CIOs in strong position to help businesses fight slowdown

CIOs are in a strong position to make a difference in the face of an economic slowdown, according to IT experts. But although some advise cost cutting, CIOs actually appear to be spending more on IT.

CIOs are in a strong position to make a difference in the face of an economic 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.

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