Keeping technology initiatives aligned with business direction is a challenge facing every company, but the larger the company, the bigger the challenge. As a global corporation with multiple subsidiaries, UPS has faced the challenge and fashioned an award-winning IT organization consistently aligned with the company’s core business strategy.

How did UPS do it? And more importantly, how does the global, multi-billion dollar enterprise continue to ensure its technology investments stay aligned with its business direction?

Setting the Stage for Alignment
The answers to these questions are rooted in UPS’s team-oriented culture and recent history. Between 1986 and 1996, UPS developed IT organization structures and processes to complement the company’s robust technology infrastructure.

Initially, an executive steering committee consisting of four cross-functional, senior-level executives set strategic direction for IT, establishing priorities and funding levels. This team met regularly during the late 1980s and early 1990s while UPS’s IT capability was built. By 2001, the committee transitioned to an overseer role, providing input on the company’s long-term technology strategy.

As the executive steering committee became less active in IT governance, it was replaced with the Information and Technology Strategy Committee (ITSC) composed of 15 senior managers from all functional areas within the company. ITSC was chartered with studying the impacts and application of new technologies and understanding near-term technology direction.

By the late 1990s, management found that most systems requests had cross-functional implications. Management also worked to leverage U.S.-based systems internationally. The international business had traditionally been independent from the domestic business, leading to redundant technology efforts. Management relied on four core processes to align IT projects with strategic objectives to eliminate such duplicative efforts and support cross-functionality:

• Customer Information Management (CIM) - systems that interfaced directly with the customer (e.g., tracking/shipping systems, Web-based systems, EDI)
• Package Management - pickup, delivery, sort and transport of packages (i.e., core operations)
• Product Management - identification, design, development and marketing of new cross-functional services
• Customer Relationship Management (CRM) - systems supporting internal units for servicing customers and supporting the sales of new services (e.g., sales force automation, call centers)

A cross-functional committee has approval and oversight on all project and programs while a senior executive heads them, and an IT owner helps prioritize needs and resource requirements across functions.

Projects are prioritized based on the strength of their business cases (e.g., service to UPS customers) and financial metrics (e.g., return on investment, net present value), but non-financial metrics are also considered so that non-core projects can be given adequate resources. For example, the CRM process team emphasized the importance of international projects by giving them higher priority, even if domestic projects were more financially attractive. Why? International business was (and is) of strategic importance to the company’s growth.

The CIM team plays an important role in project prioritization. CIM and other process teams rationalize proposals to a common set of projects across all IT systems by:

1. understanding business requirements for proposed initiatives,
2. estimating required budget, staff resources, and time to complete.

Self-governance is Critical to Alignment
In the late 1990s and into the new millennium, then CIO, Ken Lacy, continued to work toward the vision of an IT organization totally aligned with the business direction of the company. Lacy realized that self-governance was critical to realizing this goal. While top-down direction was necessary, Lacy wisely understood that the move from isolated “technical wizard” to involved “problem-solving partner” required self direction.

To that end, Lacy formed an IT Governance Committee to oversee day-to-day IT operations. In addition to formalizing the project prioritization and budgeting processes, IT established standards and designed the architecture - policing itself to ensure that all work was in tune with business requirements and direction.

Composed of the CIO and senior IT managers, the IT Governance Committee more closely aligns IT to the business, establishing stringent management processes and enforcing technology standards and processes. The committee has oversight into all key IT decisions and provides a forum to raise critical issues.

Aligning Acquired Subsidiaries
The merger and acquisition process carries its own unique challenges. The task of aligning a culturally disparate IT organization with the core organization in order to leverage resources and buying power is no simple task. UPS faced this challenge in 2001 with the acquisition of Mail Boxes, Etc.® (Note: Some MBE franchisees have opted to take on the UPS brand and are now known as The UPS Store™.)

One of the greatest advantages in any merger or acquisition is the opportunity to leverage synergies between the two organizations. The acquisition of MBE by UPS enables MBE to leverage UPS’s technical subject matter experts, IT standards, strategic technology partners as well as the company’s procurement processes, driving additional value into the technology equation and increasing speed to market for business applications.

The first step in aligning MBE’s IT infrastructure was to focus on people and organization. The MBE IT organization was realigned to better serve the needs of the business. While the MBE IT organizational structure was being honed, processes were developed to allow MBE the ability to leverage the core IT staff (now more than 4,500 strong) to help support the critical initiatives that lay ahead.

In order to improve the quality of technology support and reduce total cost of ownership, MBE technology support was migrated from MBE to UPS TeleServices, a subsidiary that provides help desk support. Additionally, the core UPS field support staff (composed of almost 2,000 technicians) has now been commissioned to provide on-site support at MBE centers in the United States.

In addition, UPS engaged more than 200 telecommunications providers and deployed a virtual private network that allows DSL, ISDN, cable, satellite and dial-up access to be available to MBE franchisees, depending on local market conditions. The solution was architected and deployed within six months from the day the acquisition closed, an achievement made possible by the strength of UPS’s core IT organization.

UPS brought its “best practices” to the MBE IT organization, particularly in the areas of quality assurance, software engineering and hardware/software certifications. In addition, MBE now functions under a rigid systems development life cycle to ensure that technology is deployed only when it meets the highest of quality standards, thus minimizing the introduction of defects and service failures.

Staying Aligned
Once the structure and processes are in place, keeping IT aligned with business initiatives is as much a factor of corporate culture as it is consistent management.

Since its inception in 1907, UPS’s culture has been one of team work, accountability and respect, all fostered by the primary ownership of company stock by employees and managers. IT professionals at UPS are making decisions not only for their employer, but for a company in which they are part owners.

• Donna Barrett
  UPS Public Relations
  donnabarrett@ups.com
  404-828-4763