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Testing year ahead for IT bosses

By Alan Cane
Financial Times
3 December 2008

What is at the top of chief information officers’ list of priorities for next year? Forget virtualisation, “the cloud” or clever cost-cutting. Above all these sits “finding another job”.

This is according to a survey carried out this year by recruitment specialists, Harvey Nash, and sponsored by PA Consulting. The survey was conducted in the UK but, nevertheless, reflects the picture in the US and mainland Europe, PA believes.

It found 72 per cent of IT leaders are actively looking for a new job or would be happy to take a call from a head hunter. A further 21 per cent were “keeping an eye on the market”. Only 7 per cent seemed happy with their lot.

The reason, Harvey Nash thinks, is the perception among chief information officers (CIOs) that their influence on business strategy is steadily waning, coupled with continuous and increasing pressure to cut costs: “The key to fulfilment [for IT leaders] can be found in the top two decision-making factors respondents would look for in moving to a new organisation: those of having a greater involvement in business strategy and a fresh challenge,” Harvey Nash concludes.

More detailed analysis suggests there is a cadre of top flight CIOs who are on the board of their companies, intimately involved in corporate strategy and able to strike a balance between “keeping the lights on” and technological innovation: “If you cannot deliver operational excellence, you will not have the opportunity to do the more interesting things,” says Anita Chandraker, financial services consultant at PA.

For second and third-tier CIOs, however, the picture can be dismal. While the outlook for the coming year is far from clear, there can be little doubt that most companies will be looking to cut costs: where and when is unlikely to be in the gift of these CIOs.

According to a global survey carried out by the Gartner Group and released last month, fewer than half the 444 technology heads canvassed thought their budgets would increase in 2009.

On a weighted basis, however, and taking into account asymmetries between regions and industries, the survey argues IT budgets will increase, on average, by about 3.36 per cent. The worst case scenario, however, suggests budgets could decline by 2.5 per cent.

“CIOs have a difficult time ahead of them,” says Karl Havers, head of technology at consultancy Ernst & Young.

“There will be unprecedented pressure to achieve more with less cash and fewer people. It will be more important than ever that the IT agenda is linked to the business agenda – and that agenda has shifted hugely. If I were a CIO my biggest worry would be to make sure projects come in on time and on budget.”

It has to be said that this latter ambition is something that has defeated the global IT industry for years.

According to Lindsey Armstrong, in charge of international field sales for Salesforce.com, 2009 will be a make or break year for CIOs: “It presents them with a real opportunity to become a hero. For too long, many [UK] CIOs have been spending their time simply keeping the lights on. Now they will need to innovate and look for creative solutions.

“The flexibility of cloud computing, which takes the management and deployment headache from businesses, is definitely going to become more appealing as the recession goes on.”

Over the past couple of years, this report has consistently noted that CIOs at all sizes of company have been under sustained pressure to cut costs.

Chris Steel, who runs PA’s US IT service says some of them have become tools of the chief financial officer, pinned into a cost reduction corner: “If they have been doing the job well, they will be constrained from an operational perspective in what they can achieve.”

Ms Chandraker warns of the danger of simply battening down the hatches until conditions improve: “Our view is that this is not sensible. One client went through a heavy period of cost containment, outsourcing most of their operations. The business moved on and the market moved on and now they realise they have to transform their IT to keep up.

“They have found there is a batch of catch-up projects to improve their infrastructure and they have been left with a complex portfolio of upgrades to maintain operational excellence while enabling change. They have simply stored up trouble for themselves.”

What do leading CIOs think?

Ian Campbell, of British Energy and chairman of the UK-based Corporate IT Forum, says his priorities are: first, year-on-year savings on business-as-usual expenditure – “The more companies just ask for a ‘flat’ 10 per cent across all areas, you know there is a general squeeze,” he says.

Second, he says, are service efficiencies which demonstrate IT is providing exceptional value for money, and third, continued outsourcing and “managed service” activity.

He argues for the need to ensure there is no wasted investment or poor cost control: these will be far more noticeable in a downturn and quickly show up poor management.

He says there is already a greater focus on return on investment, with payback expected even more quickly. Interest in “technology” projects such as Vista or Services Oriented Architecture has also dwindled. Software as a Service (SaaS) has its supporters but he adds: “There is little in the way of proper commercial offerings, so we have not seen many massive deals or a shift in the market.”

Denise Plumpton, director of information for the UK Highways Agency, says her top priorities are obtaining value for money from existing investments, making better use of emerging technologies and investing in technology and systems to improve productivity: “We’re putting emphasis on assessing the true benefits and the whole life costs, not just those ‘up front’,” she says.

“Our focus in preparing for our investment programme 2009-2010 will be to assess the cost/benefit ratio for each submission against the others, and to try to put some timescale on when the benefits will be realised so that we can prioritise our investments.”

Ms Plumpton points out that efficient use of information can improve road management by, for example, predicting where accidents are likely to happen: “The downturn has not really changed our priorities but it has reinforced the value-for-money aspect and it has brought to the forefront of colleagues’ minds that good use of IT, data and information can pay back large dividends without necessarily incurring massive investment.”

Despite the pressure on budgets, there are a number of technologies which are attracting attention as potential money savers.

Hub Vandervoort, chief technology officer of the US group Progress Software, argues for event-oriented computing, open source software and cloud computing.

Open source software, whose source code is essentially free, rather than being licensed, is often seen as a way to cut costs, but Mr Vandervoort offers a caveat: “Open source can be a dead end street. You can go so far with it but if you discover the track is not long enough, switching back to commercial software can be a big distraction. I believe the future lies with businesses that can develop a hybrid open source/closed source model.”

He says over the past two months there had been no decline in activity among his customers, “But the nature of the discussion has changed. The principal priority right now is risk reduction, not cost reduction. Everybody is looking to maximise the yield on their business, to hedge, contain and eliminate risk. Until recently, many companies did not realise how exposed they were to risk.”

There still seems to be room, however, for other initiatives. Scott Herren, group vice-president for Citrix, the virtualisation specialist, said the “green” agenda is still alive and kicking: “There will be no ‘IT for IT’s sake’, only investment in technologies that are proven and business-critical. And despite claims by some commentators, this includes green.

“Green is becoming a business essential, as many IT organisations now have kilowatt budgets alongside traditional monetary ones. Not only are companies keen to cut energy bills, power is becoming a finite resource with data centre space running out.”

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