having was that on the old system buyers were providing suppliers’ technical support, such as suppliers can't remember their email, they got the wrong category, they didn’t get the bid, and the buyers were constantly having to interface with suppliers.

When you go to a technology approach that’s more advanced, they're going to need even more assistance on how to navigate the sites or get their passwords reset. With the on-demand technology we are able to utilize the Ariba help desk. Most of our tickets are supplier based, and within 12 months of implementing there were over 700 tickets issued to the help desk, which were transparent to me and all the buyers.

That's a benefit that is definitely required when you go to a more advanced technology for processing bids. The suppliers are going to be needing more support, but you can't have your resources that are supposed to be focusing on strategic sourcing spending all their time trying to help suppliers to submit a response to a bid.

Gardner: I'd like to hear more about the efficiencies that you've been able to develop with this system and approach, but let's look at the higher-level benefits around strategic sourcing.

Is there something about using the network, Ariba’s Community, their cloud, their Discovery process and services that allowed you to increase the amount of folks that would be interested in doing business with you. Were you able to find additional people when you were seeking them, sort of a matching process I suppose? Was there really a radical or a substantial difference in how you sourced, regardless of how you went about sourcing?

When we transitioned to Discovery, there were about 350,000 suppliers on Discovery. It's grown to over a half-million at this point.

Sherrill: There was an additional benefit from using Ariba Discovery in our legacy system. There were only about 5,000 suppliers. As a public entity we're required to do public notifications of our bid opportunities. With only 5,000 suppliers within our legacy base, the competition could be somewhat limited, because it's only those suppliers who knew about our site and had come there to register to receive our bid notification.

When we transitioned to Discovery, there were about 350,000 suppliers on Discovery. It's grown to over a half-million at this point. So we've substantially increased the number of suppliers that are aware of our bid opportunities.

When you increase the number of suppliers aware of your bid opportunities, the number of suppliers that participate grows or increases. When you have more suppliers participating, you have increased competition, which then lowers pricing. And we found that to be the case on two high profile projects.

One project was related to linen. There was a supplier that we were aware of but we couldn’t find their contact information. We put the public bid notification on Discovery, and the supplier popped up. They participated in our bid.

They didn’t win, but they were strong competition, and the incumbent felt the need to reduce their pricing by about 16 percent, which resulted in a half-million dollar savings in year one and year two of the agreement. So if we didn’t have that strong competition, that saving probably would not have been generated.

Driving down prices

The dynamics that were working there was that you had the incumbent, who if they lost the business, would have a lot of explaining to do, working against the dynamic of a new company who was being told, "Do whatever you have to do to get the business." That dynamic drove the pricing down. So that was one benefit.

On several of our categories, we're just getting a lot more suppliers participating, finding suppliers that can source things that the buyers may not be a subject matter expert in. Because we're joined with the university, they're utilizing the system too, and sometimes they're being asked to source things like hay or dental strips. They're not a subject matter expert in that. Where are they going to find suppliers?

By just putting out a bid notification on Discovery, it makes the buyers who are more of a generalist have the tools necessary to find suppliers that can compete on categories that they're not subject matter experts in, in order to generate the competition to reduce price and get additional value from the supplier base.

Gardner: You mentioned earlier that one of the requirements you had was to automate and create more of a solid data repository, perhaps a system of record, for these sorts of activities. In going to Ariba, have you been able to achieve that, and what has that done that for you? Is there an analytics benefit and an auditing or tracking benefit? How has being able to satisfy that requirement benefited you as a business?

Sherrill: It's allowed us to standardize on the Seven-Step Strategic Sourcing Process, and within that process there are certain documents that have to be completed. We get audited on that documentation being completed. It's basically around, did we follow the public bidding guidelines? Did we do a public bid? Was the lowest and most responsive bidder selected? And what was the documentation, the score sheet, that support that contract award?

When an auditor comes in and they select bids, we can run a report of all the bids that were run during a particular period of time.

Now, when an auditor comes in and they select bids, we can run a report of all the bids that were run during a particular period of time. They can just select the bids that they want, and the buyers can just do a search and pull the documents that were requested.

Before, they had to go to some file cabinet and find the bid number. What if it was misfiled? It allows us to obtain audited documents much more quickly and it also standardized on the process to make sure the documents are completed in order to close the project out. So from a visibility standpoint, that has benefited us.

From the reporting aspect, we also can see how many bids are being run by what people and how many contracts are being executed, so we can get visibility into workload. Someone is doing x number of bids, but their work is not very contract related, versus someone is not doing very many bids, but they are doing a lot of contracts, versus someone who is not doing any bids or any contracts -- and that’s kind of an issue. So we can run a report and keep track of productivity, where we may have to shift projects or resources in order to better support our customers. And we can do that by just running a quick report.

Savings is another big initiative. Everybody wants to know, how much savings you generated over what period of time. We used to have an Excel spreadsheet where people were loading in their projects. A high-level executive would say, "I want to know what the savings were," and there would be this big initiative about going to the spreadsheet to update your savings. Of course only one person could go into the particular spreadsheet at a time, and the accuracy of it was always questionable.

People feel more comfortable

Now we have the technology where people load up their projects and load up their savings. We can run a monthly report that is scheduled. People are required to review their savings numbers on a monthly basis and make any tweaks or adjustments. When we get those requests for savings number, the accuracy of it is a lot higher and people feel more comfortable with it and people can update their savings at the same time.

So if we have to do it on a quick term basis, like in two or three hours, you can say, "Go and update your projects." The source analysts can just pull down that report, and we've got our numbers. That is a beautiful thing as far as visibility into savings, tracking the savings, and building more confidence in the accuracy of the numbers we report.

Gardner: How about the productivity of your buyer workforce there? Obviously, you're doing more things, but are you doing it with the same staff? How are they feeling about the workload? What's the sense of what you can do with your resources there?

Sherrill: Our resources, since we went live, have only increased by one, but we got additional work to go with that. That was medical center expansion project. So the workload has increased and we have had the same number of people.

Before we implemented Ariba, the construction category had a lot of bids, and that particular buyer was getting a lot of complaints that he wasn't turning the bids around faster, or as fast as the end user would like, and the analysis was taking too long. They wanted to see the bid results. They wanted to see it analyzed quickly, and they were escalating these complaints.

We've got them to the point that when the bids come in, they can go in and pull them down themselves and do the analysis and decide who they want to shortlist.

We implemented Ariba. So now he's able to execute his bids faster. Once he loaded one bid up, if another one was similar, he could copy and just tweak, which increased the efficiency on his end.

And because the suppliers were inputting their responses online, it was easier for him to export and do the analysis much quicker, but that particular user base also embraced the technology. We've got them to the point that when the bids come in, they can go in and pull them down themselves and do the analysis and decide who they want to shortlist.

That particular group is much happier. We're not getting any complaints, and the projects are moving off of his plate much faster. In fact, we used to have a lot of projects that were past due, past due, past due. The last report that we did there was something that was just due out in the future. So we're starting to get ahead of our strategic sourcing pipeline.

Gardner: That sounds very impressive. What would you have in terms of suggestions or recommendations for folks who are examining moving to a cloud-based procurement and strategic sourcing service or activity? Do you have any 20/20 hindsight, something that you could offer in terms of what you learned along the way?

Sherrill: The first thing I would recommend, and most companies may have it, is that you need to have your processes documented. When you buy one of these subscriptions, the clock starts ticking. If you have to stop and document your processes, then you're not using the tool, but you are paying for it.

Document your processes

Have your processes documented, so as soon as your subscription starts, you can have the tool configured and you don't have to use eight months, like we had to do, to figure out how we wanted the tool to be configured.

They also need to keep in mind that the technology is just a tool and it requires people, processes, and the technology to be successful. I like to say that you have to have brains behind the tool or it's not going to work for you.

Some of the people here had the skill set to embrace the tool and the utilization of the tool, but we have other people who don't have the correct skill set in order to effectively utilize the tool. That’s kind of a constraint if you don't have the authority to transform your organization and right size it with the people that have the correct skill sets.

Another important implementation is that you've got to have support from the top, who will back you up when someone is trying to put up a wall or be an obstacle to the implementation.

They also need to keep in mind that the technology is just a tool and it requires people, processes, and the technology to be successful.

The way you get the leadership support is having an individual who has built credibility as far as the transformation actually working. The person leading the process needs to have the right skill set, and from what we found, that was a person who had excellent project management skills.

Also key is that they need to be able to do strategic sourcing. You have more credibility, if you're actually using the tool and actually using the processes that you are implementing.

Number three, the person has to have excellent communication and interpersonal skills to deal with those people who don't want to go along with the process, as well as team building skills. If that particular leader has all those skills, it allows the opportunity for them to do sourcing events and lead by example.

One of the things that made Ohio State University’s implementation successful is that my projects were the ones that went through the tool first. I was able to identify any problems and reconcile them immediately, so that the buyers that were putting in their bids behind mine would never run across those problems.

If there were problems that I encountered that I wasn't able to fix, and a buyer identified it, I could say, "I'm aware of that problem, and here is your workaround," so that I didn't get any "aha" or "got you" moment that they were trying to come up with to stop the implementation.

The second component to that is that you need to have early adopters. These were people who wanted to change, who wanted to have their sourcing projects to be the first ones to go to the tool. That was valuable in that, while I as a project leader will say that this is great, I'm going to say it's great, because I am responsible for rolling it out. But I had early adopters who also agree, who are fans, who are vocal about it, and also had successes. That was very instrumental to rolling the project out successfully.

Adding credibility

Then once you've got several of the people who have the credibility of utilizing the tool, who are actually sourcing professionals that are using the tool, it adds credibility, and then everyone else has no choice but to follow along.

The other important thing is that you have to shut down the old way of processing bids. We had a go-live date and we had those individuals that decided to use the old way all the way up until the last date, but when we came to the go-live date, there were no more bids going out the old way. That led to us having 100 percent compliance, since we went live May of 2010. Those would be my recommendations.

Gardner: That’s very good insight. I appreciate that. You've been listening to a sponsored podcast discussion on how businesses are using cloud commerce and automated procurement to dramatically improve how they source and manage the buying process.

The second component to that is that you need to have early adopters.

I want to thank our guest. We've been here with Karen Sherrill, Senior Commodity Manager, The Ohio State University Medical Center in Columbus. Thanks so much, Karen. That was very insightful. I appreciate it.

Sherrill: Thank you for having me.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. As always, thanks for listening and come back next time.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: Ariba.

Transcript of a BriefingsDirect podcast on how The Ohio State University Medical Center has streamlined their procurement process with cloud-based tools from Ariba. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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