Below is a lightly edited transcript of my first Cloud Wars Live conversation with tech industry veteran Wayne Sadin, recorded in September 2018.
Bob Evans: Our guest today is Wayne Sadin, who has been a CIO, CTO, and CDO at multinationals, ranging down from there to startups. I’ve met Wayne on LinkedIn and Twitter, where he is a very interesting observer on things from digital transformation to the role of the C-suite as it evolves as businesses change and technology changes and engagement changes. We hope to kick around the discussion on some of those topics today.
Wayne Sadin: Hello, Bob, and thank you for having me; it’s a pleasure to be with you today.
BE: Wayne, one of the things I’ve noticed in your writing, and also in a little bit of the discussion we had leading up to this, was how digital transformation and related themes have moved up to become board-level topics. And if I could pick out a couple here, one is cyber-security, and perhaps even in the broader sense, this notion of the disruption that is taking place as all these new technologies pour into the scene and become part of mainstream life for everyone. Could you just share your thoughts about that, from the board-level folks and what they need to be thinking about?
WS: Sure, Bob. As somebody that’s worked with boards and served on boards for going on several decades now, the perception of the value of IT at the board level is changing. IT has moved from the back room to center stage; it’s permeating every facet of every business. Whether it’s customers, employees, partners, the technology itself, it’s becoming a much bigger investment, a much bigger risk. You mentioned cyber-security, that’s a risk that’s well understood and well-known. And it’s also—and what I think is not quite so well known—a big opportunity.
Let me explain. Boards have been focused on cyber-security since the very famous breaches, whether we’re talking Sony or we’re talking Target. These reach the level of board interest and board attention. So we all know about those. But as a CIO for 30 years I want to point out that that’s not the only risk in IT. If you fail when putting in a new system the consequences for the customers and the company can be cataclysmic.
So, as a board, you had better be focused on the broader question: if IT is running every part of your business and dealing with your customers in real-time, what are you as the board doing to oversee the aggregate risk of technology?
BE: Yeah, and Wayne, as you’ve described, these are no longer the days in which most of the board sort of shirks this and says, “Well, we’ve picked the people on the board as our subcommittee, you know, we’ll let them handle this.” This is an across-the-board type of priority.
You can stream this whole conversation on Cloud Wars Live.
Industry veteran Wayne Sadin on “Systems of Engagement”
WS: I agree completely, Bob. For 40-something years, businesses had what we called “systems of record”: human resources, payroll, accounts receivable, accounts payable, ERP. We’ve moved in the last ten years from systems of record to “systems of engagement.” Now IT is in the face of the customer, in the face of the employee. You’re dealing with a screen. You’re dealing with a virtual reality or an augmented reality headset. You’re dealing with Internet of Things, where your car is being driven.
So we can no longer say, “Well, if the IT goes down that will be okay; we’ll live without it.” Because point of fact, if it’s flying your jetliner in the middle of surgery you might not live without it. We have to recognize a new level of risk—but it’s not all bad, because with that new level of risk comes a new level of opportunity. We can now do things with technology we couldn’t do before.
BE: Yeah. And I think, Wayne, as you just phrased that—the opportunity—and also I think it provides more of a sledgehammer to this idea that IT is somehow separate from the business. I’ve always winced when I’ve heard about that: “As you know, our job in IT is to support the business” and blah blah blah. I just think that’s nuts, right? Because that implies that they’re fragmented, they’re separate, and I think what you’ve just described here is: IT is in the face of the customer; it is the backbone of the business today.
Along those lines, Wayne, you had also talked about the impact of culture in IT. So, a couple things. As a leader of an IT organization, a business technology organization, how do you put together the right sort of culture and why is that so important today?
Industry veteran Wayne Sadin on Company Culture and IT
WS: I can’t tell you the number of times that as a new CIO starting at a company the tour started with, “And your IT people are way away from everybody so they’re not bothered.” Or I went to work for one company, they were building a new headquarters and they said, “We’re going to put up the wall right here and we’re going to lock your people in the corner.” And I said to the chairman of the company who was taking me on the tour, “I have a better idea, first of all, don’t put the wall up. Second of all, where’s the coffee room? I want to put IT in front of the coffee room for this building.”
My biggest success with IT culture has been when I’ve co-located IT. In one shop, I took 60-percent of the IT people and put them right in the middle of the business departments. And so the head of marketing, when she looked out her office door she could see her marketing IT team, who were, by the way, picked to be high-energy, creative, quick-moving. Because one thing you have to recognize about IT, it’s not the same across the company. If I’m building a new general ledger system, if I’m building a banking system, a TSB, I’d better be darn careful everything adds up correctly. And if I’m a month late but it adds up correctly I win.
We in IT have to change our thinking. We’re about the business, we have to speak with the business, we have to work with the business. I don’t have to say we have to become the business; that sounds pretty trite. But really, we’ll talk about this as we go, as we’re building powerful tools; they’re called generally low-code/no-code tools. We’re empowering the business to be more IT-ish, and so the IT people should be more business-ish, and we can all meet in the middle.
BE: That’s a great way to put it, Wayne. I’m also of an age or a vintage when, you know, I remember getting started in the business world, you’d hear companies talk about a seven-year plan or a ten-year plan. And, you know, god bless them, at the time that was the right thing to do. But could you imagine companies today thinking in terms of decades?
Today’s environment seems to be constant change, constant adaptation, right? Because companies are putting the customer at the center; the customer’s needs, interests, desires, whims are going to change. So this thing about the pace of business I think is so vital today. The CIOs, CDOs, CTO have got to be almost an inspirational leader. I don’t mean a motivational rah rah type, but you’ve got to have that culture business-first mentality with everybody and get folks thinking in an entirely different way and also at a different speed. Does that seem fair, Wayne?
WS: All of the above, yes. I get a lot of grief from other CIOs because I have written many times that a CIO has to be a sales and marketing person, has to be a motivator, has to be an inspirational leader who can climb up on a chair and talk, has to be able to go on a sales call and close a deal. Even more important, has to be able to go to an angry customer and get yelled at like the salespeople get yelled at. And in fact, as a CIO I want to be doing that, and I make my leadership team answer calls in the call center, or at least listen in. We call on customers, we speak at the trade shows. Why? Because we need to understand what’s happening.
BE: Very well said, Wayne.
Industry veteran Wayne Sadin on IT Spend Moving to the Cloud
I love this piece of research you sent over where you were talking about the total amount of IT spend worldwide, the percent so far that’s in the cloud. It’s just a tiny percentage so far, Wayne—and you were saying, just imagine not very far out into the future, when more of that total IT spend shifts from the traditional model over into the cloud. Talk a little bit about that, Wayne, and what you think the business benefits from that could be.
WS: Yeah, Bob, I think that’s how you and I met, when you were writing about—and I’m doing air quotes—the “obvious” leaders may not be so obvious as this cloud story unfolds. And it resonated with me, and here’s what I think. First of all, the numbers I saw which came out of one of the big research companies said $186 billion was cloud revenue out of $3.7 trillion spend on IT. So if you think about it, we’re 5-percent through that story, and yet people are picking winners. It’s like watching a marathon and they’re one block into the race and you go, “Okay, that’s the winner.”
But let’s talk about who’s on the cloud right now. If you think about it, it’s not a homogenous slice of the whole world. Who moved to the cloud? There were digital natives; people that are startups and the only life they know is in the cloud, and they tend to move at their pace. They’re small, they’re nimble, they’re risk-takers, and they grew up over the last five or ten years with the cloud being part and parcel of their life. But the bulk of IT spending in the world are companies with eight-figure, nine-figure, maybe a ten-figure IT budget. You don’t move a 40-year-old mainframe system that runs billions of transactions a day over to the cloud on a whim. The systems are incredibly complex, they are very old, which creates technical debt questions we might want to talk about. But it means that there’s a tremendous risk.
As a CEO, as a CIO you’re putting yourself at personal risk when you want to take your 30-year-old crown jewels legacy system and move it to the cloud. But at some point the technical debt—and I’ll define that in a second—the technical debt is going to be so heavy, such a millstone around the neck of the company that you’re going to be forced to take action. And so we’re going to force people, maybe not this generation; maybe the next generation that’s more comfortable with that environment, but certainly sooner or later, whether it’s customer pressure, investor pressure, or you get acquired because you’re not moving fast enough, it’s going to force you to take action.
BE: You know, Wayne, as you were saying that I thought about a couple CEOs at some of the biggest tech companies. When Ginni Rometty, the CEO of IBM, talks about the power of incumbency: she’s a big believer in some of these multinational corporations, provided that they’re willing to move along at an appropriately aggressive pace without going too far off the rails of it. When they get that right, to be able to take all of their historic capabilities and knowledge and turn that into a digital organization, that’s going to be extremely powerful.
And the other part is that this has to happen at a certain pace; it’s not something that can just be switched overnight. Larry Ellison, the former CEO, now chairman at Oracle, has said this is going to be what he calls a “decade of coexistence.” So how do companies find that right balance between the cloud, their traditional on-premise systems, and what’s their migration path going forward? That that strategy of how you move, when you move, why you move, and what the outcomes of that is going to be a big determinant of who are going to be the big winners in various industries.
Industry veteran Wayne Sadin on Digital Transformation Journeys
WS: Well, that’s quite a question. The notion of incumbency is interesting. I’ve been an IBM customer, like literally since I was in high school. When I went to high school in New York we had one of the first computers in New York City. And so I literally went down to 59 Maiden Lane as a high school student and picked up an IBM computer.
I’m old enough to remember the transition to MBS, to EB2, you know, things like that. Wrenching transitions, not only within the companies using this technology, but IBM itself. And here they are again, trying to remake themselves on cloud, on the promise of Watson and AI, on new technology. Kudos to them; they’ve had a rocky bunch of quarters. They’re getting bad press on Watson, which is so undeserved.
But still, they are doing something that they need to do. And here’s what I mean: when you try to do a digital transformation, you’ve got to start at the top. So let’s go back to the board for a minute. We talked about all this risk, whether it’s cyber or other IT risk, but let’s talk about the opportunity side. The opportunity to transform your company requires the board and the CEO to be engaged. It’s about culture. It’s about changing the company to say, “Whatever we had before isn’t necessarily good.” It’s not always bad, but it’s not necessarily good just because it got us there. We’ve got to make the change. So that’s number one.
And as a footnote, when companies that are not tech companies, end-users of this tech have to do the same change, they’re missing an element in many cases. They’re missing somebody on the board who has that technical background. If you’re an IBM or an Oracle or a Microsoft you have the tech background, of course. If you’re not, if you’re a bank or a transportation company, hospitality company, how do you get that skill and have it available to the board at all times? My argument is boards should be out shopping for former CIOs, chief digital officers, maybe a CSO if they’re in the security realty business, but adding a qualified technology expert (QTE) to the board.
Now that you’ve got the will and the commitment at the executive level you’ve got to be figuring out what you want to be at the end of this. What are we going to be next week? What are we going to be next year? Where are our customers taking us? So that’s the challenge—and that’s where the CIO has to get involved. What are our capabilities? Okay, the board wants to do X, now what are we able to do?
Because we can’t just assume we can do anything we want by waving our magic wand or even writing a check. If the IT organization is still mired in legacy speed and everything goes through 14 committees and has 700-page spec written and the architecture committee meets twice a year, you’re going to have a problem. You’re going to solve it either by dumping the IT department and going outside, or by rebuilding the IT department. They’re both acceptable strategies if you’re the CEO. As a CIO I know which one I prefer.
So what does IT have to do now to get ready? IT has got to get away from the traditional waterfall model. We’ve got to move to an environment that involves agile, dev ops, cloud, and low-code/no-code; the four pillars that make an IT transformation.
And then: how do we automate the process? So we make a decision to make a change, the change gets tested and goes in, as close to instantaneously as possible. We don’t want to sacrifice quality for features or features for time. And so that’s the big culture change in IT.
BE: Wayne, thank you for the perspectives on a range of things. These incredibly powerful, highly transformative, and truly customer-centric types of technologies, they’re no longer just a province of the biggest guys.
That’s one of those things that I think is so intriguing about today’s business environment, because this constant innovation is often driven by these smaller companies, the disruptive ones coming up from underneath. I think sometimes we forget that digital transformation isn’t something you’re just dropped out of the sky; companies are going through this digital transformation because there’s a couple billion people around the world that are eager to live more increasingly digital or digitally enhanced lifestyles. So this is not a fad, right? And for companies both big and small, they’ve got to have these tools. And as you’ve said, the cloud really seems to be the ideal platform for delivering that.
WS: You’re absolutely right. It works like this: now, if I’m a big company, I’m at a disadvantage because my bureaucracy, my size, my need to protect my install base is a problem; I’m dragging that along with me and the newcomers don’t have to deal with that. They may want to have a conversion, an onramp to the new way of doing it, but they don’t have to serve the customer that I’ve served for 30 years or 50 years.
Industry veteran Wayne Sadin on Technical Debt
I also want to come back to technical debt for a minute, because I think it’s a serious issue and boards need to understand it and don’t. When I build systems or when I buy systems, I’ve made an investment upfront in that capability. People think “My computer turns on in the morning, therefore it’s fine.” Well, if you’re running a ten-year-old machine running Windows XP, even though it turns on in the morning and still opens a browser window, you as a board member are not fine. Because there’s no longer any security patches, there’s no longer any updates being done.
When you look at technical debt and you see that an airline or a hospital has been down for a day or two, because they usually say “electrical panel,” that’s in my view nonsense. The electrical panel might’ve been the precipitating event, but there was something in the brittleness of their software and hardware that meant that fixing it took an inordinately long time. And so as a board an important question to ask your technical people is “What is our technical debt?” If I’m putting in the Oracle product or the SAP product I want to pick an any vendor, and I don’t do the maintenance to it and I’m ten years behind and maybe at the same time I’ve had my IT staff customize the heck out of it; now I’ve got $200 million worth of customization and I’m eight releases behind on my ERP, and now the board comes and says, “We need this new customer-facing capability to meet our competition. I need that added.” And you go to them, “Well, it’s going to be a $500 million project because I need to rehang the ERP.”
BE: Yeah, Wayne, so often it’s one of those things like, the board says, “Well, we don’t have $500 million.” Okay then, what’s the alternative? You ride that slow spiral into irrelevance.
What you’ve really done here today, very nicely, is raised a lot of flags for people to think about. Good enough in today’s economy isn’t going to be good enough unless you’ve got the customer at the center of everything you’re doing, which is at the heart of so many digital transformation strategies. It’s just not going to cut it.
Wayne, is there any particular topic you wanted to take a last shot at here?
Industry veteran Wayne Sadin on the Importance of Getting the Right CIO
WS: I do. I want to send a message to CEOs and boards. The message is a company gets the IT they settle for, the CIO they settle for. And if your CIO is not able to have this conversation with people on the board, with customers, with the media, with analysts, within investors, you’ve got the wrong CIO. And if your CIO is not at the same time versed in finance, able to keep up with the disruptive technology, able to sell an idea, able to listen to the team, able to go represent the company, you’ve made a bad choice and you no longer can get away with having inadequate IT departments and inadequate IT leaders in a world that’s being disrupted and a world that needs transformation. So that’s not on the CIO; they’re doing the job you probably hired them and trained them to do. It’s on the CEO and on the board, who has to have the right people in the right chairs.
BE: Great thoughts, Wayne. Thanks very much. That’s a really good high-level view and I’m glad you addressed that to CEOs. I’m always puzzled when companies have someone other than the CEO leading the digital transformation effort. The CEO can’t do all the actual work, but it’s got to be in every case the CEO that leads these things; they’re just too big, too vital, too sweeping and too disruptive for the CEO not to be in that chair on it.
WS: It’s my pleasure, Bob. I do want to mention my opinion about the CEO and digital transformation. If your CEO is not leading the digital transformation, you can call it whatever you want, but it’s not a digital transformation. Especially if your CIO is leading it. A digital transformation starts with culture, products, markets, customer experience, employee experience and so on—and then leads to what can we do with technology. If we are just, what they say, paving the cow path, I refer to it as better/faster/cheaper; if all we’re doing is better/faster/cheaper, we are doing digital optimization.
BE: No doubt, Wayne. That’s a critical point. Wayne, again, it’s been a great conversation and thanks a million for your time and great insights.