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CHAPTER 2 The IT Communication Triangle-- Solving IT Issues 2.1 The Challenges of Communicating About IT In the last 20 years, IT has emerged from a discipline that is primarily focused on financial and administrative tasks to become a core underpinning of all aspects of airport operations. At the same time, the role of the IT professional has expanded and become highly visible, and the work done by IT staff has become an essential part of most business operations of all sizes and complexity. The growing dependence of airports on their IT infrastructure, applications, and data has caused all organizations to have a vested interest in that infrastructure's reliability and function- ality. Good communications among airport executives, stakeholders, and the IT organization are critical to the successful operation of airports. The three-point relationship between these parties (CEO, executive stakeholder, and CIO) can be described as a triangle of communication, as shown in Figure 2-1. The diagram puts the CEO at the top, in a simplified version of the airport organizational hier- archy. However, the triangle is about communication; it is not an organizational chart. Regard- less of the organizational structure, the triangle of communication remains the same. This chapter examines commonly occurring IT communication challenges among the three parties in the communication triangle. As each challenge is discussed, the chapter provides insight into the problem, identifies why it exists, and offers suggestions for improvement. Table 2-1 sum- marizes the common challenges. It is important to recognize the three distinct executive roles and understand that, especially in smaller airports, the roles may be consolidated and performed by one or two staff members who have competing interests. This chapter facilitates the mutual understanding of each executive's perspective in regard to the fundamental considerations of IT at airports. Each section focuses on one leg of the commu- nications triangle. For each leg, a table of each executive's expectations and perspectives about the other is provided. The associated communication challenges and suggested solutions are then discussed in more detail. 2.2 CEOCIO Communication Setting clear goals, delegating authority with responsibility, and assigning accountability for actions are all appropriate activities between the CEO and CIO. Because IT permeates all depart- ments in an airport, the interaction between CEOs and CIOs is extremely important yet uniquely different from that of other executives who report to the CEO. Table 2-2 portrays perspectives that each of these executives feel it is important for the other to understand. 6
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The IT Communication Triangle--Solving IT Issues 7 Figure 2-1. IT triangle of communication. Table 2-1. Common IT challenges at airports.
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8 Information Technology Systems at AirportsA Primer Table 2-2. CEOCIO perspectives. The perspectives discussed in Table 2-2 lead to common communication challenges between the CEO and CIO. These challenges and suggested solutions are discussed in more detail in the following. 2.2.1 Challenge: IT Systems Have a Short Life Span It is difficult for many disciplines and industries, including IT, to perfectly foresee advances and growth and to project all costs over the near and long term. IT's fast pace and expense can be a source of concern and frustration for airport CEOs and stakeholders. As IT expands throughout airports, it requires a larger share of capital and operational funds, and unlike ter- minal buildings and runways, which have lives measured in decades, many IT systems are effec- tively obsolete in as few as 5 years.
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The IT Communication Triangle--Solving IT Issues 9 Establishing IT systems with longevity presents a significant challenge to airports. Informa- tion technology's very nature involves frequent innovation and change. Over the past two decades, computers and software have become more powerful by orders of magnitude. Network speeds and capacity now extend into ranges over 100 times greater than they were just 10 years ago. Nothing indicates that these increases in performance are slowing down or that the appetite of users for improvement is diminishing. This rate of change causes IT systems to have short life spans, given that users demand new IT features and capabilities on a frequent basis. The problem is how to future-proof the IT investment to the greatest degree possible, such that upgrade and replacement costs, while not eliminated, are at least reduced and managed. Solution: Plan Strategically Airport management is skilled at master planning. Typically, on a regular cycle, the airport staff and planning experts meet to review the existing master plan and revise and adjust it in light of a range of conditions, from traffic forecasts to changes in airline requirements or the need for additional parking. These periodic strategic planning sessions provide executive stakeholders and the CEO with long-term guidance for organizing and funding the capital projects of the air- port. By tying the goals of the IT master plan to those of the airport master plan, the usefulness and longevity of the IT infrastructure can be expanded. Over 50% of CEOs believe that IT goals are not mapped to airport goals, and only 18% indi- cate that an IT master plan is produced. These numbers indicate less than half of the airports are developing an IT master plan, which is a significant problem. An IT master plan does not have to be complex or cumbersome. Its size, scale, and detail will depend on the size of the airport and the airport's need for IT. Regardless, long-term planning for IT is essential and must be performed. When it is performed, it is incumbent on the CIO to normalize that plan to the airport master plan and relay the future vision for IT technology to the CEO and stakeholders. IT master planning includes assessing the existing conditions of all IT systems and highlight- ing systems that are near their end of life or are otherwise unsustainable. A 360-degree analysis of user perceptions of the IT systems and department will identify both technology and manage- ment areas that require attention. By looking outward at the industry, IT can identify technol- ogy trends that may be applicable at the airport. When the research is completed and lessons are extracted, IT projects can be prioritized and organized into a road map that is aligned with the airport master plan. (Although this will not eliminate IT costs and the cycle of innovation, it will help identify economies, ensure that all parties understand the costs and benefits, and allow for more effective planning overall.) CEOs need IT master plans so they can understand what funding the IT department needs and what IT projects are critical to accomplishing the airport master plan. Here is a real-world story from an airport, obtained, as with all of these quotations throughout the primer, through an anonymous survey: We worked with a third-party consulting team to create an IT master plan. This project allowed us to assess our IT needs from a systemic viewpoint and to build out in a sensible manner. Frankly, it also allowed us to curtail some of the more random selections of system software and hardware peripherals, as well. The greatest benefit was the ability to rationalize our purchasing, set out multi-year small sum purchase plans for individual PCs, peripherals, and software upgrades, and to get better control of our various service agreements.
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10 Information Technology Systems at AirportsA Primer As this example suggests, the CIO can use the IT master plan to check the implementation of technology against the airport's needs and to solicit input and ideas from the stakeholder com- munity, helping to ensure that the projects are necessary. These actions help ease the funding of these projects by giving them visibility and support. Once the IT master plan is completed and supported by stakeholders, the CIO can use it as a touchstone for future dialog with the CEO. Important things to remember about IT master plans include: · IT systems change much more rapidly than airports. Therefore, IT master plans will usually become obsolete faster than the airport master plans from which they were derived. IT mas- ter planning should be done at least every 24 to 36 months. · Capital expenditures in IT master plans should be categorized as near-term and long-term. Near-term expenses should be forecast with some accuracy, but long-term expenses will need to be reviewed and adjusted as their planned implementation grows closer. · IT master plans provide an opportunity for the CIO to receive constructive criticism and peer review of the IT master plan, which in turn will improve the plan. 2.2.2 Challenge: Governance Complexities Are Difficult to Manage Many airports are owned by a city, county, or state, most of which have their own CIOs and policies and procedures related to IT. One of the major management challenges that CEOs encounter involves differences of opinion between the airport CIO and the CIO of the owning entity. (This is less true when the airport is an authority.) This situation can cause several different types of conflicts. The owning entity may insist that the airport share in cost pools for networks and for applications, such as financial accounting systems, which are not necessarily the preferred or optimal solutions for the airport. Airports may prefer to have independent control of these assets and may argue that their special nature warrants independent investment. Airport CIOs often feel that their city, county, or state coun- terpart doesn't understand aviation and the unique aspects of the industry. Here is an example directly from an airport: Our biggest problem at the [airport] is when procurements have to be approved by our downtown IT department. Our downtown purchasing department will not approve any computer procurements unless downtown IT has approved the project. Any time downtown gets involved it will delay a project anywhere from 3 to 6 months. Solution: Establish Governance Working Group Governance--who owns the airport and how IT is managed relative to the type of governing body--is an important consideration for IT systems. When the governance is external and causes delays or problems for the airport, two general actions can be pursued: 1. Adapt to the governance structure. The airport CIO needs to be fully aware of the practices and policies of the governing entity and must integrate these into his or her practices, poli- cies, and procedures, which may mean incorporating specific procurement practices or allow- ing added time for external reviews or budgeting. 2. Establish an airport IT working group that includes representatives from both the airport and the governing body. The working group should provide a forum for regular communi- cation, advanced planning, and opportunities to address governance issues and influence the process. An airport IT working group should have a clear charter that includes coordi- nating planning, standardizing specifications and technical requirements, funding, procure- ment, and installing IT systems. The working group should include representatives from IT management, airport stakeholders, budget, procurement, and the governing entity.
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The IT Communication Triangle--Solving IT Issues 11 2.2.3 Challenge: Quality IT Staff Must Be Acquired and Retained Acquiring and retaining the right staff is a difficult challenge for airport CIOs, who must com- pete with other airports and private industry for talented staff with very specialized skills. For example, certified information systems security professionals (CISSPs) are currently in demand across all industries, and airports are often shocked by and unwilling to pay the salaries garnered by these leading-edge technology professionals. Also, IT staff members who have been internally developed within the CIO's organization may be recruited to another organization or may choose to leave for a variety of reasons. Solution: Augment IT Staff Through Outsourcing The CEO must recognize that skilled individuals in the IT department have other opportuni- ties outside of aviation--which is simply the nature of the competitive landscape for IT profes- sionals. Although the cost of some IT professionals may be high, especially in an industry that is particularly sensitive to the current economic downturn, it is important to weigh their skills and value in the overall IT market, not just in the airport community. For example, consider the cost of a data security breach. Credit card companies are currently transferring risk of loss to the merchants whose systems store and transport sensitive credit card information. Liability for an airport whose network exposes credit card information from park- ing transactions is currently about $500,000. Liabilities and/or loss of revenue for delaying air- craft or shutting down piers may carry similar consequential costs that justify the skills offered by IT security professionals. Retaining qualified staff through fair salaries and good working conditions is important, but not always practical. In these cases, or as a response to a variable work load, some airports have turned to outsourcing. Outsourcing technology functions typically makes sense when: · The outsourcer has specialized skills that allow the outsourcer to operate more efficiently than an airport can with its own staff and systems. · The outsourcer has a stable of skilled specialists who can be used when needed but do not have to be carried full time by the airport. If the IT function is outsourced, develop a solid service level agreement, and review tasks and projects routinely with airport management. A weak service level agreement will make life for the CIO very challenging for a long period of time. Outsourcing also gives the airport access to a pool of part-time experts with specialized skill sets, without having to pay for them full time. Figure 2-2 shows how an airport is able to meet staffing demands through outsourcing and only hire when sustained demands warrant it. Figure 2-2. Example of meeting staffing demands through outsourcing.
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12 Information Technology Systems at AirportsA Primer 2.2.4 Challenge: Cost Overruns Must Be Avoided A frequent complaint of CEOs (and CFOs) is that an IT system that had been approved based on a specific capital cost later became much more expensive because of unforeseen issues. The following story provides an example: We funded over $1M to implement a geographic information system (GIS). We hired a consultant, wrote a specification, put it out for bid, and selected the best provider for the task. The project plan from the ven- dor was very thorough and we felt this was going to go well. Two months in, however, we discovered that the room identifications in the floor plans didn't mean the same thing as was expressed in the lease or in the property management system. A third of my staff spent 5 weeks straightening out the mess so that the system would work right. If we actually counted the cost of their time and the impacts to operations, the costs would have been much higher. Instead we just burnt everybody out. Solution: Include Hidden Costs in Budget Estimates IT systems have an extensive set of direct and indirect costs. Direct costs are those that are typ- ically tracked in the financial system, while indirect costs are the hidden costs that exist but aren't easily associated with the system. These costs are frequently overlooked when planning and esti- mating IT systems. As Table 2-3 shows, many of the costs of an IT project, especially indirect costs, are incurred by the stakeholder as well as by IT. Whether planning a project or planning an operational budget, the CIO and stakeholder need to share an honest, mutual understanding of the costs involved. Table 2-3. Cost implications of an IT system.
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The IT Communication Triangle--Solving IT Issues 13 Far too often, projects are presented to the board with only the hardware and software capi- tal costs documented in a vendor quote. Without considering the total picture of direct and indi- rect costs for both operating expenses and capital expenses, the stage is set for cost surprises and cost overruns. Complete planning of projects early in the lifecycle is essential. Experience shows that when teams collaborate that are well-versed in a particular type of project, they will identify external issues, indirect costs, and other items that will influence the final cost of the system. Therefore, many IT professionals and consultants insist on a longer conceptual phase when developing a project's cost. Chapter 5 provides a more detailed discussion of capturing a system's TLC. 2.2.5 Challenge: The Value Proposition of IT Systems Must Be Created One of the trickier parts of the project planning and funding process is valuation of system benefits. Projects are presented for capital funding in a variety of formats and may not include all the evaluation criteria necessary for proper decision making. Some project proposals state the capital costs but omit the operational costs. Others talk about strategic value but fail to clarify any operational cost reductions or revenue gains. For the CEO to make sound investment decisions, the valuation must be realistic and based on clear statements of goals, benefits, and costs, with measurable results. Solution: Develop a Standard Process for Valuation of Capital Requests The solution to this problem is to develop a consistent valuation methodology, which allows side-by-side comparison of projects and a better means of justifying decisions to fund projects. Valuation supports and leads to the development of metrics, provides a useful benchmark for determining if the project has met all of its goals, and helps identify areas where corrective steps need to be taken. Chapter 5 provides a detailed methodology for valuing IT systems and a means of comparison to make informed investment decisions. The result of the methodology is a documented value proposition. The contents of this value proposition should include the following information: · Description of the system. · Benefits statement (justification). · Financial evaluation, including: The total direct capital costs, including expenses for performing the project. Indirect capital costs of labor (both inside and outside the IT department). The net impact to direct and indirect (labor) operating costs, which includes: New operating costs incurred by commissioning a new system. Eliminated or reduced operating costs achieved by decommissioning the old system. Addition and/or reduction of staffing due to the new system. Net revenue generated by the new system. Return on investment (ROI) analysis over a consistent term. · Regulatory compliance achieved. · Intangibles such as: Customer service benefit. Increased security. Increased safety. Improved environmental position.
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14 Information Technology Systems at AirportsA Primer · Risk assessment. Project risks. Risks created by having the system. Risks avoided by having the system. · Proposed project schedule. · Funding sources [Airport Improvement Program (AIP), passenger facility charge (PFC) eli- gibility, etc.]. · Strategic value (alignment with airport or IT master plans). This valuation should be developed by both the CIO and the vested stakeholder organizations. For example, an expansion of the airport will likely require added space, power, and HVAC ser- vices. The CIO must confer with the appropriate parties at the airport to understand the effects this will have on overall operation and costs. Figure 2-3 is a scoring template that captures tangible and intangible benefits and provides a simple, objective scoring system. The template can be used for assessing the relative value of indi- vidual systems or for comparing the investment value of multiple systems. Project Name Sample Project Advocate(s) Name CIO and stakeholder Project Description Describe the project here Expected Benefits Describe benefits here Risks Describe risks here Evaluation Norms Score Weight Nonfinancial Evaluation 2.6 a 1 means: a 3 means: a 5 means: It could become a Imminent danger of Is this a regulatory necessity? Not really problem being shut down 2 25 Does this support the airport master plan? No Somewhat Yes 1 0 Was this in the IT master plan? No Somewhat Yes 2 10 Is there community goodwill to be gained? None Somewhat Lots 1 15 Spends significant Saves significant Is this a green initiative? energy Neutral energy 3 15 Is customer service improved? No Somewhat Yes 4 15 Does it increase airport capacity? It decreases it a little Somewhat Significantly 3 10 May factor into their Significant draw Does it attract air carriers to operate here? Unlikely decision potential 2 10 Will it reduce errors and improve efficiency? No Somewhat Yes 3 10 Will it make the airport safer? Less safe A little safer Much more safe 2 15 Will it make the airport more secure? Less secure A little more secure Much more secure 2 15 All revenue comes Mixed revenue No air carrier revenue Does it diversify revenue sources? from air carriers sources expected 5 10 No effect on Some impact, but it Affects tenants & Will implementation disrupt operations? operations won't be big. operations a lot. 4 10 There is risk, but it is How risky is the project? Very risky manageable No risks 2 10 Financial Evaluation 4.5 Internal rate of return 8.8% Below 3% Around 6% Above 8% 5 50 Net present value $ 9,799 Negative Near zero Positive 4 30 Breakeven point (years) 3.8 Above 5 Around 4 Below 3 4 20 Figure 2-3. System valuation scoring sheet.