How does the land lie, in light of the past 12 turbulent months, where IT departments have been forced to pull their metaphorical belts in? And, more importantly, what should IT managers be thinking about, planning and budgeting for in the year ahead?
The start of a new decade
2009 has been a turbulent year for many businesses across the world. With fears and uncertainty about what lay ahead, many took a conservative and considered approach to investing in their IT infrastructure. But with a new decade upon us and a new generation of innovation just around the corner, organisations are once again assessing how technology can help them improve business efficiencies or gain competitive advantage.
I hear very similar messages from both public sector and corporate clients. Organisations are willing to invest but there has to be a compelling business need to justify any spend. With little budget to play with, stakeholders must be presented with robust business cases for spending. So as the UK pulls out of recession, I highlight three key business drivers that CIOs and IT managers are likely to follow as they plan their 2010 priorities:
Does my IT investment decision address any of the following?
- Optimise current investment
2. Reduce costs
3. Continue to mitigate risks
If not, then it’s unlikely to happen any time soon. Furthermore, the impending General election will put increasing scrutiny on any Public Sector spend and will undoubtedly affect how budgets are allocated. Decisions makers are clear that they will only be signing off projects that are guaranteed to deliver a fast Return on Investment, with the focus on being able to demonstrate immediate gains with a 6-12 month RoI
Unlocking the commercial wallet
In the commercial space, 2009 has been a year of prudence and restraint where businesses have preferred to keep cash reserves instead of committing capital on IT projects. Through 2010, as confidence grows in both the housing and retail markets, and as unemployment starts to fall, we expect that cash to be released; business will start to spend but it will be guarded.
A recent survey by the Gartner research group found that IT will play a key role in business planning as organisations shift from cost-cutting mode to looking for revenue growth.
Gartner found that 62% of chief executives are looking to their IT managers to help drive organisation growth. 2009 saw cost control as a top priority. However, the New Year will see this attitude soften significantly as business leaders look to ensure their organisations are ready to take advantage of a more buoyant market, ahead of their rivals.
While capital spend on IT will increase, it will take time for attitudes to thaw and budgets will still feel the effects of previous prudence. Gartner backs this up by predicting a moderate 3.3% growth in IT expenditure for 2010. But that is a great deal better than many IT managers saw in 2009. Gartner also echo’s my own findings on business attitude as they predict the focus for 71% of business leaders is a return to revenue growth in 2010.
Gartner research vice-president Mark Raskino adds more weight to this view by suggesting business leaders are ‘gagging for growth’ and that requires a mindset change in the IT department. “A switch in focus from cost to revenue will reshape business-change priorities and in turn will impact the IT project portfolios. IT managers should expect to reprioritise some key projects as the business cycle starts to turn.”
Gaining a competitive advantage
Most organisations still believe that IT is a great enabler and can ‘save the day’ but this only rings true if IT infrastructure is maintained and improved as the market develops. It will always be a short-term measure to put on hold IT investment to get through a tough period.
Whilst offering short term gains, hanging on to old outdated technology does not improve productivity; conversely it is more likely to hamper output as hardware and the applications they run become sluggish. There is no doubt that ultimately, investing in business processes will cut overall costs and increase output.
I predict that there are four key areas organisations will look to address and invest in over 2010.
- Security – This has to sit at the top of every CIO’s worry list. Cybercrime is big business; today’s hackers are sophisticated, experienced, organised and focused. They have the resources and expertise to target every business; it is what you do about diverting that attack which matters.
Incidents such as data loss, data breaches and cyber attacks can all paralyse a business.
The subsequent PR nightmare of dealing with the incident and implementing solutions after the ‘horse has bolted’ are costly, inconvenient and embarrassing. Looking after your organisation’s data must be one of your highest priorities; your data is your crown jewels and the custodians of that precious information are the IT department.
It is their job to deploy the means to prevent intrusions and data leakage. Because of this imperative and often, legal obligation to guard data, organisations must continue to invest in security. I foresee continued interest in installing content monitoring and filtering solutions, data loss prevention solutions, e-mail encryption and Web security solutions.
An effective data security strategy is the basis upon which your organisation builds trust and a strong reputation. Not securing your employee’s data and that of your customers is the fastest way to drive away credibility and business.
- Green IT – The recent Copenhagen summit has brought environmental issues to the fore. The Green concept will gather pace due to the prominence of ‘green’ topics but also because of the business benefits that the adoption of technologies like virtualisation brings. I predict that the uptake of energy saving solutions such as ‘power-down’ will rise. Companies will look to significantly reduce their physical servers to drive down energy consumption thus ticking both environmental and money-saving boxes.
- Software Management – The continued focus on cost controls throughout 2010 will drive many organisations to take on software managed licensed services. With virtualisation and VM sprawl, we no longer live in a world of just buying licences to satisfy a tick box. Many organisations fail to track what licences they own and so they are either under-licensed or over-licensed risking either compliance issues or incurring unnecessary costs.
As companies look to drive out cost they will look for advice, tools and processes to help them achieve this. I expect businesses to increase their software outsourcing and at the highest level put out to tender their entire software estate.
- Harnessing the Cloud – It is one of the few areas which has seen remarkable growth in 2009 and I predict further accelerated adoption of Cloud Computing throughout 2010. IDC predicts that 45% of IT applications will be in the Cloud by 2017.
Cloud Computing has definitely become ‘en vogue’. The cloud offers so much opportunity, in particular for service organisations to offer support, advice and assistance to companies wishing to go down this route. There are still many questions that companies have around Cloud Computing and that is where the Value Added Resellers (VARs) can help.
The SME space is an area which presents huge potential for VARs as these companies typically don’t have a large internal IT support structure. This is where we see the biggest uptake. Concerns over the cloud as a viable solution continue to be voiced by the larger national, international and public sector organisations, in particular where their data is going to be stored and its surrounding security.
Watertight service level agreements are likely to be on most organisations’ agendas. Irrespective, as new businesses emerge and others see the need to move data into the cloud as an efficient and affordable way to grow their business, this market will undoubtedly grow.
I expect hosted outsourcing and software–as-a-service (SaaS) to become a higher priority in 2010 for many organisations. This is already a common feature of many office IT systems; many organisations already have outsourced payroll and HR systems. The benefits of not having to make an up-front investment, rather paying on demand, must be the future of software delivery. Furthermore, the software provider of yesterday is the hosted software provider of tomorrow.
There will continue to be an increasing demand for specialist companies and hosted VARs to amalgamate the hosted offerings, especially when you consider the complexity of some programmes and solutions available through the cloud. Companies need guidance and support on making the right decision.
I don’t foresee it as being an all or nothing move – I expect organisations to take a gradual, phased approach. The industry is still looking for evidence that the cloud is robust, safe and secure and until that time the less critical systems will transfer but I believe sensitive/business critical information will remain within an organisation’s internal physical infrastructure.
Outsourcing has considerable momentum and has been talked about as the ‘answer to cost reduction’ for a long time but this time is very different. When it first surfaced some 8 years ago, network speeds were slow, this is no longer the barrier its matter of time before we hit tipping point. The role of a VAR is going to grow alongside this as customers search for a trusted advisor to guide them to true value for their IT systems.