From Outsourced Megabits to Internal Manpower

By Abigail A. Lorden, Editor-in-Chief | May 04, 2010

Boiled down, when it comes to outsourcing, there are two sides: pro, as in, you'd better leave that to the experts; and con, as in, if you want something done right, do it yourself.

When Chipotle Mexican Grill (www.chipotle.com) first came on the scene in 1993, putting their tech support in the hands of outsourced expertise seemed like the right choice. In the years that followed, however, the Denver-based eatery's philosophy of 'quality foods served quickly' started to catch on, and business needs were growing by leaps and bounds. Between 1998 and 2005, the company grew from 16 locations to more than 500, having landed attention and investment capital from McDonald's Corporation. In January 2006, Chipotle went public and doubled its stock value in its first day, and later that year McDonalds fully divested from the organization. The money from the offering was used to fund new store growth, which today stands at nearly 1,000 locations.

Blue screen of death
"Historically, the way Chipotle was set up, all of the technical expertise was outsourced," recalls Joel Chrisman, executive director of IT and training. With the exception of its Exchange servers and a small SQL environment, Chipotle's technology was 100 percent external. In the beginning, this approach was adequate, but somewhere around store 450, Chipotle's in-store tech support needs started to seriously outpace its resources. "There weren't a whole lot of internal people who could provide support, so when we needed help we had to call someone who wasn't necessarily familiar with our environment," says Chrisman. "Systems were down for longer than they should have been, and it was hurting the perception of IT from within the company."

In 2004, after a few too many blue screens of death on back-office computers, coupled with the need to evaluate nearly all of its systems for new Sarbanes-Oxley and Payment Card Industry (PCI) compliance mandates, the company brought on its first team member with a fully technical background, Frank Daidone, director of IT. Daidone recalls the dynamic when he joined: "When everything gets outsourced that way, you operate in a silo mentality where people are responsible for different systems. It's not holistic; protection and integration become afterthoughts."

At the helpdesk, the problem was most obvious. "We had to ask ourselves, 'why do we feel that an outsourced model is right for our helpdesk, which is the face of any IT department?'" says Chrisman. "The issues that started to come up in our stores were happening over and over again. "It's perhaps the best example of doing it yourself when you want it done right: with an outsourced helpdesk charging on a pay-per-ticket model, there's no incentive for the technician to educate the end user. The department started to evaluate costs, and found that they could bring on 25 staff members who could not only run the helpdesk, but also work in the field to provide preventative maintenance and take over new-store POS installations, which were also being outsourced to the tune of 120+ locations per year. "We felt it made sense from not only a cost perspective, but that they'd also have a huge incentive to provide the best customer service possible because now it's them taking the call at 9 p.m.," says Chrisman.

Bringing in the human resource
Once the decision to internalize was made, the company had to bring in the right people for the task. Rather than looking for would-be Geek Squaders for its tech support, the company recruited people with great customer service skills, knowing that they could teach them the IT they needed. "It was the upbeat person who wouldn't be scared to troubleshoot," that Chrisman says they wanted. They started with a remote market, hired the right person for the job, and moved that market off the help desk and onto their new internal interactive voice response (IVR) ticket system. That very first market quickly reflected a drastic decrease in call volume. "Having things in-house versus outsourced, there's a great deal of pride, but it also empowers them to take ownership of their area," explains Daidone. It took about 18 months to hire and train the right people, and market-by-market, move the stores off of the external help desk and onto the internal system.
 
At the same time that Chipotle was growing its field technicians, the company was bolstering its corporate IT department, one area of expertise at a time. They hired a data  center administrator and began a period of discovery to get a full inventory of systems. "We handed them a clip board and said, go back and find out what's back there, and welcome to the fire," recalls Daidone. Recruiting the right people to join the infrastructure team was a bit more challenging than bringing on the right field technicians, in no small part because they were completely redefining roles and responsibilities. Through it all, though, constant communication of the vision kept morale high and the end-game in sight. "We have a philosophy that there's no area you can't participate in or have a voice in," notes Daidone.

When it came to vendors, "we let the majority of them go, much to all of their surprise. We had to change our philosophy in how we allow them to participate with Chipotle IT," says Daidone, which, today, is focused on creating partnerships.

Between 2004 and today, the company went from an IT department of about 10 employees (4 field techs and 6 infrastructure employees), to a department that's 50 strong, with just over half in the field. Internal expertise is spread throughout several new groups with specific skill sets: an engineering group that handles the data center, networking and security, with expertise in Cisco; two development teams with expertise in .NET and PeopleSoft; a business development group that's strong in Oracle; and a compliance group. Additional skill sets include JPS, Microsoft SQL and IIS.

Payoffs and playbooks
With its internal structure in place, and a healthier relationship with its vendor partners, the department has had several significant wins. In 2008, they engaged Radiant Systems (www.radiantsystems.com), working side-by-side with the Chipotle internal development team, to roll out an online ordering system in seven months. Using the new system, customers can place their order in a secure payment environment and save their information for repeat orders. "Before we had the real system it was a fax smoke-and-mirrors system," explains Daidone, where customers placed an order that was converted to a fax and sent to the most appropriate store for fulfillment. "When we got to the online ordering point was when we knew the structure we'd put in place was working and was something we could grow on," he says. The system was piloted to managers at their bi-annual meeting. "We did a demo and there was an unbelievable eruption in the room like Elvis had walked into the building. It was a huge outpouring of support for IT," Daidone recalls.

Chipotle's IT team was now able to support the business in entirely new ways, so when the marketing department came in and asked for an iPhone application, they were able to execute quickly. In August 2009, Chipotle released an iPhone app on the Apple store that allows customers to order and pay for their food via their iPhone and iPad touch devices. Chipotle's marketing and internal IT departments worked with Berkeley, Calif.-based Pervasent (www.pervasent.com) for the programming, and engaged San Francisco-based Sequence (www.sequence.com) to design the user interface. Rolling out the app was easy since it sits on top of the new online ordering platform. The app allows customers to save their favorite Chipotle meals online, while location-based technology lets them find the nearest Chipotle.

On the intelligence side, bringing ownership in-house has allowed the company much better use of its data. "We'd still have a lot of the same data if we were outsourcing, but we're better able to use it," notes Chrisman. "We weren't able to explain to our managers what we have; in the past it was a case of 'you don't know what you don't know.'" Today, the company is looking at a labor management tool to provide the restaurants with opportunities.

With its new internal system, the IT directors knew they wanted to safeguard not only the data, but also staff knowledge. Once the positions were defined, the department began creating "how-to" documents of critical knowledge for each area of expertise, what they call "playbooks." Each playbook details the tasks that need to happen for a given role on a regular basis. If several positions are suddenly unfilled, for example if the IT department is hit by swine flu, critical processes can be maintained with relatively minor interruption. "From a business continuity perspective, we can take that playbook and open it up and give it to a staffing agency or another individual to make sure we can keep that role up and running," says Daidone. As with patch management, for example, where back-ups and restores are run on a regular basis; each procedure is detailed through screen shots and mouse clicks.

Despite its massive in-house migration, there are still several systems that Chipotle uses partners for. Hosting of financials, PeopleSoft, and electronic invoicing are all examples of things better left to the experts. "But because we brought in people, we have the staff to manage development and applications," says Daidone. "Our suppliers are never calling vendors to get issues resolved, they're calling IT."

Finally, with the recent interest in cloud computing, Chrisman and Daidone don't rule out the possibilities that some systems may yet be moved to a hosted environment. "We're constantly reevaluating what it would mean to move to SaaS [Software as a Service],"says Frank. Chrisman agrees: "There's nothing to say we won't take something into the cloud, but what we realize is that having the knowledge to manage the system in-house is what's important for us. "It's that human element that deserves all the credit in the end, says Daidone: "The tireless efforts of all of the people who were here in the beginning and all of the brave individuals that came along after them are what really made this change happen."
 
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