News Analysis

'Creative destruction' should drive your 2012 IT budget, says Gartner

Cliff Saran

With the planning season for many companies' 2012 budgets under way, Gartner's Dave Aron urges CIOs to tear up the rule book, or risk being sidelined while their best staff are poached to other departments.

Business is facing a tough economic climate. "There are continuing cost issues," said Dave Aron, Gartner fellow in the analyst's CIO research group, But most IT departments are pretty lean - cutting costs will mean cutting services; or will it?

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Aron explains: "Globally 67% of the IT budget is spent keeping the lights on, 19% supports growth of current business such as scaling up volume or helping the business enter new markets, Only 14% is allocated to genuine transformational IT."

So he recommends CIOs use "creative destruction" in the IT budget. "Get rid of things," hee said.

For instance, one insurance company Aron spoke to has moved to a thin-client architecture, got rid of all paper, and merged internal and agent systems, giving a big boost to the business. The topic will be a big focus at Gartner's Symposium in Orlando next month.

These are not necessarily radical ideas, but are arguably unpopular because the cost is in user computing. Taking away printers and PCs from users will make IT unpopular with the business. But if virtual desktop infrastructure can reduce the cost of maintaining desktop PCs, why keep them? Consolidating systems will save money. If the CFO is looking at IT to reduce its costs, why not switch users onto systems that are lower cost?

Tackling the IT budget will free up resources, which CIOs can use to help IT innovate. "It's a real challenge," Aron said. "We are seeing genuine innovation in the market, such as Friendsurance in Germany, which allows users to buy insurance with friends and cover part of the claim - which addresses fraudulent claims. Quest2Learn in education has completely redesigned education for kids based on computer games."

But, warns Aron, if IT does not change, someone else will. For instance, he says in IT-centric businesses like media and financial services, the CIO is not driving the digital strategy - IT is not getting involved in growing the digital business.

"This is not an attractive prospect for CIO," he said. "In a few cases, some of the people who are pushing the digital era are being plucked out of the IT department and are being put into new areas, to prevent them from being smothered by IT."

But, Gartner is seeing IT change the business model.

"CIOs recognise the need to innovative," said Aron. "They are interested in cloud computing and see the possibilities of smartphones. They just need to find the time and mindshare to invest in these areas."

User departments are already buying external IT services, such as Salesforce.com or hiring web design agencies for marketing campaigns. There is no reason for the CIO to control all aspects of IT within a business. Certainly the consumerisation of IT within business is not necessarily a bad thing.

Perhaps users and departments should have the freedom to choose their own IT, where IT's role is one of establishing a framework and policies? Given the maturity of server virtualisation, virtual private networks and the availability of software as a service and cloud-based applications, it is not unreasonable to redefine what internal IT means to the business. For this to work, Aron said, "CIOs must have good integration, governance and integrity covering security, risk policies [and connectivity to] cloud services."

So IT must be creatvely destructive with the 2012 budget. Gartner recommends tackling the 67% that will be earmarked to maintaining existing systems. Outsourcing the maintenance of legacy systems and using cloud computing tactically for IT infrastructure, may free up valuable budget. But there will always be risks. "Cloud has the potential to free up IT budgets, " said Aron. "But it is also another way to screw up if you do it wrong."


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