Octo Telematics- Introduction

•Set up in 2002
•Large telematics provider specialized in the provision of telematics services and systems for the insurance and automotive
market

•New and profitable customer value proposition for insurers based on customer’s driving and risk profiles
•Pilot program for its first 2500 OBU (On Board Unit) in 2003
•Basis of value-adding analytics: tried to align the information architecture and services to its stakeholder needs
•Technology is at the heart of a new ecosystem of services, resources, data and stakeholders
•Octo: the systems integrator played the role of market facilitator and enabler
•Octo has had to reshape the organization and the link between the IT function and the business
•In 2002, IT was almost the entire business
•Today, IT is seen more as a provider of specialized technology
•IT separate from business
•CIO as technical expert
•The case describes the continuous attempt of CIO to forge a dual identity: IT function as strategic partner of business and the
CIO as business problem solver
•Challenges faced by the CIO and the organisation in designing a new IT governance model.
 Governing the alignment of business
Alignment: Performance

and IT:
❏ Strategic fit - Strategy <-> Infrastructure
❏ Functional integration – Business <-> IT
❏ IT and business alignment, ranked 2nd of all
Performance is combination between the typology of
decisions and models of governance.

Five major IT decisions:

issues
1. IT principles
Dynamic equilibrium: strategy, technology,
organization architecture, processes and skills 2. IT architecture

Enabler of Alignment: 3. IT infrastructure strategies

1. Senior executive support for IT
4. Business application needs
2. IT involved in strategy development
5. IT investment and prioritization
3. IT understands the business
Performance measures:
4. Business/IT partnership
1. Asset utilization
5. Well-prioritized IT projects
2. Profit
6. IT demonstrates leadership
3. Revenue growth
Octo Telematics: Company background:
Founded: 2002 (started in 2003)
Founders: Fabio Sbianchi and Giuseppe Zuco, current CEO and CIO respectively.
Pilot program-
•To install telematic devices in Unipol’s customer vehicles.
•Designing specific insurance policy (Unibox) for telematics users.
•Bringing new customer segments
● Octo Telematics was considered -
1. ‘a machine to make money’ by the financial press with EBITDA- 50% and growth rate- 25%+.
2. ‘a leader on profits’- Value of the company: Rise of 500% in 4 years.

● Managers managed- investments, costs and revenues, assuring high margins and dividends to investors.
● Second phase of the program (2008): Value proposition based on 3 services
● E-call and tele-diagnosis system
● 10 years journey of Octo
The infrastructure and services:

Infrastructure:
•OBU (On Board Unit) collects specific driving data and transmits them to a server for further processing.
•The data flows into the data exchange repository.
•Exchange via web.

Advantages of Smart Services:

•These newer ‘Smart Services’ create an open communication channel with the customer.
•Ongoing interaction established by different communications technologies.
•Smart services- to enrich an existing/new telematic offering, or as a starting point for potential/existing insurance clients
The organization and IT dilemmas
● Octo was very centralized.
● The establishment of international branches and the arrival of new investors led to a restructuring of the company
● A new challenge came up with the need for responding to More departments-Finance, Sales and Operations
● CIO’s role changed from being a strategic partner to an internal (technical) provider.
● CIO as an ‘IT Monarchy’ within Octo.
● Giuseppe and his team were considered by internal colleagues to be reactive.
● He was beset by a huge series of issues. They are
• Rework was about 30%
• Lack of time to analyse recurring issues
• Frequent downtime caused by uncoordinated releases or changes
• High level of workarounds
● Lack of planning for roll-out
• High number of problem tickets per day
• Long response times to fix problem tickets (sometimes months!)
• No formal escalation path for problem tickets;
• Overbooking of human resources
● He realized that Octo’s people and roles were not connected to company processes.
● All this meant that Octo has insufficient awareness about the financial and economic impacts of decisions on projects,
delivery and management overall.
● Giuseppe wanted a change and said: “We have to work on services vs technology, on quality vs costs, on proactivity vs
reactivity … I need to rethink IT and I have to integrate my work with corporate operations and sales, through a new
governance structure”.
Getting aligned through the new
governance approach
From the end of 2009 through 2013, a wobbly alignment process was observed. This could be explained in two distinct
stages-
1. ‘IT Monarchy’ to ‘Duopoly’
2. Disintegration back to the Business Monarchy

During these stages, Octo implemented some governance alternatives to reduce the gap between IT and the business, but each
time something went wrong.
Stage 1: from ‘IT Monarchy’ to ‘Duopoly’
First step – transparency
● Giuseppe wanted to institutionalize arrangements with the two key business units: Operations on post-sales support and
day-to-day quality of services; and Sales about requirements setting and projects planning.
● This was important as it help reduce the re-work rate, prioritize projects, optimize projects profitability with a stronger
cost control and make infrastructure change management more effective.
● IT department consisted of a development team, a testing and operations team, a unit focused on the OBU devices, and a
group specialized on SAP
● Giuseppe introduced two new functions and a new process-Program & Service Management and Demand Management
function and the Incident Management (IM) process [Bridge].
● Scope of Demand management include-
1. The collection and integration of business needs from organizational clients
2. Formalization of new IT initiatives
3. Definition of areas of evolution and transfer requests for corrective and adaptive maintenance.

4. Responsible for those applications already in operation

● Program Management [I.T.] responsibilities included-

o Consistency check for business planning and Information and Communication Technology (ICT) planning

o definition of priorities for implementation

o monitoring IT projects through periodic meetings ,underlining any problems or deviations from the project
baseline and submission for approval of any changes in the scope of the project

o definition of functional test planning and post implementation review with the client and end user.

o Was delegated to define service level agreements but soon Giuseppe backtracked on his decision to structure the
relationship around SLAs

o Acted as the first level of escalation for the customer that dealt with new requests and/or about critical downtime
and recurrent problems.
 ● Inter-functional process, IM was introduced to strengthen relationship with operations and scope included to record and
track all issues raised by customers due to a platform’s downtime or a loss in the service, investigating the cause of the
incident, to find a solution (both temporary workaround and permanent), escalate trouble tickets and to verify customer sati
● IT and Operations together managed and organized the IM process across three levels of support i.e IT staff trained
colleagues at the first level of support, expert groups from Operations, IT and Administration at second level, typical IT
developers at third

● Effect of reorganization in this way was that a transparent chain from IT to the end customer.In addition the number of
tickets decreased and Operations people started learning more about IT work and its customer approach compared to prior
situation of IT being the only function involved with trouble tickets.

Both IT and Business people were not satisfied with the reorganization because

o Demand Manager was too isolated from the IT team

o Program Management was isolated from sales people so the unit lacked on overall view of projects.

o IM was a success except within the development team which felt ‘controlled’.
Second Step : Sharing
● There was problem in sharing the information within department which causes IT department under pressure as sales
people signs contracts without consulting IT department.

● To overcome this problem new bridge organization called Change Advisory Board (CAB) for sharing decision making
was created

Formal CAB
All changes
written Review and
affecting Octo
change allow or delay
platform request request
Functions of CAB
Core activities of CAB consist of as follows

● Planning

● Controlling

● Managing risk

● Minimizing disruption

● Communicating

● Implementing

● Measuring changes

● Monitoring costs
Business Monarchy
● In middle of 2011, Giuseppe decided to implement a new inter – organizational process to manage new project set up.

● Decided to further centralize much of design phase within a steering committee composed by operation and finance to
bring down the business costs and manage IT business structure.

● At corporate level he proposed three level planning-

1. Planning during the project design stage (Design Team – inter-functional)
2. Delivery project planning (Project Team – interfunctional)
3. Detailed operating planning after the contract (Functional Teams in each area of Octo)
● Vice president of sales was not very open to the idea of reorganisation planned by Giuseppe because there was
possibility of decrease in sales by this plan.

● This led to confusion and conflict and sales team and it came up with new authority on business analysis.

● Fabio stepped and decided, in February 2013, to introduce a new function – Business Integration (BI)

● It was a classic bridge unit between the business and IT. This was the rise of Business Monarchy vs IT Monarchy
Mission of the BI unit:
● support standardized sales and effectiveness of customization;
● minimize time to market;
● ensure logistics and IT readiness;
● minimize planning inefficiencies;
● maximize cross- and up-selling on the existing customer base;
● maximize IP protection;
● ensure process effectiveness and efficiency.
Business integration unit as introduced in early 2013:
 Reasons for the problems faced because
of the formation of BI:
● Business units have to negotiate IT projects with the BI manager , but then the CIO has to be negotiated separately. Sales
managers often have to persuade the CIO to put in planning and accelerate projects.

● The BI manager is at the same hierarchical level as the CIO, so he cannot impose decisions. The CEO has to resolve
conflicts between them.

● There is still a gap between the demand of new platforms/ services for new clients and the ability of the IT department to
deliver, caused by inadequate staffing, shortage of competencies on project management and service management, the lack of
a strong leadership in the IT unit and related sub-units.

● Procedures, processes and templates from Sales through BI to IT are not aligned and shared.
Conclusion

One major reason behind the success of Reshaping the IT Governance in Octo Telematics to Gain IT-Business Alignment is
its ability to choose the right combination of proposed generic and intensive growth strategies based on prevailing competitive
and market conditions. Overall, the analysis suggests that risks and costs associated with each intensive growth strategy vary
and the firm's choice of each intensive growth strategy is linked with the generic growth strategies.