Sounding Board: IDC's Forecast for Management Survey 2009

CIO spoke to three Australian CIOs from the CIO Executive Council to get their response the latest Forecast for Management Survey from IDC and discover their views on IT budgets and spending, the impact of the global financial crisis and the top challenges and priorities for CIOs now that the crisis appears to be easing.

Rob Livingstone, CIO, Ricoh
RETAINING TOP STAFF
This is my first exposure to the survey in detail, but a lot of what I’ve seen reinforces my suspicions of what’s been happening out there. But I’ve never seen this kind of mixed environment before; usually there tends to be an across-the-board slowdown or an across-the-board increase.

This is a mixed environment rather than an overall business slowdown. Some businesses are still hurting and others are going crazy with work that has to be done and increasing budgets. The top challenges are cost reduction and staff retention, which reinforces this result. Organisations that are on the ascendency are in the staff retention pool, and those that are not are in the cost-cutting pool.

This reinforces my own concerns about staff departures as the economy starts to pick up. I think this is one of the stand-out issues at the moment, because up until now people have not moved because of the risks. As an employer, we’re looking very carefully at specific staff retention strategies in IT.

Parts of the business community are still battling or are still in ‘lock-down mode’ in terms of salaries and other things which can negatively impact staff sentiment. But other industries are going gang-busters, so that might create additional incentive for staff to move. Many businesses have also unleashed a lot of pent-up demand for business change projects, which means a vast amount of work for IT. They want to refresh systems or change business processes and that translates to a spike in the workload for IT to support those changes.

In my personal experience, our project load has actually increased in the last 12 months even though things were on the decline in the initial stages of the GFC. That’s purely because the majority of our effort is spent on value-creating projects and the minority of IT’s time is spent on keeping the lights on. It’s a different situation in different industries, but because we operate from a fixed staff headcount, our project load was basically a prioritisation issue rather than upscaling to meet the demand. Nevertheless, the project load did increase because of the high expectations of the business to reduce cost and drive efficiency.

Angelo Grasso, CIO, Aristocrat
FEWER WILLING TO PAY MAINTENACE?
I think there weren’t many large surprises in terms of where investments are going, but it clearly depends on which industry you’re in.

Some areas of Australian industry are going great guns. For example, there is the Rudd Government’s stimulus approach and it’s large projects -- the companies who are upstream from that are faring quite well, especially engineering companies.

Conversely there are companies in a number of industries that are still feeling the GFC and probably haven’t started to see any light at the end of the tunnel, so their investments are remaining quite flat. There’s definitely an industry diversity there.

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An interesting aspect of the survey is to see where people have been squeezing. Traditionally, vendors tell you that you must stay on a supported platform, and therefore you must pay maintenance. But sometimes the value proposition doesn’t work.

If you’ve inherited systems that have been heavily customised or ones where there hasn’t been a lot of business involvement, in terms of stakeholder management and sponsorship and ownership from the organisation’s functional units, then there isn’t a lot of appetite to pay for maintenance. There are clearly companies who don’t mind if they run the risk of not paying exorbitant maintenance fees to vendors.

The other thing I found interesting was the consistent numbers around the use of collaboration, unified communications and videoconferencing to bring teams together in a virtual manner. When we moved into our new building, both here and in the US, we invested in unified communications, desktop videoconferencing, room-based videoconferencing and more. But we’ve taken a low-key approach. We’ve put all the investments in place and then tried to get things to spread through word of mouth. We’ve had reasonable success there and it appears the groundswell is starting to build.

Peter Palmer, CIO, Veolia Environmental Services
IMPROVED PERCEPTION OF IT
The immediate thing that stood out to me was the five per cent for IT cost versus revenue ratio for budgets. In the sort of companies that I deal with, and have been dealing with for more than 15 years, it’s nothing like that. I think the numbers may reflect a focus on the banking and finance sector, but given my focus on manufacturing, distribution and logistics, I think that’s an aspirational number.

Looking at systems and hardware, you can see that Moore’s Law is holding up very well and costs are still driving down. Indeed, there’s been some very interesting technology over the last year, especially in the area of SANs [Storage Area Networks]. Some great SAN technology has suddenly hit the market, both in the way the density of disk storage has improved, but also some of the software to manage the whole environment. SAN replication, for example, lets you build DR strategies very cheaply, which in turn drives down the cost of your hardware and software farm.

Some things did surprise me by not making the list of Top 10 CIO challenges. I agree with controlling costs being at the top of the list, but I would have thought alignment with the business would’ve been higher than it was. Another thing I was surprised didn’t make the Top 10 was benefit realisation. It seems to me this is the ideal time to be looking at the technologies that you have installed and looking at how you really get the benefits out of them. But when I looked at the charts about the perception of IT, I was really encouraged; 90 per cent of respondents view IT as adding value to their business, either by making a positive contribution to operational capability or as a source of competitive advantage.

Another interesting figure was network costs and seeing how they jumped. I really don’t see how network costs could have jumped by a factor of four, which is what the survey shows. If it’s true that network costs have jumped by a factor of three or four in the past year, then maybe my T2 shares are worth hanging onto. . .