A local power failure has left Dr Richard Sykes temporarily without electricity at his home in Islington, London. He is also being photographed to illustrate this article but the double delay in being able to talk to him affords a little time for admiring his collection of modern art and perusing his bookshelves, groaning under the weight of volumes that testify to the interests that have underpinned his career.
There are the books about Japanese business which serve as a reminder of Sykes’s days in that country for ICI, and some on outsourcing, a trend he helped to vindicate in his days in the early 1990s as group vice president of IT at the chemicals giant. There are also many more on general business management by Charles Handy, Peter Drucker, Tom Peters and the like that underline his abiding insistence – common enough now but somewhat rebellious at the time – that IT must align itself with business.
When the photographer’s time is up and Sykes is finally ready to speak, he is, as ever, charming company with a rich fund of anecdotes and wry thoughts on the occasional absurdities of the IT industry, recalling how he returned home from Japan where he had been general manager of ICI Films in Asia, to step into IT for the first time, after 20 years on the commercial side of ICI.
“I got pulled into the IT job in 1993 [at the age of 47] and what had happened at ICI was that IT had grown up in the individual business units in two very different schools,” he says. “In manufacturing it was Digital and on the accounting side they were with IBM. The late John Harvey-Jones [later to become known for the Troubleshooter TV series] had seen this was leading to a tremendous duplication so in 1983, he had created a corporate IT department. What I inherited was a very strong corporate structure of 1,300 people. We had mainframe computing and telecoms, where we had to get leased capacity from European telecoms incumbents and create private networks. That had given ICI a global network and consolidation to a few datacentres with very good economics. The downside was that people had become arrogant and had decided they knew what to do next. The result was they built a £12m datacentre in the north-east of England that closed because there wasn’t the business to justify it. It’s now a library and archive store. IT had become a centralised monopoly power. So management said, ‘Hang on a second, something’s gone wrong here. Come to head office and take over this role.’”
Early on in the job, Sykes realised that there were two distinct views of how well IT was operating at ICI.
“I was taken by my new team to visit IBM, Digital and BT, and everyone said what a great operation we had. Then I met the business unit CEOs at ICI and they said, ‘Line them up – there’s the machine gun. They have this monopoly power and they don’t listen to us.’”
How Sykes fixed the problem through outsourcing and managed his way through the demerger of pharmaceuticals wing Zeneca and the merger with Unilever’s speciality chemicals businesses while reducing core headcount to a team of just 30 has made him a regular on the speaker circuit. He is also an acknowledged expert on how firms should handle outsourcing and on the role of IT in M&A. As well as that hard-won experience, part of Sykes’s appeal lies in his robust, no-nonsense views and willingness to challenge conventional wisdom and standard practices.
He recounts the story of how, in one outsourcing agreement, he did not renew the arrangement after the term of the deal was complete.
Heart of the matter
“I heard that the chief executive [of the outsourcer] was beating up his team on having failed to win the renewal. I invited him to dinner and said that in the three years with us they had changed strategy from being low-cost and fast-moving to having significant overheads and, therefore, they no longer had alignment with what I wanted.
“So I told him, it’s not your team’s fault, it’s your fault. I got a nice letter from him later saying he would never beat up his team in that way again. In outsourcing, a CIO has to have a strong understanding of alignment with partners. If it’s not there, tell them, warn them, debate it and do something about it.”
Sykes also used a good trick when it came to negotiating with an outsourcing partner, drafting in a merger-and-acquisition specialist to help do the deal and dispensing with the usual request-for-information (RFI) element of the process.
“Usually, you did an RFI, got a large number of replies to get a shortlist and then did an RFP – a request for proposal,” he says. “We never once did an RFI but we did our own market research to get down to three or four players. That way, we were more likely to get a strategic fit. Our opening line was ‘We‘ve saved you an RFI and we have a business proposition...’ We always wanted a market-based understanding rather than having the classic situation where the outsourcer shifts and changes and does everything to win the deal because the company they work for has this deal-making culture.”
In some ways, Sykes’s ICI helped create a template for today’s shared-risk/shared-reward arrangements.
“What we always wanted was an outcome-based relationship where you worked as a combination with the same ideas. We always wanted to move away from ‘classic’ outsourcing deals.”
In recent times, of course, outsourcing has changed hugely, thanks to globalisation and the India effect. Is Sykes a fan of offshoring? The answer is mixed.
“The IT outsourcing movement grew up from companies with a very strong technology offer, that slowly learned how to be facilities management operators. What the Indians have done is to come in and leverage world-class talent at a cost base much lower than Europe or the US. They have taken the old model but what they haven’t done is innovate on that model. Some people have taken outsourcing into front-line call-centre work, egged on by the lower cost structure, and have not understood the importance of the culture.”
Despite having left ICI in 1999, Sykes has stayed very much involved in technology and business, having been chairman of outsourcing firm Morgan Chambers between 1999 and 2004, taking up several non-executive positions and business consultation roles, and advising on how technology can best be tapped to address social issues.
His latest incarnation sees Sykes moving over to advise vendors, prompted by what he sees as a seismic change in computing architectures. While notions of cloud computing still divide many industry watchers, Sykes believes that remote, hosted, web-based services have the ability to change the basis of how IT is run and how services are delivered.
“You’ve got one fundamental thing that’s happening at the moment,” he argues. “Over the last 10 years, a bunch of companies like Google have been teaching themselves how to commoditise online services. But in the process they’ve taught themselves how to do the complex, underlying stuff. They have the physical assets [in the form of datacentres and networks], proven reliability and robustness, and people don’t realise how good it is.”
Sykes believes that the opportunity for the likes of Google and Amazon.com is to take that infrastructure and use it to serve applications, or provide a platform for others to hawk their applications and services.
About Richard Sykes
Richard Sykes graduated in Natural Sciences at Cambridge University in 1967, then took a doctorate in Biosynthetic Chemistry from Yale.
In the early 1970s, he worked as an associate of renowned US consumer-rights lawyer Ralph Nader.
In 1973, he began a 26-year career working for chemicals giant ICI. That career included spells in petrochemical exports, purchasing energy, managing an Asia Pacific business unit, and as executive director of ICI Japan. The Japanese period included building a £55m production plant.
In 1992, he returned to the UK to become ICI group vice president for IT. There, he helped IT navigate through the acquisition of Unilever’s speciality chemicals business and the demerger of Zeneca. His strategic outsourcing and downsizing projects saw ICI’s IT team reduce from about 1,300 to a core team of 30.
After leaving ICI in 1999, he became chairman of outsourcing consultancy Morgan Chambers until 2004, and now holds various consulting positions as well as being a regular public speaker.
But doesn’t commoditisation mean that firms lose competitive differentiation? Sykes won’t have any of it.
“There’s this image of commoditisation that it’s bad but if you’re a brilliant retailer you ain’t going to create competitive differentiation with a different infrastructure.
“There’s a very sloppy piece of language in IT called ‘technology drivers’ but technology is the enabler and the driving comes from human involvement. If you’ve got another year of learning ahead of your rival you’ll always be ahead of them.”
OK, so the $64,000 question for CIOs is this: what becomes of the CIO and IT department in a world where offshoring is mature, where remote, hosted, web-based applications are widely available, and where even changes to great big pieces of business logic can be achieved without significant manual intervention?
Sykes’ answer is typically robust. CIOs might become more like COOs or might get another title and the UK might have to accept that pure IT skills need to be sourced from abroad, or that they belong to service providers.
“Younger people in the UK increasingly are not going into universities to do IT [and many regard this as an important problem]. My counter argument is that you need people who are going to be all-rounders. I have a relative who is studying aeronautical engineering at Imperial College, London.
“Do you know where they go when they graduate? The City! They’ve studied how to build aeroplanes but they’re highly numerate, business-literate and instinctively IT-literate. If you do a law degree you don’t get turned out into the world to be a lawyer. You’re a broad player with broad business skills. In the UK, I’m less concerned that we’re not producing pure IT professionals. I’m concerned about making more blended individuals.”