The IT Imperative
5 May 2011 Silvio Sperzani
For top-performing organisations to work at peak capacity CIOs need to understand the strategic aims of the business. CEOs, meanwhile, must comprehend IT to ensure that approved projects are in line with corporate strategy as defined in the boardroom. Silvio Sperzani, CIO of Italian energy giant Enel, tells Michael Jones why IT can no longer afford to be a law unto itself.
IT strategy is so fundamental to the performance of large organisations that the relationship between CIO and CEO is now an important enabler for businesses. Only if these two key executives communicate effectively can IT and corporate strategy be closely aligned.
"A close reporting relationship with the CEO is needed to guarantee that corporate strategy is effectively translated into the IT development plan," says Silvio Sperzani, CIO of Enel. "The CEO approves the IT development strategy by analysing it in detail and he follows up on its evolution on a regular basis. Furthermore, the CEO has a very active role in defining and approving all relevant IT projects."
Enel is Italy's largest power company and Europe's second largest listed utility by installed capacity. Active in the production, distribution and sale of power and gas, it has been expanding internationally and is now consolidating its assets and integrating newly acquired businesses. With a presence in 40 countries, Enel has over 95,000MW of net installed capacity and sells power and gas to 61 million customers.
IT is a fundamental part of Enel's business, supporting its operations across four continents in highly regulated markets.
"Enel wants to provide safe, affordable and accessible energy, to grow responsibly while respecting the environment, and to ensure a better future for new generations," says Sperzani. "We consider this a highly progressive perspective. IT contributes to the fulfilment of these objectives by developing a plan that is fully aligned to these principles and which helps us to achieve them."
The goals of the company's IT strategy are twofold: to focus on business support and on continuous improvement. This means developing systems that guarantee adequate support for business processes, as well as rationalising and improving the efficiency of the IT infrastructure. To ensure that the company is on the right track in terms of these goals, and to ensure that IT remains flexible enough to keep pace with the company's growth, there is a process of constant evaluation across the IT infrastructure.
"All key IT projects are monitored on a monthly basis by an independent unit that checks the projects' status – both technical and economic – the emerging risks, and the actions that are being taken to manage these risks," explains Sperzani. "Considering the size and growth of the company, very often we have to make technological choices that will support the business for a certain period of time and that do not allow an easy way out in case of problems. The major challenges we usually face are to select the correct technology that can support our volumes, and to predict scalability for future growth."
Oversight of innovation and efficiency
It is in aligning the IT infrastructure to the present and future needs of the company that the quality of the relationship between CIO and CEO is put to the test. Enel has a strong track record of successful and innovative problem-solving to enable the company to grow in line with corporate strategy, and the understanding between CIO and CEO has played a large part in facilitating this.
The goal is to target selective investment for future growth, while lowering operating costs through efficiency gains. This relies on effective and clear communication not only at the level of senior management, but also down the chain of command into each business line.
"Enel has implemented several innovative solutions that have delivered benefits to all the stakeholders and have improved process efficiency," says Sperzani. "In many cases the specificities of the company have required ad-hoc solutions of which we are very proud. An appropriate and well-structured IT governance process is fundamental. It oversees the technological issues by verifying the obsolescence of the technology in use and by evaluating the introduction of new technologies in terms of functionality and cost-effectiveness across different geographies and business areas.
"In developing and adopting new technologies, Enel not only evaluates the current status of the technology itself, but also makes a sound prediction of future sustainability," he continues. "This is always part of the final decision. A business case is always prepared to support the choice between different technological solutions. Solid preparation is crucial. A solid business case for each initiative, to show that it is self-sustained, is a fundamental first step. The next step is to have all the business owners fully on board and sponsoring the projects."
A proven approach
The validity of this approach is borne out by the way in which the company has handled the acquisitions that have been the bedrock of its expansion. For instance, Enel recently bought Endesa, Spain's leading utility company and the number one private electricity company in Latin America, which also has interests in natural gas and renewable energy.
Integrating a substantial business into the group is a huge task, and one that must not disrupt the operation of existing business lines. In terms of IT, the key is to take the best from each business and link these elements together in a way that supports a sustainable, efficient and more profitable business model. Once again, the close alignment of choices in IT strategy with the wider corporate vision is the vital ingredient to successfully pursuing the integration process.
"In the joint work we are conducting with Endesa the most important challenge is the creation of an information system capable of supporting the business by offering the best global practices in terms of applications and infrastructure," notes Sperzani. "This task is particularly challenging considering that both Enel and Endesa have well developed systems."
The regulatory scenario in the energy sector can evolve and impact significantly on the business. Systems must be ready to react promptly and smoothly.
"As IT, the only answer we can give to prepare for regulatory changes is 'flexibility'," says Sperzani. "Systems must be flexible enough to guarantee quick adaptation to a changing regulatory environment. Systems never are flexible enough, but the adoption of a service-oriented architecture helps speed up the pace of change.
"Furthermore, we see virtualisation and the cloud as two real and concrete opportunities. The first is, in our scenario and understanding, a way to build a more resilient and cost-optimised internal infrastructure. The second, the cloud, is a paradigm to be considered in the perspective of buying services directly by external actors, therefore increasing the flexibility and the time-to-market."
There was a time when many companies might have viewed IT with incomprehension and even, perhaps, suspicion. There was often a dividing wall between the people who understood what the business was trying to achieve and those who understood the technology that could make that vision a reality. Those days are long gone, and Enel is proving that there can be a much better mutual understanding between IT experts and business minds.
For Sperzani, a mutual understanding between IT and its internal users is fundamental and is getting even more crucial given the pervasiveness of IT in our everyday life.
"Today, IT is pervasive in every aspect of our life," he concludes. "Every day we face new requests, from our internal users, to integrate new 'consumer' technologies within the corporate IT system. We think that, in order to guarantee the need of flexibility that our users are asking for, while at the same time avoiding the 'fragmentation' of IT infrastructure, these technologies must be distributed gradually, in a controlled manner, within the company.
"We want to seize every possible opportunity in terms of productivity improvements that these technologies can guarantee but at the same time not to put the integrity of the corporate IT architecture at risk."