Government-owned logistics and transport company Transnet is transforming. Like many government-owned entities, it has to become efficient and customer-friendly, or risk obsolescence. Part of this transformation involves its IT competency, and how it processes and uses information. This is where group CIO Thagaran Govender comes in.
When Govender took over in 2005, Transnet's business units were inclined to make IT purchases based on their own requirements, with little reference to group IT's strategy or plans. This disconnected infrastructure meant it was difficult for management, in particular, to get the information it needed to make decisions, when it needed to make them. There was no standardisation across business units, and this lack of IT governance was a problem.
As well as solving these problems, Govender's task was to cut 30% of Transnet's R1.2 billion IT spend, ie reducing spend to R800 million over a three-year period (2005 to 2008).
In order to achieve this, Govender put a new IT programme in place. This, he says, focused on two areas: cost savings and transformation.
Cost savings have been achieved, so far, in a number of ways.
The renegotiation of licensing deals with several large vendors, including Microsoft and SAP, yielded R50 million in savings in the 2008/2009 financial year.
Working with MTN and other telecoms providers, Transnet saved R26 million in telephone bills in 2006/2007.
Through optimising costs and leveraging internal economies of scale across its divisions, it saved an initial R144 million in 2005/2006, and a further R32 million since.
While some of the savings are once-off, many, like the licensing costs, are cumulative and have continued to yield positive results.
Underlying its entire infrastructure is, of course, Transnet's network. Transnet has 17 000 users. Its network spans 974 sites and is made up of 10 000km or so of fibre, copper, radio, microwave and satellite across southern Africa and the rest of the world.
The organisation runs a number of outsourcing initiatives, the largest of which is its connectivity, which Govender says the company outsources to Neotel. He says it has achieved R60 million in savings there (in 2007/2008), through consolidation and a technology refresh, although its bill is still “a few hundred million rand per year”.
Standardising its desktop equipment, refresh cycles and services generated R15 million in savings in 2007/2008.
“We now buy off a single, multi-product contract with a single provider, which has had great financial benefits, as well as provided ease of management,” he says.
Technology plays an important role in containing cost.
Thagaran Govender, group CIO, Transnet
The organisation runs one of the largest messaging systems in the country, also via an outsource agreement, which takes care of the company's several hundred servers delivering IT services to the aforementioned 17 000 users at over 900 sites, via Active Directory. One of its interventions was the implementation of a unified mail system that saved Transnet R9 million in 2006/2007.
Transnet is busy renegotiating its outsource agreements. Its intention is to save R100 million over a three-year period, which is possible, given the advent of cloud computing and virtualisation, Govender comments.
Adapt or die
Transforming Transnet's IT infrastructure is an ongoing drive to continually get efficiencies. Transnet is implementing enterprise performance management. Part of that is getting its SAP systems in order. In 2006, it had a variety of SAP systems running in six of its operational divisions. It has since implemented a SAP Centre of Excellence and rationalised its SAP processes for financial and HR systems, as well as the technical management of the systems. The idea is to enable efficient supply chain management, something that is critical for a logistics company to get right.
Says Govender: “Today, the data is current, it's relevant, it's readily available, and it has high integrity. It drives virtually all decision-making, and it provides rapid feedback on the correctness of the decision and a much improved information feedback loop.”*
He adds that turnaround time for monthly management reports has dropped from 20 to eight days. “Our aim is to get that down to five days, and even that will be only because the unit heads need that time to add their commentary to the numbers. The credibility of our finance data has by and large been sorted, albeit with great pain and effort.*
“The involvement of business through its business sponsorship of the improvements also plays a vitally important role in ensuring success. Here, the finance function took ownership. Hence the attitude of business towards IT bares direct relevance to its success in any organisation,” he says.
And then there are the organisation's IT governance challenges. These have been addressed through setting up processes, procedures and channels to ensure timeous and accurate information flow between IT and the business units. A measured governance policy has been developed, and implemented by Ernst & Young, which was tasked with implementing best-practice auditing functions and controls.*
“Here, IT's role is to comply and to do so meticulously so that strong credibility can be built with the business community,” notes Govender.
“So there's been a profound cultural shift,” he states. “In the early days, managers would ask, 'What does the system cost?' Then they advanced to, 'What is the return on investment?' Today the question is, 'How will it enable our people and improve our processes?' Cost management is important, but it's all about the impact on process.
“The challenge and the greatest effort still lies in getting business information systems to be used at the forefront of operational decisions,” he adds. “I think this is steadily improving and the greatest benefits will come as people begin to appreciate the positive effects to ICT and systems in their day-to-day jobs.”*
In a recession
Having achieved the savings he set out to, Govender now finds himself managing what is probably the country's largest IT shop - in a recession.
“Technology plays an important role in further containing costs,” he says. “We need to double our efforts until things improve.”
This is also a good time to invest for the upturn, he comments.
“Transnet's strategy of investing for the future makes it complex in terms of doing things in a prioritised fashion.”
Govender is looking at a number of areas. From a BI perspective, “our strategy is to meet the need for accurate information,” he says. This has been elevated by the recent crisis.
“We're looking at enhancing our enterprise performance capability through managing by KPIs. This requires an automated system to make it an efficient process.”
Govender's major headache, however, is the same felt by CIOs and CEOs all over the world.
“The challenge is how do we prioritise what is important, what not so important and what we can defer. It requires constant engagement with the business to determine what its priorities are,” he says. “The better you do with savings, the more airtime you get to discuss these with the CFO, hence saving and spending go hand in hand.”
Central to his plan is Transnet deciding what it can do internally and what needs to be outsourced, providing the expected costs and benefits can be obtained.
“We follow a simple model. Infrastructure services, networking, application development (I didn't think we'd be able to attract the right skills) and the hygiene stuff is outsourced,” he states.
Infrastructure services is the subject of the current negotiations with the preferred bidder for arivia.kom. The network has been outsourced to Neotel. It's the most critical piece of Transnet's infrastructure as it is central to the organisation's survival.
“We predict that as we move more and more into the information age, efficiency in logistics services will be driven by good IT. We need to plan to make the network robust with on-demand capacities so that we can enable the organisation in the next few years,” Govender concludes.
A pretty ambitious goal, from a pretty ambitious man. What makes the above even more impressive is that Govender was only 28 years old when he took on Transnet's IT. Now 32, we'll be watching to see what he decides to tackle next.
* As quoted by Microsoft: http://www.microsoft.com/southafrica/casestudies/auto_trans.mspx
This article was first published in the September issue of ITWeb's Brainstorm magazine
Share