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A panel of academics, IT directors, analysts and vendors give their views on the current state of the industry and predict what...

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.

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