The global recession and how to cope with it will inevitably dictate the business and IT agendas during 2009. While the general consensus is that IT budgets are likely to remain relatively flat overall, circumstances will vary from industry to industry, with sectors such as financial services and travel being hardest hit. Government and utilities will see investment remain relatively buoyant.
Gartner indicates that, although 46% of CIOs believe their budget will increase, 21% expect expenditure to fall and a further 33% anticipate that there will be no change. Mark McDonald, global vice president of executive programmes at Gartner, says: "Some companies are going through large budget declines, while increases are very modest, which is holding the overall number down."
Nonetheless, many IT organisations are already shelving nice-to-have, discretionary projects and getting rid of costly on-site contractors, while at the same time adopting a somewhat longer-term, wait-and-see approach.
Chris Howard, vice president and director at analyst company, the Burton Group, says, "A lot of people are running relayed budgets that are flat year-on-year, but they're waiting for business colleagues to experience cuts as high as 20% to 30% to their own budgets. So they know that later in 2009, they'll find out the reality of what the impact is on IT," he says.
Another consequence of the current economic climate, however, is a general shift towards more tactical initiatives. "It tends to be about 'what can I do this quarter to keep my head out of the fire'. But what happens in this situation is that strategic vision often tends to weaken. So the trick is to do tactical things on strategic lines, focusing on the near side for long-term benefit when things pick up," Chris Howard adds.
So what areas should IT directors and CIOs focus on?
- Infrastructure projects and software asset management
- IT governance
- Portfolio management
- Outsourcing/software-as-a-service/cloud computing
- Business process management and SOA
- Information management
According to Tim Jennings, a research director at the Butler Group, most projects can expect to see a return on investment on server consolidation and virtualisation within 18 months. After the British Library consolidated and virtualised about 70 of its x86 servers, for example, it succeeded in saving about seven per cent of computer room space and generated per annum power savings of about £14,000. Energy costs related to cooling also dropped by about £4,000.
2009 is also likely to see an increase in the number of storage virtualisation initiatives, however, although the rationale here tends to be more about improving management efficiency and reducing administrative overheads than saving power per se. This is because storage accounts for only between 15% and 25% of total data centre power consumption, which is half that of the average server estate.
Infrastructure projects and software asset management
Many organisations are currently holding back from undertaking infrastructure projects. Other enterprises, meanwhile, are attempting to improve their software asset management by trying to gain a better handle on what applications/software licences they have to simplify them. The Telegraph Group is one example of a company that managed to save £100,000 in software costs by simply establishing what assets it had and introducing consistent management processes. This ensured that it did not end up buying supplementary licences because it was uncertain of what it had already purchased.
According to Gartner's Mark McDonald, one of the key trends for 2009 will be revamping and revisiting IT governance methods to help CIOs "make better decisions and achieve a tighter focus". This will involve coming up with a clear definition of the role IT plays in the business as well as how it supports both the enterprise as a whole and individual business units. It will also see the continued introduction of best practice frameworks such as COBIT for IT governance and ITIL for service management.
One of the manifestations of this shift is that organisations will start putting more effort into activities such as power and waste management. The essence of it, says Martin Atherton, a research director at Freeform Dynamics, is "about trying to modify ingrained behaviour and using what you've got more effectively".
Another offshoot of the growing IT governance focus will be the rising adoption of portfolio management techniques and tools. Although such activity has so far mainly been limited to Global 2000 enterprises, it is expected to percolate down to mid-market companies over the year ahead.
"There's been a density of projects over the last six years, most of which have been done in a singular way without any kind of holistic, integrated design. But if you do portfolio management well, it helps you to identify overlaps and make more efficient use of what you already own. It's about streamlining and tuning in preparation for the upturn," says Howard.
For example, Northcliffe Media, a £500 million business, which provides 36 local newspapers and related web sites across the UK, undertook a two-year IT transformation programme using portfolio management techniques in order to prioritise spend and minimise costs. This approach helped it to introduce discipline around handling competing internal interests and meant that the savings generated from the initiative could be reinvested in more flexible systems to support an increased online focus.
Introducing portfolio management techniques tends to lead to closer scrutiny of sourcing options. One of the key beneficiaries of both this activity and the downturn is expected to be software-as-a-service (SaaS), particularly for new projects in areas such as collaboration and messaging. This covers everything from hosted e-mail and related services such as anti-virus scanning to enabling users to share documents and virtual presentations.
One of the appeals is that, because such services are generally paid for on a monthly subscription basis, they come out of operational rather than capital expenditure budgets. But adoption will tend to centre on standalone offerings, rather than integrated portfolios, and such offerings will only be introduced where they make sense.
According to Neil Ward-Dutton, a partner at analyst company Macehiter Ward-Dutton, although business process management (BPM) has been on "a real slow burn" for the last decade or so, adoption will pick up during 2009 as "it fits the current economic environment well".
The aim of such technology and techniques is to make enterprises leaner by standardising and integrating business processes, which, in turn, cuts waste. Such tools can be used by business analysts to design, simulate and execute on a flow chart of optimum processes based on business rules, which can also be tweaked if change is required or a new process introduced. Because such processes are not hard-coded into applications, however, organisations do not need to undertake potentially expensive new development projects to accommodate business change and so it can be introduced more swiftly.
But the fact that many BPM projects involve integration work means they often tend to dovetail into SOA initiatives, although there is currently a general trend to cut back on large enterprise-wide projects in both of these arenas in favour of optimising end-to-end processes such as order-to-cash in chunks.
"Rather than implementing a major transformation all at once, you can prioritise and, say, work on the first three improvement measures, before moving onto the next three using your return on investment. You don't have to re-engineer everything from top to bottom immediately - if you do BPM right, it's an iterative process," Neil Ward-Dutton says.
One organisation that benefited from adopting a mixture of BPM and SOA approaches was the Carphone Warehouse. It introduced Tibco's Enterprise Service Bus and iProcess BPM Suite to capture and model business processes and ensure they were suitably supported by IT. The move led to the integration of a range of key existing processes, to which were attached performance indicators and service level agreements to ensure that services would continue to operate at optimum levels.
Enabling the business to unlock the value of its information assets will be an important theme over the year ahead, whether this information is stored in IT systems or people's heads. Deploying business intelligence tools to mine data will be viewed as a useful way to generate repeat business from existing customers rather than trying to acquire new ones, which costs five times as much.
Collaboration tools will also come into their own as a means of enabling staff from across the business to share information and work together more effectively, as will social networking systems such as wikis, blogs and corporate Facebook equivalents.
"It's about knowledge-sharing," says Howard. "Some companies are starting to shed workers like crazy, but that involves risk as they're not just a resource - they take their knowledge and experience with them. A lot of organisations recognise that this situation is probably going to continue for a while and so they're trying to get appropriate mechanisms in place to deal with it."
So while many organisations will simply concentrate on cutting costs over the year ahead, it will not be true of everyone. Others will be looking at how they can go about optimising the way that IT is used in the business and how they can enable the business to become more efficient in order to support top line growth instead.
Image: ITV/Rex Features
This was first published in January 2009