What is on a CIO’s mind?
by Hu Yoshida on May 4, 2006
I recently attended an interesting CIO Panel at the Churchill Club in San Francisco. It was a Blue Ribbon panel with CIOs from Bechtel Group – Thor Geir Ramleth, Intel – John Johnson, McKesson – Randall Spratt, and Yahoo – Lars Rabbe. The Moderator was Dave Margulius and the title of the panel was Building the New IT. Attached are some of the insights that the panelists provided.
Major Changes for IT in 2006
IT is shifting out of the utility role toward a business perspective. It is a service oriented business aligned with the business units, making the workflow more efficient. This means a business focused approach to IT and less around technology. Technology matters but the application of technology to business is what really matters. For Johnson, Spratt, and Rabbe, this meant more focus on the consumer space. Ramleth said that applications must be more intuitive. “You don’t need a manual to use Yahoo, but you do need a manual to use SAP.”
It Budgets for 2006
Not surprising, most budgets were flat. Yahoo was the only one who had an increase in budget since it is a growth company. Mr Spratt said that instead of asking IT about budgets, which is the measurement for cost centers, IT should be asked about Rev/Profit like a business unit. IT is being measured on unit cost which can be tied to profit. IT must be rationalized with revenue.
Intel looks to outsourcing as an option. All the others felt they could find better costs inside rather than outside.
IT is getting pulled into the product planning cycle doing more proof of concepts. IT brings the relevance of support, usability and maintainability to the Product. The cobbler’s kids are being asked to try on the shoes first.
Spratt said that the biggest problem is “ankle biting” where the vendors go directly to the individual business units and establish themselves as ad hoc solutions that need to be rationalized with IT at some later date. Rather than build fences against vendors, companies like McKesson are opening up their strategic planning to the vendors. Invite the vendors in and give them the strategic vision so that they can align with corporate IT, and market from the top rather than low level penetration.
Consolidation and Vendor Lock in
All these companies agreed that consolidation was important to be more cost effective and agile. They were not concerned with vendor lock in. Rabbe felt that the bigger footprint a vendor had, the more leverage the CIO had with the vendor, making it easier to manage them.
While consolidation was a benefit, vendors need to make their licensing easier and more adaptive to changing business needs.
Was a key interest for everyone, as a way to increase utilization, and provide more flexibility and agility. Virtualization of the infrastructure helps to drive down costs. The next step in virtualization is virtualized environments. Where you can swap out a compliance environment for instance and then bring it back later when it is needed.
Was not mentioned during the panel but was brought up in the Q&A. The response was that security is table stakes, but not singled out as a high priority.
These are just some of the thoughts that I captured. Do you agree with the panel?
Is the role of IT changing?
Should vendor lock in be a concern?
Would your company share their IT vision with vendors to get better alignment from them?
Is virtualization a key enabler for the new IT?
Please send me your thoughts.
Comments (5 )
Here are a couple of comments, tied to the different headings:
“Major Changes for IT in 2006″
I like the comment “Technology matters but the application of technology to business is what really matters.” One challenge will be to know how much is being spent on technology in support of the company’s different business initiatives. How many IT departments can trace IT spending to the company’s strategic business objectives?
“It Budgets for 2006″
If IT budgets are flat and at the same time general business conditions improve, will this cause an upward pressure on IT salaries, increased IT job hopping, or both?
One question is, “Outsourcing of what?” Development? Application or Infrastructure Support? Will there be a lessening of dependence on proprietary applications and an increase in dependence of remotely sourced applications?
This assumes availability of IT staff who are (a) attuned to and trusted by the business and (b) who are able to move rapidly without overpowering bureacracy or justification hoops. Are IT departments set up to do this?
You call this “ankle biting.” Vendors call this “standard sales method applied to selling to the real decisionmakers.” Businesses have to see an advantage of involving IT if only to help businesses avoid the problems that IT understands all too well.
“Consolidation and Vendor Lock in”
I don’t know about this one. What I’ve seen in cases of single large vendors is that the single large vendor ends up driving the dependent customer’s business strategy. I’d be wary.
One question here is — has everyone reviewed their current application portfolio to see if they are paying for unused licenses or overlapping licenses bought by different subsidiaries that might be consolidated?
Very cool ideas, but will old fashioned software licensing agreements going to cause problems with implementing on the fly virtual environments?
I think of security more in process terms than in technology terms, so the extent to which IT departments can support process changes (like, keeping laptops from walking out the door) the better.
Check on a recent blog notice http://blogs.hds.com/david/2006/04/storage_economi.html where Gartner and CIO magazine have differing opinions on storage spending in 2006. The bottom line is that end-users have to determine the best ROA or ROI of any new IT investment. Spending may be flat, down or up, but the IT department can do more to improve the returns on these IT investments.
Thanks for your comments.
More of our customers are inviting their vendors in to give them guidance on their strategic IT initiatives. Some will invite all their vendors in at the same time and hold different breakout sessions for network, Storage, and applications. As a vendor we find that very helpful to align with our customers. Our CIO, Frans van Rijn, holds similar sessions with his vendors. Not only does it help to build better alignment, it provides transparancy in the procurement process.
“Is the role of IT changing?”
I most certainly see a change over the years. Obviously the increased focus on compliance issues, data privacy and information security forces IT organization to be more internally focused than they really care for. It takes budget and resources away from initiatives that are more strategically aligned with the business. More importantly though is the recognition that IT systems actually touch the external customer. Where in the past there were Sales people and delivery people in between our company and the customer to make up for any deficiency we have in the back office, today and even more so in the future our systematic solutions interact directly with our customers. So as one of the panelists related to, you can no longer deploy systems that require extensive training and are awkward to use. They should be intuitive and fun to use, which changes the design criteria. It also changes the sequence in the way you introduce new applications in a company. Where in the past the business would change and IT would catch up, in the future both IT systems and infra-structure have to be in place before the business changes. We have to develop the ability to be agile and flexible in order to respond rapidly to ever-changing business needs. This takes a cultural change not only from the IT department but as much from the commercial side of the business.
“Should vendor lock in be a concern?”
To be realistic; you are always locked in to a vendor one way or the other. I would claim if you have multiple vendors for the same discipline you are locked into multiple vendors rather than just one. It is all about assessing the risk and having a contingency plan. So to answer the question directly it is a concern and it is an issue than can’t be avoided therefore it needs to be managed carefully.
“Would your company share their IT vision with vendors to get better alignment from them?”
Being an internal IT services provider of a storage solution company our position is somewhat special. We of course deploy our own solutions and we provide feed-back to our product and solution development groups, so we are aligned at the storage solutions side of the house. We do share our IT vision with the other vendors because we know how important it is for them to understand the direction we are taking so they can prepare for it. This is true for Hardware as well as Software vendors.
“Is virtualization a key enabler for the new IT?”
Virtualization is absolutely key to the new IT in many different ways. The main challenge we have in IT is to drive cost down while improving the responsiveness to new and changing business needs. In our case this also means that we see an increased level of integration between all the applications we have deployed internally and with the applications of our business partners including our parent and sister companies. We have already seen the a very large portion of the implementation time of new systems and infra-structure is dedicated to regression testing. As you can imagine it is very expensive to have the server and storage infrastructure available at all times to facilitate that . Virtualization is the answer to this. It will not only reduce the cost by improving resource utilization, but will also simplify the environment and, in addition, create a great deal of flexibility.
Frans van Rijn,
Senior Vice President and CIO
Hitachi Data Systems
The real news is one of the CIOs sees the consumer web app model taking hold in the Enterprise. Now don’t sell Oracle short: this is one canary in a coal mine. It is the implications for IT infrastructures that interest me. To understand that you need to understand the dynamics between the BUs and IT.
The BU folks typically have a “some love, mostly hate” relationship with IT. Wherever they go they see what the competition’s IT does that they can’t. They discount the good in what their IT delivers and exaggerate the bad. They look at every online experience they have and compare it to what their IT group delivers. When the gap gets too great, they start buying their own technology to close it.
So what gaps are BU execs seeing today? How about the speed with with which numerous small companies are rolling out web-based applications that come out of nowhere and scoop up millions of users in months, sometimes even days.
Read the rest at Storagemojo.com.