with its back to the wall…

February 6, 2010Blog Standard

It is the second month in the new year and the usual buzz around the new year has almost settled down. I have been reading analyst predictions of top 10 trends and have been keenly listening to the “IT speak” from enteprise IT teams– their thoughts and plans.

Amidst all the noise about the latest and hottest trends and listings on what is in and what is not, one fundamental shift, about the enterprise IT, is unmistakable..
The IT function in an enterprise seems to be on defensive….Even as the recession seems to come to an end and companies world over claim a return back to a “new normal”, the IT budgets continue to be flattish…and the CIOs under pressure to show more “proof” that the spending on IT is delivering value. In the post 2008 days, IT has seen itself transform from a function which was focussed on how to aid and support the exploding growth of businesses to a function which is suddenly seen as “spending too much money” without necessarily showing enough of results.
The CIOs are hard pressed to keep their budgets flat and juggle their spend to reduce the keep-the-lights-on spend and increase the transformational maintenance spend. Trends like cloud and social networks while being powerful and game changing are giving them more power against the vendors but are also putting more power in the hands of business which can now directly go to cloud.
What this means to the ecosystem around the CIO, the product and the services vendors who serve the CIO, and the busienss groups who are CIO’s end customer. is the topic of another blog post…

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COMMENTS

LabManagerLoyal

Show me the money!
According to Gartner, the top spend by CIOs this year is #1 virtualization and #2 cloud computing. Spending should increase by 8% to improve enterprise processes, reduce enterprise costs and improve the use of analytics / information (top 3 priorities, according to Gartner and the CIOs).
In the blizzard of new offerings and mergers, it becomes a daunting task to analyze the new tools and solutions and to forecast which company will future-proof today's decisions.
In order to save money, they've got to spend money. I believe investing in staff (hire, already!) to evaluate solutions which fit their CIO's initiatives will be KEY in 2010. People first, solutions second.

MBG

It is true. The key difference between recession in early 2002 and now is enterprises are willing to invest if there is a clear business benefit. Most of the IT technology vendors are compelled to show the ROI. While some of them do come up with ROI calculators and case studies, it is important to ensure same is applicable to your enterprise. Enterprise may not see ROI if the situations / assumptions of the ROI calculation is not relevant. In case of some technologies enterprise wide adaptation becomes key for realizing the benefits. What many CEOs and CFOs are looking for how does my enterprise benefit instead of going by benefits derived by a case study company.

Shreyas

This debate started way back – even before the recession when Nicholas Carr wrote the provocative article – "IT doesn't matter" in Harvard Business Review (http://www.roughtype.com/archives/2007/01/it_doesnt_matte.php)

Whatever value add or return on investment the IT department tries to show, it's still seen as a cost center traditionally in companies, as in most cases it doesn't add to the top line. Further the commoditization of IT and the trend towards off-shelf nature of IT may point to the impending doom of the CIO and his team. Add to that the recession which made a big dent in the CIO's budget now has made him in a defensive role to prove why companies need to do an increasing spend on IT. In future where IT will not matter is when IT is just going to restrict itself supporting the business, just like electricity – the usual ERP products streamlining a company's operation which is now taken to be granted. And the maintenance of IT infrastructure – a polished housekeeping as a managed service.

However IT is not just that. Here I'm just considering companies whose main line of business is not IT because that's where the debate holds much prominence. IT really matters when IT enables a company to get added business rather than just focusing on cost reduction. For instance, a book retailer going from a pure brick model to a brick and click thereby getting a chunk of online buyer's market milking his existing brand, IT matters there. Or a Singapore port which reduces the ship turn-around time using intelligent EDI and thereby making S'pore a famous port among sailors, IT matters there. (But in this example, the benefit enjoyed is only on a short term – as over a long run it can be replicated in other ports). But on a general note from an innovation standpoint when IT gets more business to a company, yes IT does matter.

Ajay Bhagwat

I second Shreyas's thoughts- "IT really matters when IT enables a company to get added business rather than just focusing on cost reduction."

Anirudh Joshi

A mail I received from my friend, Matt – An experienced software executive
"
The CIO & IT are definitely on defensive now for a number of reasons. But that in of itself is not new as cost reductions / consolidations / standardization has been a focus for many years. However, I do feel there is a new level of desperation with their defensive positions. Maybe it is just the added pressure of the down economy on top of the other pressures.

I think it is something different, and a fundamental shift is happening. For years the CIOs had the ability to talk a language of black magic to the CEO/CFO about the unique technical components and architectures required to run the business. The CEO/CFO always demanded more for less, and the CIO could use techno jargon to explain why it couldn’t be done any other way.

And now Cloud Computing, the utility IT model seems to have finally arrived. Standardized computing is now being presented in business terms, with the same platform utilized my multiple different companies across a variety of industries. And the CEO/CFO is asking the CIO why they aren’t using this new standard cheaper model. And since the CIO didn’t build it, and it has been ‘blessed’ by other CIO’s / companies, the ability to re-direct the discussion with black magic language is no longer available."

Anirudh Joshi

A mail I received from Unni, an experienced IT veteran with an IT services major
"
Anirudh, the thought is an interesting one. Yes, nowadays, business’s r demanding outcomes and r definitely better placed to ‘negotiate’ with the IT team

This definitely does put pressure on CIO’s to ensure that every $ spent is accounted for; flipside is that transformation engagements r not pursued aggressively due to the inherent associated risks"

Anirudh Joshi

A comment I received on mail from Mohit, a sales veteran, based on business development perspective from APAC,

"
It seems customers are doing more rigorous ‘thinking’ and evaluation before making any decision. The Q&A have been lately more mature in ASEAN. Now the cycle time for a deal closure has also increased due to the time invested in investigations and also the IT dept is doing more exploration along with vendors. The positive side is that they are now more open to hear ideas. If a vendor is not giving them ideas then they are not very comfortable. Yet the organizations and people in IT depts (customer side) have to still undergo a learning curve. In my experience while customers are more open their lack of understanding of a ‘skeleton sketch’ and build an ivory tower which is meaning full is low. They still need lot of vendor support and expect a faster response time. Guess for us its best to align ourselves to the new shift and move fast. If we have to succeed then we have to be more cleaver in our solutions, present end to end story, design of the solution has to happen by a more matured team as they have to use their experience to carve out end to end solutions ( incomplete information or lack of clarity from client will prevail & grow even more). Faster turnaround. Customer expect costs to be lower and quality of services to be improved year on year. Delivery excellence will supersede lower cost of operations (lower costs are expected and now a hygiene as companies around the globe have also evolved low cost delivery models) so offshore companies value proposition has to change beyond low cost opps."

Anirudh Joshi

A comment I received on email from an experienced sales director in Bay Area…
"Hi Anirudh, this is a good article. I was recently at a dinner and the group there talked about how the window for capitalizing on any innovation has shrunk dramatically. In effect, even as a new idea/software/application/functionality is developed, there is very little time for the original creator to capitalize as ‘very similar’ products come out into the market super-fast. Thus the only remedy to this from the author’s perspective is to constantly innovate and keep building on the original idea to continue differentiation and/or to recruit the ecosystem to continue making the product or application improving on a regular basis. Viz. even as competitors pop up for the iPhone, the applications built outside would continue to add value to the original product. This I think, is also the lure of Open Systems, where, on a good idea, a larger set of people can work on it to keep increasing value.

Do share your thoughts on SaaS this in my view is an altogether different story. Depending on the size, risk capacity and appetite of the enterprise, I would think the larger guys would start with platform or infrastructure first."

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