IT & The Economy: Balancing Cost, Risk & Growth
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1 IT & The Economy: Balancing Cost, Risk & Growth Peter Sondergaard Senior Vice President Gartner Research Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via Gartner is a registered trademark of Gartner, Inc. or its affiliates.
2 "Events, Dear Boy, Events " SUMMER 2007 U.S. recession P<25% U.S. "soft landing" Europe "like to escape" China & India "decoupled" Biz confidence high Property markets "cooling" $100 oil "possible" Inflation begins Post-SOX transparency All sectors are thriving SPRING 2008 U.S. recession "already here" U.S. "crisis" Europe & Japan "headwinds" "Decoupling is a myth" Biz confidence fails Property "bubble burst" $100 oil "floor" Inflation threatens profits Bank risks "unknown" Wall St. won't hurt Main St. AUTUMN 2008 U.S "double dip"? U.S. "depression risk" Europe & Japan recession APAC & East Europe weakening Biz confidence crushed No property market $80 oil due to recession fear Inflation recedes Will my bank survive? Bailouts hit all pockets WINTER/SPRING 2008/2009 IMF: "Global Economic Growth Worst for 60 Years" ILO: "Up to 51 Million Jobs Could be Lost"
3 Shifting CIO Priorities CIO Agenda 2008 Top 3 Business expectations Improving business processes Attracting and retaining new customers Creating new products or services CIO Strategies Delivering Projects that enable business growth Linking business and IT strategy and plans Attracting, developing and retaining IT personnel Top 3 Technology Priorities Business intelligence Enterprise applications (ERP, SCM, CRM, etc.) Servers & storage technologies CIO Agenda 2009 Top 3 Business expectations Improving business processes Reducing enterprise cost Improving enterprise workforce effectiveness CIO Strategies Linking business and IT strategy and plans Reducing cost of IT Delivering Projects that enable business growth Top 3 Technology Priorities Business intelligence Enterprise applications (ERP, SCM, CRM, etc.) Servers & storage technologies Source: Gartner 2008 and 2009 CIO Survey
4 CIO Strategies Reflect the Need to Reduce Cost and Improve Performance * Item not included this year 3
5 Gartner Research View: Current Issues for Our Clients IT Modernization IT Cost Optimization Green IT Virtualization Cloud Computing Workforce Business Intelligence IT Risk Management By year-end 2010, more than one-third of all application projects will be driven by the need to modernize application technology or skills obsolescence. IT budget for CIOs who are producing significant improvement in business performance will continue to rise, even as a very high percentage of CIOs are forced to constrain or cut IT budgets. Winners in the low-carbon economy will be enterprises able to figure out how to do different things, not just doing the same things differently (i.e.. with less carbon) Virtualization is the most important trend in infrastructure and operations through 2012, in terms of cost reduction, IT architecture, process impact, IT service offerings By 2012, 80% of Global 1000 enterprises will be paying for some cloud computing services. Many clients are asking us today how they can become "cloud-like" internally. Between 2010 and 2012, business demand for IT-driven growth will outstrip the supply of qualified people even as companies reduce overall IT staffing Through 2012 more than half the Global 1000 will experience failures of strategic performance initiatives due to lack of appropriate information infrastructure, tools and skills to meet their analytic and collaborative needs. By 2011, 50% of large companies will establish IT risk management (and compliance) as a function that is fully integrated into the enterprise risk management framework.
6 Gartner Research View: Top Contentious Issues by IT Organizational Role CIO Infrastructure & Operations Security & Risk Business Intelligence & Info Mgmt Sourcing and Vendor Relations Enterprise Architect Applications Manager Program & Portfolio Manager Business Process Improvement Business expectations for IT have outstripped IT's internal capability to deliver How do we more-rapidly modernize I&O and reduce costs? Business reluctance to accept accountability for security and risk management Lack of executive sponsorship and engagement How do I get my vendor to deliver what it promised? Gaining & maintaining stakeholder involvement and support to effectively manage change Why should we modernize our applications? When? Who will benefit and who should pay?" How much formal process is needed for Program and Portfolio Management How are IT and business roles and responsibilities changing as we move from process automation via applications to process management via explicit process models?
7 Gartner Research View: Top 10 Strategic Technologies Servers: Beyond Blades Virtualization Social Networks & Social Software Cloud Computing Enterprise Mash-ups Unified Communications Web-Oriented Architectures Specialized Systems Green IT Business Intelligence Audit applications to identify those that will need remediation to continue to meet service-level requirements in the multi-core and beyond blade era Virtualization cannot be deployed as a simple cost-cutting solution. Enterprises must proactively plan for and leverage its strategic impact: management, process change, sourcing, service offerings. The concepts, language & technologies of consumer social software will become part of mainstream workplace technology vendors by Evaluate use of Web Social Software to transform customer interactions By 2012, 80% of Global 2000 enterprises will be using some level of cloud computing services and 30% will use cloud computing system and/or application software services. Explosive adoption of Web mash-ups among individuals has moved from a Web hobby to enterprise-class systems, and portals. Enterprise Architects should use the mash-up reference architecture to examine options. Link Unified Communications to collaboration and enterprise applications to support growth initiatives. Computers embedded in everyday objects can create better, morenatural or intuitive behavior, or improved performance. IT and OT have drivers forcing convergence CIOs will need to own or align with OT Consider potential regulations and have alternative plans for data center and capacity growth Execute BI and CPM initiatives to empower the business to make better real time decisions.
8 Gartner's Top 10 Recommendations to "Users" for IT Cost Optimization 1. Reduce headcount/freeze hiring 2. Renegotiate with technology and service providers 3. Curtail data center expansion/"virtualize"/sell assets and lease them back 4. Consolidate functions and systems to drive economies of scale 5. Outsource commodity services - shift to variable cost basis where possible 6. Increase leverage of offshore resources 7. Investment shutdown 8. Project prioritization 9. "Mothball" businesses/products 10. Change leadership/new IT management structure and power base
9 A Framework for Cost Optimization Enable Innovation and Business Restructuring Implement process improvement, business restructuring and innovation Difficulty Joint Business and IT Cost Savings Implement cost-saving technologies in conjunction with the business Cost Savings in IT Identify opportunities to reduce IT costs Value IT Procurement Get the best pricing and terms for your IT purchases Execution of various types of cost optimization will involve different parts of the organization and varying levels of control by IT alone.
10 Decision Framework For each initiative to cut costs: What's the upside? Is it worth the effort? Costs, Time and Risks? Potential Benefit - How big is the saving if the action is implemented and how does it affect cash flow? Customer Impact - What impact will this have on customers? Time Requirement - Can you capture the savings in this fiscal year? Degree of Organizational Risk - Will your leaders ensure the changes are made? Is your organization capable of adapting to the changes? Degree of Technical Risk - Is there a risk that the change will undermine the ability of your systems to deliver? Investment Requirement - Does the change require a large upfront investment before savings can be captured? Is the organization willing to make an investment at all? Benefits Benefits A $ number here A $ number here A $ number here Negative None Positive >18 months 6-18 months <6 months Staff redundancies, and re-engineering of processes and structures Impacts OS, DB, middleware and applications Limited changes in roles, structures and processes Moderate impact on few components of the architecture No staff reduction, nor changes in organization and processes Little more than "moving boxes" High Moderate Low/None
11 Virtualization Is Advancing in Many Areas Servers, Storage, Networks, Clients... Deduplication Unprocessed Data Elements Storage System Single-instance storage (SIS) Compression data reduction Host-Based Software Disk Array Controller Virtualized Pool of Heterogeneous Storage The Promise Lower-cost data migration Unified storage management Common replication services Longer product life External Appliances Intelligent Network Switches
12 Cloud Computing: Evolution and Revolution From the Enterprise Data Center Pressures RTI & Virtualization Grid SaaS and Utility Models Application Commoditization Alternative Client Devices Bandwidth and Connectivity Cloud Elastic Web Services Internet Information and E-Commerce Connectivity From the Web Web 2 and Mashups Global-Class Consumer Applications Browser Delivered SaaS/Sites Googleplex Web Platforms Subsidized Applications SOA Venture Funding for Service Model Cloud Computing: Data-Intensive Applications A style of computing where massively scalable and elastic IT-enabled capabilities are provided "as a service" to external customers using Internet technologies.
13 Unified Communications: Consolidation In the next three years, will the number of communications vendors companies you use be reduced by 50%? How will you manage the consolidated and converged products? Telephony Magic Quadrant Market Scope IM Market Scope Team collaboration and social software Audio and video conferencing Wireless Wireless application vendors Data, storage, clusters Web Conferencing Magic Quadrant Contact Center Magic Quadrant
14 Business Intelligence and Information Management: Five Critical Initiatives Business Process Change Exploit Info as Strategic Assets A better informationcentric infrastructure Enterprise Content Management Business Driving Forces Data Management and Integration CIO Responsibilities: Business Model Innovation Knowledge Worker Productivity New capabilities for business and knowledge workers BI and Performance Management Enterprise Information Management Social Software/ Collaboration Business Intelligence and Information Management Initiatives
15 CIOs Will Make the Decisions That Shape IT Resources and Results Decisive Resourceful Results Priorities Expectations Budgets Scope Metrics Key partners IT organization Tech. infrastructure IT people and skills Information Time Purchasing power Applications Revenue Customers Control Cost Cash flow Capital Capacity Quality 14
16 Business Imperative Action Plan Today - Run: Focus on Virtualization & Green IT for immediate cost and flexibility benefits - Grow: Execute BI and CPM initiatives to empower the business to make better real time decisions. - Transform: Evaluate use of Web Social Software to transform customer Interactions The Next 18 Months - Run: Exploit mashups and selective cloud based services to address immediate user needs - Grow: Link Unified Communications to collaboration & enterprise applications to support growth initiatives. - Transform: Establish an EIM strategy to support business transformation efforts Longer Term - Run: Cloud Computing & WOA together with new Servers and Specialized systems promise to minimize costs and maximize agility. - Grow: Apply more sophisticated content analytics to support sales, marketing & customer support. - Transform: Opportunities emerge from cloud computing, Social networking and new approaches to infrastructure Virtualization Cloud Computing Servers: Beyond Blades Web Oriented Architecture Enterprise Mashups Specialized Systems Social Software & Social Networking Unified Communications Business Intelligence Green IT
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