A panel of academics, IT directors, analysts and vendors give their
views on the current state of the industry and predict what the
future is likely to hold.
Trying to work out what the future holds is more vital and more
difficult than ever before. With economists offering conflicting
opinions about the financial situation and customers uncertain
about what to buy, it's no wonder vendors are trying to determine
whether there is a consensus of opinion about what 2002 will
bring.
Earlier this month, Sun Microsystems and Amdahl invited a group of
people to a debate in London to talk about the state of the
industry and where it is heading. The panel included academics, IT
directors, analysts and vendors. The following is an edited version
of the debate and covers some of the talking points, which are also
being discussed widely in the industry at the moment.
The debate began with an attempt to summarise where things stand
after the dot com boom and bust of the last couple of years, then
moved on to cover the changing issues in IT infrastructure and
closed with a look at the current focus on return on
investment.
Chair: The Wall Street Journal recently reported a group
survey that found 40 per cent of 350 European firms are going to
cut IT spending and 30 per cent plan to increase it. This sounds
rather like a glass half empty, half full situation and therefore
we are in a slow growth situation that is somewhere between gloomy
and upbeat. Are there any comments on that in the general economic
outlook and the role played by IT?
Gary Barnett: It's all about confidence. Customer IT spend
is always dependent on what they hope to get back, and they've
always been ambiguous about what they get back from IT. The feeling
of ambiguity is strengthened and the business case for their
investments has always been a bit precarious - I would guess it is
even more so now.
Chair: If it was always precarious, then why did we get into
it so much?
Gary Barnett: One of the things that drove it was this very
rapid entry into collective wisdom that all of this expenditure was
a really good thing to do. So people were rushing off to develop
these very far-reaching e-commerce strategies and so on, and if you
stopped them and asked, 'Precisely why are you doing this and how
do you hope to achieve it?', they'd go a little blank and then
carry on with whatever presentation they were making. There's this
kind of shoaling effect, isn't there? It just became the
collectively sensible thing to do, to invest in this funky new
technology that was going to transport the economy.
I like the suggestion that companies felt obliged in some way to
present some kind of IT dot com type strategy, and I can imagine
fund managers saying 'we're not going to invest in them, they're so
bricks and mortar', and what's interesting is that those bricks and
mortars that saw it as an additional channel will start to reap
their own rewards.
This kind of healthy dose of reality is good for technology,
because in the 80s IT was about process improvement, it wasn't
about business process improvement. It was about producing more
widgets faster, not necessarily about the leading edge of the
business, finding more customers and relating to customers in a
better way. If this has caused us to stop and examine what the
deployment of different pieces of IT will do for our business, it's
probably a very upbeat message.
Pat Leach: There's been a lot of talk about IT departments,
it certainly wasn't my experience that corporations were being
driven by IT departments. I think the drive came from a bunch of
entrepreneurs and marketers who went out and set up the Internet as
a business proposition and then companies thought 'We've got to
follow', marketing directors suddenly woke up to it, the IT people
at last had a bit of power and attention as a result of the year
2000 and grabbed hold of it.
Greg Stroud: A lot of really positive things have come out
of the boom in the last couple of years. Fundamentally, I think
businesses' core objectives haven't changed. They're still doing
the basic, core things, they're just communicating faster.
We've almost gone overboard on the supply chain, as the tragic
events of 11 September showed - people had no inventory in their
pipeline, in their business stock. So now, without IT, they would
not have the ability to place inventory strategically back into the
supply chain. They're going to be a lot more intelligent, so
there's going to be more inventory being put back into the supply
chain, but it's going to be done more strategically and with a lot
more thought than could ever have been contemplated 20 years
ago.
Andrew Lyle: We couldn't do what we do without IT, it's
fundamental. We're a high throughput analytical laboratory, so we
receive thousands of samples from pharmaceutical companies. Those
samples contain thousands of components; we have a high throughput
technology that can separate, quantify and identify those
components, then we send our customers a database with millions of
observations. The whole business was created when the IT and the
associated biological technologies became available to do it.
Steve Smithson: Just a comment on productivity, I think in
most companies, it's hard to deny the labour productivity is
improved. At the same time, that's not the only type of
productivity - you also have to look at the productivity of the
capital, and as you pour more and more money into the capital,
especially in office-type businesses, instead of just having pens
and telephones, that productivity of capital is actually dropping.
The other thing with productivity is that we tend to think about IT
in the sense of doing it by itself, but there are lots of other
variables - changes in business structure, changes in management
practice, changes in the environment - and it's hard to credit IT
with a particular achievement.
Chair: To sum up, I think there are plenty of examples of
real transformation, the business model and how we do all of that,
and at the same time I am mindful when every management guru says
'the only certain thing is change', you know the one thing that
doesn't change is their opening introduction and another thing that
doesn't change is [the disappointment of] voice recognition or a
mobile in the wallet, or smart cards, or a lot of other stuff. So
all of that for me tends to argue towards the midway scenario that
we were talking about in terms of how speedy the recovery can
be.
In the light of Sun's and no doubt Amdahl's excellent R&D
record, could you comment on the suggestion that there might be a
tendency with today's caustic reaction to the exuberance of the
past to throw out the technology baby with the information bath
water? We turn the volume up on the information, we say technology
is not so important, it's all user needs now, we're not looking for
a big breakthrough in R&D, but I think people rush to knock
technology.
Greg Stroud: I tell my people in sales you have to develop a
RITE to work with customers - built on relationship, integrity,
trust and, most importantly, execution. We spend a lot of time at
Sun on execution, just delivering real computing solutions - I'm
not trying to solve the world here, I just want to provide a
computing solution to our customers, and we go out and execute it.
We do power slide products like every other company, but at the end
of the day, it's who's going to deliver this architecture today,
and who is capable of delivering that architecture today. There is
a finite number of companies that can go out and deliver today, and
that's really how you're going to develop the right to do
business with customers.
Chair: As we approach the finish line, let's talk about ROI,
because while we've all become more HR sensitive, needs sensitive,
customer oriented, supply chain oriented and so on, which I think
is right and there's no alternative because nobody else is going to
do it in a hurry, an ROI question is always a five, ten-year
question. How can you anticipate that? You've got to make a leap of
faith, and that in your view it's quick wins, often of a
psychological character, namely people are not tearing their hair
in the first sort of six months or resorting to litigation or
whatever, that's not ROI but at least it's tangible and you can
kind of measure it and that's the way we should be looking at it.
At the macro level, do you see a big improvement in productivity or
return on investment at the macro level because of the last few
years, or is that still to play for?
Steve Smithson: I think that's still to play for. We haven't
actually decided what we mean by infrastructure - some people just
think about telecom cables, but it's also the data that's being
shared, the services, the people. This is a very difficult problem
in big socio-technical projects, be it IT infrastructure or
building a new hospital or school. I think we're trying to evaluate
some sense of social structure or social technical structure. It's
not just evaluating whether one chip goes faster than
another.
Neil Mortenson: Just a comment on the productivity issue. I
find it quite difficult to get my head around that, because it
doesn't seem to be a metric you can use in isolation. IT has
fundamentally changed the way we do business. It's enabled things
to happen that couldn't happen before. So the productivity measures
I've seen always relate to productivity per employee. They don't
talk about the type of business that's being done, the way business
is moving forward. It's like saying the invention of the automobile
has not helped people's productivity because the time it takes them
to get to work now is the same as it was 100 years ago, but they
live in different places, their pattern of travel has changed. The
whole thing has fundamentally changed, so I don't really buy the
productivity argument as a negative against the IT industry.
Gary Barnett: To a certain extent, the ROI problem is the
same as with any big infrastructure problems. I've got customers
who have a massive mix of technologies mainframe 400, they've got
funky stuff from the 70s, they've got their Solaris and so on and
they know how much it's going to cost, but they know that if they
go to their board and say 'can we have $12m please? We need to
modernise and integrate our environment', $12m is not an untypical
price that a multinational bank would expect to pay.
The problem is the board asks 'when will we get our return on
investment?', and they say 'well, the first four or five projects
probably won't feel the benefit, but projects seven and eight will
feel a bit of a benefit, and by projects ten or eleven you won't
believe how much better they'll be'. The problem is the same with
the proposed motorway - you know precisely how many millions of
dollars it costs for a mile of motorway - what you don't know is
how many cars are going to travel on it.
So people create these big models and the more Excel sheets you
have, the more believable the model is. But the problem is boards
are sufficiently cynical about IT, particularly in banking, central
IT is at a very low ebb in terms of credibility.
The only effective strategy IT marketers can adopt is to have a
secret master plan about technology. So they decide XML at that
level, but never say the word XML to their board, because if they
do, the boards will say 'no, this is rubbish'. So what they have is
this kind of blueprint, then they say to the board, 'you've just
done this merger, it's going to be a pain, we'll need six months to
do this, these are the results we expect'. And you get a pat on the
head - it's like training a dog.
The more confidence you establish with your board, the more likely
they are to let you run with it, so I tell my clients to have a
master plan, which is about making your life easier and delivering
things that make your customer's life easier, although they may not
necessarily be the same thing.
Greg Stroud: I don't believe people have stopped spending
money on IT. I believe in boom times marginal IT projects were
accepted with no pay-off. I believe IT is now undergoing a much
higher degree of scrutiny and that's good - it's good for IT, for
Sun and for the consultants, because we should all be working to a
standard of payback to shareholders in adding value to customers.
Every day I talk to customers, but I never talk about computers - I
talk about reducing costs, because that's what they're interested
in now - increased revenue.
So reducing costs, server consolidation, process disimmediation
using the Internet, the supply chain is increasing revenues,
getting closer to my customers, and using the power of the Internet
are really topmost in the minds of the very largest customers of
the UK that do business with me.
Well, I take it from the customers; what they're talking about is
how to manage these complex systems we're building. I think a lot
of it is concerned with management and the management of assets and
the security issue. I work at a company that is probably one of the
top ten targets for every hacker in the world; they probably get a
badge of honour for hacking into Sun, so we really understand
this.
We've got the smaller battles of getting the execution
implementation, providing value today. Then we have a much larger
battle - the battle for control of the Internet.