Hudson IT

Issues facing IT Directors

The key current issues can be summarised under four categories:

Reducing Costs

Cutting costs is the reality of the business strategy for many organisations in the current climate. IT Directors as a result have had to realign IT strategy in the light of this 'new reality' as their IT departments come under the microscope of the finance department as never before. For some this is a painful process that has been going on for three years with a 'second generation' of cuts now being proposed and a requirement now to 'cut smarter'. Primary means of attempting this seem to fall into four broad categories.

Centralise, standardise & rationalise

A number of trends prevalent within the 1990s are now being reversed as control and cost saving become the overriding decision criteria. IT departments are again becoming more centralised and customisation is being avoided. Contrary to previous mantras the business is now often being changed to accommodate the software to avoid expensive bespoke development costs. This is often not a popular trend with business department managers and as a result politically adept CIOs need to ensure such initiatives are approved at board level. As a consequence 'best of breed' niche vendors are increasingly losing out to large-scale blue chip vendors, such as SAP. The reason for this is that some IT Directors are making the conscious decision that whilst one supplier solutions may not be optimal for the entire business, the standardisation and cost savings possible outweigh the disadvantages.

Complementing the above is a general drive to 'do more with less', with servers, storage, data centres and architectures all being consolidated and the number of software licences being reduced where possible.

Supplier Management

Many accepted norms in the technology sector that have previously been tolerated by IT Directors are now being challenged for the first time. Many now question the tradition of software upgrades and why the 'next version' is necessarily better. The inconvenience of older versions becoming unsupported after a number of years is also being broached. Underpinning the above is the increasingly vigorous price negotiations being initiated, leveraging economies of scale and long-term support contracts to extract maximum discounts. This process is particularly acute in the area of relatively commoditised products such as networks and telecoms.

People

Managing the balance between permanent and contract staff has always been part of an IT Director's portfolio of responsibilities. Many have already cut back on contractors as part of the 'first generation' of adjustments. However, the mass culls of permanent staff that occurred in the early 1990's have not yet materialised in most environments with the possible exception of the City. Most IT Directors continue to seek to keep a portfolio of valuable skills at hand and to protect their teams. Instrumental in this is understanding and measuring both the costs and benefits that their people bring to the business so they can fight in their corner at board level.

In such environments, the professional standards and skills required from IT professionals at all levels is rising with an increasing intolerance towards 'technology for technology sake', a lack of business understanding or poor project management execution skills. With the bar being raised, skill gaps are being exposed and some IT Directors find themselves in search of fresh hybrid talent able to translate technology into business advantage, despite nominal recruitment freezes that may exist.

Outsourcing

This has been a well publicised trend over the last ten years as companies focus on their core business and seek to give part or all of the 'headache' of IT to a specialist third party. An incremental approach is often adopted with specific application support or legacy applications being outsourced on a pilot basis to allow their own people to take on the more strategic challenges. Others decide to go for the 'big bang' approach and seek to outsource the majority of their IT. Most would now agree that the principle of outsourcing is established with its actual degree of practical success down to 'the devil that is in the detail' of any proposed service agreement. With IT seen in some quarters as 'a utility', the benefits of avoiding technological obsolescence, sharing risks and significantly reducing costs are proving increasingly appealing in a number of organisations including the likes of Sainsbury's & JP Morgan Chase.

Back to top

Demonstrating Return on Capital Employed (ROCE)

How to deliver increased revenue at reduced costs is the conundrum that many IT Directors face on a daily basis.

This increased pressure comes at a time when the balance of budgetary power in many organisations is shifting back to the end-user. Project governance and approval processes are becoming more demanding with a need to establish 'best value as well as least cost'. IT Directors as a result need to be crystal clear about an individual projects' value proposition and have clear answers to the following:

Is it increasing revenues or decreasing business costs, and by how much?

What is the pay back period?

According to Gartner, two thirds of all projects do not achieve intended savings. In the face of such lamentable results many project approval boards are implementing multi-stage approval processes, breaking large projects up into sub projects and only releasing the next stage of funding once it has been verified that objectives achieved at each stage are in line with those anticipated. Again Gartner estimate that one quarter of all major projects can expect to be terminated after they start. Given the internal political impact that large scale project failures can have on the standing of an entire IT department, many IT Directors are increasingly reluctant to 'live in hope' and are imposing a discipline that says that if a project does not prove itself within 60 days then it gets cancelled.

Quite understandably, in such a climate 'playing safe' has become a primary survival strategy for many IT Directors as they only look to proceed with the more conservative projects most likely to very quickly deliver financial benefits.

Back to top

Reducing Risks

Issues such as security and disaster recovery have always been the responsibility of IT Directors but often seen as the necessary but rather unexciting end of the spectrum. 9/11 combined with the rise of the Internet as a channel to market, especially for retail and financial institutions, has changed all that. Reducing risks to the business and its systems is now a high profile pre-occupation of most IT Directors and can be divided into two broad categories:

Security Solutions

Security intrusions can destroy customer confidence, increase legal liabilities, and potentially cripple an organisation. As a result many now undertake comprehensive reviews either driven internally or via specialist third parties to ensure that risks are assessed, security architectures are integrated and other initiatives such as consistent identification and authentication are adopted.

Business Continuity/Disaster Recovery

Given most organisations' dependence on IT today, the issues of continuity and disaster recovery have moved beyond protecting the data centre and now require a comprehensive strategy to minimise interruptions, limit financial losses and enable a controlled return to normal operations. Besides providing basic protection for both systems and data, such an approach has been shown to simplify decision-making in the event of a disaster and minimise interruptions.

Back to top

Leveraging Technology to enable business strategy

Despite the cynicism engendered by the dot com bubble, the disappointing reality of over-hyped technologies in the past and the pretty poor implementation record of many IT projects, IT remains critical in the modern business environment. It can be a major commercial contributor and its all-pervading nature means that it must be used to some degree to at least 'keep up' with the competition. For a smaller number its creative use has proved a genuine source of actual competitive advantage. Despite the cost cutting climate, IT Directors have a major role to play in disentangling genuine business advantage from self serving vendor hype and putting the business case forward for why and how their companies can unlock the potential benefits available. Many observers now believe that the IT market has reached maturity and that 'killer applications' are unlikely to be so obvious in the future. However the following summarises the key application areas and technologies that have in the recent past been the focus of attention, and that are likely to continue to be so for the next few years:

Integrated Solutions Delivery

Especially for larger organisations, both short term cost management and long-term competitive positioning can be enhanced by effectively implementing CRM, ERP, Supply Chain and Business Intelligence solutions.

Enterprise Integration Solutions

Linked to the above, many have found the need to review and integrate end-to-end business processes across applications and to enable collaboration across processes/systems and organisations via technologies such as web services.

Storage Management

As a consequence of the implementation of ERP & CRM systems in particular, many are predicting a data explosion with the potential loss of mission critical data resulting in business processes potentially grinding to a halt. Data storage costs can also rise exponentially if they are not managed pro-actively. As a result many are turning to specialist third party tools for archiving, storage management, and replication.

Asset Management

Given the complexity and distributed nature of many organisations today, understanding the business, to effectively run the business, is a significant challenge. MIS or Asset Management tools facilitate this process to help provide clarity and allow the right decisions to be made.

Summary

Despite the significant challenges inherent in the issues raised above, we have found that most IT Directors & CIOs remain relatively upbeat. Most have responded positively to the concerns of the business with a degree of maturity and realism and used these concerns as an opportunity to get closer to the business. For many the more accountable and measurable climate is also one that has proved cleansing and professionalizing, leaving a leaner and potentially more effective IT department better placed to tackle the opportunities of tomorrow.

Back to top