CIOs are in a strong position to make a difference in
the face of aneconomic slowdown, according to IT
experts. But although some advise cost cutting, CIOs actually
appear to be spending more on IT.
IT expenditure is staying buoyant despite an uncertain economic
outlook, said Stefan Foster, managing director of corporate IT body
the National Computer Centre (NCC).
A recent NCC survey of 120 organisations found that 58%
predicted an above-inflation increase in their IT expenditure over
the next 12 months, with the construction and health sectors
predicting the highest growth.
"The IT spending can be viewed as investing, rather than
spending. If it makes the business more efficient, IT can arguably
affect the bottom line, providing that the newer and better
technologies fit with the corporate strategy," Foster said.
"If you can gain efficiencies from deploying technology, then
getting all the IT in place now can prepare for some sort of
downturn going forward,"
Vista roll-outs
The report found that many organisations plan to go ahead with
large-scale Windows
Vista deployments, with many laptop purchases on the cards - a
57% increase in laptop deployments is expected over the next two
years. Organisations also plan to buy more PDAs: 134% more over the
next two years. Virtualisation, storage area networks and voice
over IP are also high on the agenda.
"We hear talk of a recession, but the benchmark results indicate
that IT purchasers are remaining confident about future economic
conditions they are making sure that their businesses have the
right technology to deliver growth over the coming years, but they
are not over-optimistic," Foster said.
As well as investing well, his advice to CIOs was to ensure
their users were getting the most out of existing technology.
"The CIO can make it clear to the rest of the organisation that
there is much more you can do with your machine. Even a marginal
increase in usage, such as using diaries more effectively, or
making better use of printing technologies, can impact sales or
operations, or the supply chain. If you increase the effectiveness
of your IT usage by 10%, that will have a massive impact," Foster
said.
Capgemini executive consultant Ivar Sinka said, "It is not
completely clear if there is a significant recession coming, but if
there is, the IT function will have a very strong role to play in
cost cutting and automation. There is also the option of driving
the business onwards through new technologies."
IT innovation
He said that Capgemini's recent 2008 Global CIO Survey of 400
global CIOs indicated that a new generation of IT-literate business
users were driving IT innovation in their organisations.
"Individuals in their private lives are well ahead on how they
share information and the IT department can help those people.
There is also the opportunity to look at using internet services,
such as Google Earth, in an innovative way," Sinka said.
He noted that Capgemini had identified a sub-group of the
organisations it surveyed that it defines as top innovators, and
their characteristics included a strong delivery in "the
fundamentals": cost reductions with performance gains.
These top innovators also tend to have a CIO who reported to the
CEO rather than the CFO, and who saw themselves as partners of the
business rather than service providers.
Sinka said that one way in which organisations can help their
CIOs and IT teams to innovate more freely is to reduce the pressure
of key performance indicators (KPIs), service levels and costs. But
this comes with the proviso that they can meet their cost and
performance obligations, he said.
IT outsourcing was also mentioned as a means of helping to
combat an economic downturn.
Almost three-quarters of the CIO respondents in the Capgemini
report believe
outsourcing has a
positive impact, allowing them to focus on innovation. Some 60% of
CIOs believe it is possible for an IT department to manage both
business innovation and fundamental IT services.
Gartner analysts said that CIOs have a range of tools at their
disposal to cope with a tightening economic environment,
particularly in the area of data management.
Data Consolidation
Ted Friedman, vice-president and distinguished analyst at
Gartner, said that businesses should prepare now to cut their IT
costs, starting with their
data management and integration initiatives.
Gartner identified a number of areas where CIOs can
significantly reduce costs during 2008, while continuing to support
data management and integration initiatives.
The first is to consolidate redundant databases and database
workloads. Gartner said that in the typical large enterprise, the
cost of running redundant databases can range from hundreds of
thousands to millions of pounds, but consolidation activities can
potentially reduce these costs by 10% to 25%, or more in some
cases.
CIOs should also combine siloed data marts into a single data
warehouse, or into a smaller set of marts, said Gartner. This can
deliver the same types of benefits as operational database
consolidation, Gartner said.
Friedman said that the cost of database consolidation is worth
it. "In most cases, the cost of implementing the steps will be far
outweighed by the savings that can be realised," he said.
Other recommendations include optimising data integration tools
licensing and exploring open source licensing. This can help to
reduce the cost of overlapping, redundant or costly tools.
Gartner also advised CIOs to defer low-priority or
limited-benefit projects, and to defer the replacement of
custom-coded architectures, which carry the double costs of
migrating away from the custom code, and the software licensing
costs of the migration tools themselves.
However, Gartner analyst Donald Feinberg said that despite
Gartner's consolidation and cost-cutting advice, he did not believe
that IT budgets will be cut this year.
"Our surveys, even as late as December 2007, show a worldwide
budget growth for 2008 of 3.7%.
"This is from CIOs knowing about the economic situation. Maybe
for the first time in economic history, the management of
organisations are realising the true value of IT to the
organisation. This leads to increasing - or at worst not decreasing
- the IT budget," Feinberg said.
"Now is the time to continue [investing] and use IT to help the
company become more competitive. The CIO can still look for places
to save costs and use the additional savings to help the
organisation even further," he said.