Pim Berger and Arthur van Schendel from IT company Schuberg Philis were declared crazy for their business model, which puts their best people in the front row. Now they are enjoying the fruits of it. ‘Getting continuity under control is great, but immediately afterwards the next step follows.'
Original article in Management Scope 8-2017. Read the full original text in Dutch in the PDF-viewer below.
Text: Erik Bouwer, interview by Bart Sweerman (AT Kearney). Photography: Mark van den Brink.
We buy stuff in digital shops, our money is digital, and we communicate digitally. And our music, photos, books, and newspapers are already mainly digital. We even navigate digitally. Hardware, software, and data have permeated all facets of our lives. Behind all these digital services and products there are long chains of processes and companies, among which IT service providers play an important role. All data and applications are stored somewhere in a data center. That is also the place where different applications communicate with each other. Nowadays the IT landscape is complex and full of mutual dependencies. This makes it difficult to recognize and manage the real risks, but also difficult to keep companies agile. IT gets its own pyramid of Maslow: at the base are functionality and security, but higher up the ladder are reliability, scalability, and agility.
Bart Sweeren (responsible for the digital practice of A.T. Kearney in the Benelux) talks with Pim Berger (one of the founders and Managing Director) and Arthur van Schendel (Customer Director) of IT company Schuberg Philis, a new partner of Management Scope. Schuberg Philis is not a run-of-the-mill IT service provider. Their management model, which is based on autonomous customer teams, has drawn the attention of Harvard Business School. When you visit them, you are confronted by extensive security procedures, but also by a top chef who prepares meals for 250 people each day.
Schuberg Philis has been around for 15 years. How did it all start?
Pim Berger: “We started out as a management buyout at the time that classical outsourcing was all the rage. The company was born from dissatisfaction with the way service provision related to the way mission-critical IT was organized. At the time I worked for Pink Roccade, which carried out large-scale outsourcing projects. The large IT service providers mainly delivered generic IT services – for example managing workstations, LAN and WAN environments. These IT companies were set up based on competences: silos specialized in databases, workstations, or Windows.”
Arthur van Schendel: “Customers who had questions or problems could contact a firs, a second, and then a third support line. But they only came into contact with the best and most expensive experts in the final instance: the experts were not readily available. Whenever something related to company-critical processes went wrong, this type of service provision was not fast or effective enough. Even when every department complied with the agreed service level agreements, things often went really wrong in the third line, where expertise and knowledge were organized in separate silos. That created extra delay, especially when complex problems needed to be resolved.”
Berger: “When something went wrong in a mission-critical IT environment, the best people were brought from those separate silo-based centers of competence and put together in a room, saying: we won’t leave this room until the problem is solved. Bringing those disciplines together meant that the experts began to think in terms of chains. That is of course the best approach; our greatest mistake then was that, after finding the solution, we let everyone return to their own silo.”
When you established Schuberg Philis you chose a different approach. You now generate an annual turnover of €50 million. What did you do differently?
Berger: “From the start, Schuberg Philis chose to focus strongly on ‘mission-critical IT’. We adopted the crisis model, whereby multidisciplinary teams cooperate to solve complex IT problems. We were indeed seen as crazy with our business model, in which we put the best people in the front line. We have built up our reputation as a service provider by guaranteeing 100 per cent reliability in company-critical IT environments, something that’s of great value for companies. With the emergence of cloud computing, however, a high degree of availability has become more self-evident and the concept ‘mission-critical’ has also changed its meaning. If a certain process causes sleepless nights for members of the board, that process is company-critical. In e-commerce these are often customer-facing processes – for example a webshop that must always be in the air and needs to respond quickly. At a retail bank 24/7 availability of a platform through which money can be transferred is crucial, something that in the early days of online banking certainly wasn’t always the case. But, when a bank now introduces a new service, that’s a company-critical process. In the medical sector there may be few ‘customer’ contacts, but there, for example, the security of stored DNA profiles is ‘mission-critical’.
Do organizations have a good idea which parts of their business are mission-critical?
Van Schendel: “We make risk analyses together with our customers: what are company-critical processes? What would be a disaster if it went wrong? For many companies it doesn’t matter if a website is down for an hour at night. But during lunchtime it’s a different story. You can calculate what the consequences would be if customers then leave in droves. It’s even worse if a logistics process fails, so that your customers don’t receive their orders the next day: this will result in serious damage to your reputation. There are also less obvious risks. An online retailer will soon be out of business if its image databases with product photos full of meta-data crash. When half an hour’s delay in the departure of a container ship costs €60,000, because a printer fails to produce an essential document, then that printer is for the duration mission-critical. If such a situation regularly arises, it will affect the bottom line of your company process and the Board of Management will start to ask questions, even if the printer is only down for five minutes a day.”
Berger: “From the start, Schuberg Philis has focused on complete chains. This has become more and more relevant, for example through the digital transformations which companies are now undergoing. The IT landscape of companies has become much more complex in recent years: there are more applications, but also more parties involved, such as suppliers and integrators. There are more determinants, which are often outside your own chain. Ensuring business continuity allows you to sleep well at night and that’s great, but immediately afterwards comes the next step: now we must also contribute to the acceleration of companies. Control is often associated with ‘slow’ processes that must be predictable and manageable; you can at most change things twice a year. That’s very different from continually delivering new business functionality. To ensure that you both remain in control and can innovate rapidly, your IT landscape must meet certain criteria.”
Digital transformation is not a project, but a continuous process. Does that make it interesting for companies to manage company-critical IT themselves again?
Berger: “No, on the contrary. I think that company-critical environments will more and more often be handled by specialists. The so-called non-functional aspects, such as compliance and security, are becoming increasingly important and are often seriously underestimated. In addition the IT landscape is gradually changing into an ecosystem of all kinds of parties: software developers, SaaS providers, startups that become fintech providers, and various cloud services. This means that cooperation becomes an important prerequisite for success.”
In a situation with so many determinants can you really guarantee 100 per cent availability?
Van Schendel: “That’s a good question. If 99.9 per cent availability is guaranteed in a thick service level agreement document, a lot of attention will be paid to describing what will not be covered if something goes wrong. And which problems are precisely not the responsibility of the IT service provider. This kind of behavior by IT service providers has played a big role in creating customer dissatisfaction with the way they operate. This is the context in which we have positioned our statement of 100 per cent availability. Schuberg still takes complete responsibility for IT. You can always say ‘if software is not in my data center, that’s not my problem’, but then you end up with the same problem as 15 years ago: no-one is responsible.”
Year in, year out you score high in the benchmark study that market research institute Giarte publishes annually on customer satisfaction among organizations that outsource their IT. What’s the reason for this success and what still needs to be improved?
Van Schendel: “Top of the list is the way we organize ourselves, whereby teams are responsible for customers. There are no managers, no sales staff, and no directors. The teams adopt a customer, take responsibility from beginning to end and feel closely connected to that customer.”
Berger: “When customers talk to someone from their team, the team gets started right away. Communication does not first take place at a higher level and then trickle down. The team creates its own commitments and has a broad mandate. A high degree of customer satisfaction – let’s say eight out of ten or more – ensures that you can focus 100 per cent on tomorrow and the day after. When there is low customer satisfaction, you have to focus primarily on today. Digital transformation is about the future, about trying out new things, and you can only do that if you trust each other. In Giarte’s benchmark the satisfaction of outsourcers is increasingly linked to the quality of the relationship with the service provider, instead of the ‘recommendations’ it makes. Perhaps we will ultimately arrive at an assessment of the service provider by all of the partners in the total ecosystem.”
Van Schendel: “Our teams must also cooperate with more and different partners and parties. Important here is that our teams often have a broad mandate, while in the agile teams on the customer side that’s not always the case. This is an area where our teams need to collaborate even more. And, as already mentioned, Schuberg Philis has always focused on the non-functional aspects of technology: reliability, security, and compliancy. That is not always easy to explain to customers, where the business is keen to get going with minimal viable products, prototypes and faster pilots. If you don’t already think about security-by-design today, the maintainability of software or future audits, you will be creating tomorrow’s roadblocks.”
Many companies struggle with two-speed IT: IT must be reliable and secure, but it must also help the business with rapid execution of change and renewal strategies. Strategy and technology become more and more closely intertwined. Who is your counterpart: the CIO of the CEO?
Van Schendel: “We work for companies such as Air France-KLM, Rabobank in Ireland and Australia, and MoneYou in Germany. Our customers are all in their own way busy with a digital transformation, which often involves mission-critical applications. Our specialists mainly add value to environments in which change is an important component. We don’t engage with customers where the static character of the business regularly dominates; otherwise we won’t keep our engineers. If the issue is change and renewal, we also find ourselves more and more often sitting down with the COO; after all, he or she is responsible for the core of the business. As far as we’re concerned, there is also a task here for the CIO: forget all your own plans; focus first of all completely on the business.”
Berger: “For years companies have worked with fixed budgets for long-term, complex IT projects. If the CIO wants to encourage IT teams to engage in pilots and experiments with the risk of failure, then it’s important that financial governance is adapted to that movement. At the same time you need to find relevant incentives for the partners in the ecosystem. The classical hourly model is still preferred and it encourages setting up and closing down teams, depending on what’s needed in the short term. That seems to be logical with project-driven innovation, but agile teams need time and space to get going and become productive. We often see that agile teams that have not delivered anything after a month tend to fall back into old behavior patterns where they revert to planning and project managers. But you don’t build fast, responsive teams in two or three months. Another crucial role for the CIO is to ensure there is healthy cooperation and coordination between the business and IT. To get the most out of applications and data, the business and IT must have a shared vision and short lines of communication if priorities change. The work of today’s CIO is more about listening and organizing that about technology.”
Finally – where does the name Schuberg Philis come from?
Berger: “When we were established 15 years ago, we were looking for a name that would meet various criteria. The name should stand out in a long list with competitors such as Pink Roccade, Capgemini and Atos Origin – we wanted major companies as customers. So we didn’t just want the surnames of the founders in a row, but were looking for a name that would be appealing to an international audience and one that would last. It had to have the ring of the quality and reliability of a Swiss timepiece combined with the image of a chic law office in New York. Going completely against the grain of the assignment, the agency came up with a name that took parts of the names of the three founders and combined them in a clever way to create the final company name.”