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ENTERPRISE CIO DECISIONS • APRIL 2010 1
INSIDE
One on OneWith a Leader
IT ExecutivePay in 2010
2010 Budgetsin Flux
Respond tothe Business—Fast
Cutting Costs
ReduceRisk, BoostEfficiency
APRIL 2010 VOLUME 1
RunningLean in 2010Find out how ITSM,outsourcing andtechnology arecombining to makeIT a lean, meanfighting machinein 2010.
EnterpriseCIODecisions
Guiding technology decision makers in the enterprise
WELCOME TO Enterprise CIO Decisions.TechTarget’s award-winning ezinehas a new look for 2010, with a newset of features, plus the essential in-sights that senior IT executives havecome to expect from TechTarget.
The ezine is available as a conven-ient, accessible PDF ready for read-ing online or downloading and shar-ing with your team. Each edition willfocus on an important topic thatreaders have told us is pivotal fortheir IT strategic planning, businessleadership and functional manage-ment for 2010, from architecture tosourcing to running IT operationsfor cost efficiency and performance.
Each topic is explored throughseveral articles that look to addresschallenges and pain points, decisioncriteria, latest trends and analysis inthat month’s given subject area.
In this issue, learn how to managebudgets in a tough economic envi-ronment; how to respond to busi-ness needs with agile IT; how to cutcosts by renegotiating with vendors;and how to reduce risk and boostefficiency through technology.
You’ll also find two new sections:
� One on One: Each issue, we’ll getpersonal with a leading IT execu-
tive, discussing lessons learned,viewpoints and critical successfactors for IT strategy and leader-ship. If you’d like to be featured,e-mail us at [email protected].
� Up Front: The new front sectionof the ezine features short articlesand content such as the latest ITresearch, emerging technologies,career news, book reviews andproject highlights.
With Enterprise CIO Decisions, wewant to help you tackle new issuesand look for answers to aid in yourdecision making, whether you’re inthe midmarket or working for thelargest enterprise.
We hope you find the EnterpriseCIO Decisions ezine informative anduseful. If you have any commentsor feedback, please write to me [email protected].
SCOT PETERSEN
Editorial DirectorCIO/IT Strategy Media
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1 EDITOR’S LETTER
New Look, New Name,Same Focus on You
E
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UpFrontNews, views and reviews
for senior technologymanagers
OONN TTHHEE JJOOBB
No longer one-trick poniesTHE AVERAGE TENURE for senior ITexecutive jobs has ballooned to 6.3years, according to SearchCIO.com’sannual salary and careers survey.
The longevity of people in the topechelon during the worst recessionin more than 50 years is a starkchange from rough economic patch-es in past decades, when the typicallifespan of a CIO was 18 months.
The relative stability of IT execu-tive jobs also differs from the techbust of 2001-2002, when they oftenwere prime targets for cuts. Andthat suggests that businesses arelooking to IT leadership for help andthat CIOs have honed their financialmanagement skills, according toemployment experts.
“A lot of CIOs in 2001 were one-trick ponies. They could do the
growth, but they couldn’t do thecontraction. If you realize that theaverage IT budget growth between2002 and 2010 was less than 2%,you see that CIOs had to be goodfinancial managers all along,” saysGartner analyst Mark McDonald.
Years on the job for those top ITexecutives surveyed—a group that
comprises C-level IT executives and IT vice presidents—exceededthe average tenure for midlevel ITexecutives (5.68 years) and for ITmanagers (5.36 years). Twenty per-cent of all IT leaders surveyed haveheld their current jobs for more than10 years. —LINDA TUCCI
6.3The average tenure for
senior IT executive jobs has ballooned to 6.3 years
UF
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EEMMEERRGGIINNGG TTEECCHHNNOOLLOOGGIIEESS
10 Top Strategic Technologies for 2010According to Gartner Inc., the top 10 technologies for 2010 have thepotential to make a significantimpact on the enterprise during the next three years:
� Cloud computing� Advanced analytics � Client computing� Green IT� Data center reshaping� Social computing� Security (activity monitoring)� Flash memory� Virtualization for availability� Mobile applications
SOURCE: GARTNER INC., STAMFORD, CONN.
by the numbers:
tWhich industry had the most pessimistic IT executives going into 2010? That would be computer-related retailers, wholesalers and distributors,with 64% of respondents
feeling blue.
rWho were the most optimistic? IT executives in automotive and transportation, where 50% of respondents foresee
rosier futures.SOURCE: SEARCHCIO.COM 2009 IT SALARY AND CAREERS SURVEY
BBEESSTT PPRRAACCTTIICCEESS
HACKYOUVERY MUCH: A study by ImpervaApplication Defense Center on password worst practices atrecently hacked social network app maker RockYou indicatedthat 123456 was the most popular password in use today, followed by password and iloveyou. Imperva urges users topick passwords of at least eight characters using a mix ofupper- and lowercase letters, numbers and symbols. So, besmart and flex your password creativity—even though you’rethe only one who will know it. (Right?)SOURCE: IMPERVA APPLICATION DEFENSE CENTER CONSUMER PASSWORD WORST PRACTICES REPORT, 2009
UF
OONNEE OONN OONNEE
proof is in the pmoNAME: Sharon GietlTITLE: CIOTIME IN THIS ROLE: Five yearsCOMPANY: The Doe Run Co.HEADQUARTERS: St. Louis ANNUAL REVENUE: $800 million
SHARON GIETL is in her element asCIO at The Doe Run Co., the largestlead producer in the western world.To call her business volatile might bean understatement. From 2008 to2009, the price of lead plummetedby more than 75%. “We had to laypeople off and cut budgets—andthat meant cutting projects,” Gietlreports.
Deciding which projects to cutwas made more rational, if not lesspainful, by Gietl’s efforts during thepast three years to establish anenterprise-wide project manage-ment office. The new, two-personPMO, underpinned by a projectdelivery system based on 1,600pages of methodology, signaled amajor culture change at the 146-year-old mining company—quite acoup for a CIO. The PMO also helpsher IT team of 25 stay focused anddeliver “actual business value,”instead of “trying to do everything.”For the full interview with Gietl, visit “Project management officehelps CIO navigate rough financialwaters,” at SearchCIO.com.
Your IT organization is lean. Howdo you spread the word on taking a process-oriented approach toprojects?We have project managers through-out the organization, and they tendto be engineers. We work with themon what the process is, how they goabout doing it; we hold classes onthings like how to complete anauthorization for expenditure, onbasic project management, onMicrosoft Project. Besides that wehave workshops. Those might be ontopics like, how to do a SWAT analy-sis on the project, or on risk identifi-cation and risk mitigation.
You were given a year to convincefellow executives of the PMO’svalue. Where are you now on that?We have gotten the entire buy-infrom the executive team, and that is
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Sharon Gietl
UF
where this needed to get sold first.Each year, we have different objec-tives. Now we have the whole proj-ect portfolio for the corporation pri-oritized. We started that by havingpeople present their projects andtheir justification for their projects tothe executive team and senior lead-ers as part of our annual planning.
What generates the most debate?Projects that are considered strate-gic. We can’t do everything, sowhich ones get top priority andwhere we draw the line in terms ofthe capital we have available gets alot of discussion.
What do you tell other CIOs about the benefits of a PMO?It allows you to be embedded in the business. You’re not just seen as over there and to the side.
—LINDA TUCCI
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SSAALLAARRYY SSNNAAPPSSHHOOTT
IT EXECUTIVE PAY IN 2010Will most IT executives get payincreases for 2010, and if so, howmuch? Our annual IT salary andcareers survey of 949 respondentsshows a big rebound from last year.
QQUUIICCKK QQUUOOTTAABBLLEE
“IT executives are spending much more of their time on operational andtactical things, and that makes sense,because in this climate IT is trying todemonstrate immediate value in theirinitiatives.”—JERRY LUFTMAN, distinguished professor and director of information systems program, Howe School of Technology Management, Stevens Institute of Technology
80
60
40
20
0Expect to receive a pay increase
in 2010.
Expected to receive a pay increase
in 2009.
SOURCE: SEARCHCIO.COM 2009 IT SALARY AND CAREERS SURVEY
50%
38%
4.8%Pay increaserespondentsanticipate
UF
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2010 IS ALREADY proving more chal-lenging than 2009 for Tom Gainer,CIO of First Bank Southwest, a re-gional bank based in Amarillo, Texas.Gainer’s 2010 IT budget is about$150,000 less than last year’s. Capital spending is down. A long-planned document imaging projecthas been shelved until 2011, and sohas a server virtualization project.
“These two projects are huge andcostly, and right now we can operatejust fine without them,” Gainer says.
As many companies like FirstBank are still hunkered down, IT re-mains in a difficult position in 2010.If the economy begins to wake up,technology spending will increase—but if the recovery falters there willbe flat or reduced IT budgets.
In fact, Gartner Inc. and ForresterResearch Inc. see IT budget growthquite differently based on their
views of the economic recovery.While the consultancies see oppor-tunities for adding capabilities in2010 via Web 2.0, virtualization andcloud computing, many of the ITprofessionals we talked to are focus-ing mostly on changes that serve toincrease productivity and providefor efficiencies via traditional soft-ware or hardware upgrades.
For example, Gainer is investing.He’s improving network securityand upgrading several core systems,including the bank‘s Voice overInternet Protocol (VoIP) and virtualprivate network. Later this year, thebank will migrate to Windows 7.
“We held off until this year formany reasons, but now it’s time toinstall upgrades. I do not like beingmore than one release behind onthese types of platforms,” Gainersays.
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2010
BudgetsinFlux CIOs are looking to rein in
spending as 2010 budgets remain fluid. BY LINDA TUCCI
Stamford, Conn.-based Gartner,which began 2009 by predictingmodest IT budget increases butquarter by quarter revised its pro-jections downward, recently pro-nounced 2009 the worst year for ITbudgets since it began tracking thenumbers in 1999. According to Gart-ner, IT budgets dropped by 8.1% in2009, essentially erasing four yearsof growth in a 12-month swoop.
The outlook for technology spend-ing in 2010 does not appear anyrosier. According to most gauges,including TechTarget’s recent IT Pri-orities Survey of 958 IT managers,the majority of CIOs expect IT budg-ets to be flat or smaller this year.Gartner is predicting a nominal 1.3%uptick.
“CIOs see 2010 as another toughyear,” says Mark McDonald, groupvice president of executive pro-grams at Gartner. Only 6% of Gart-ner’s 1,600 survey respondentsexpect business to grow in 2010,while four in 10 expect business tocontract and 53% describe theirbusinesses as stable.
POISED FOR AN ECONOMIC UPTURNHowever, CIOs from across manyindustries suggest that amid flat todeclining budgets, IT is cautiouslypositioning organizations for anupturn.
Joseph Marcella is CIO of the cityof Las Vegas, where the property
and sales tax revenues that supportcity services, including IT, havedeclined about 25% during therecession. Three years ago, with thewriting of the real estate bust on thewall, Marcella’s team Web-enabledmany city services and initiated araft of workflow improvements. Inland management, where the staffwas cut by 50%, Marcella is puttingin a system that ties together thevarious departments, from buildingand safety to public works, andautomates much of the workflow.The automation helps make up forthe workforce that was laid off.
“But it also gives us efficiencies,”Marcella says. “So when this picksback up, we’ll be better poised to do it, with less staff but more effec-tively.”
Troy Lethem, CIO of Capitol Insur-ance Cos., a property and casualtyinsurance underwriter based in Mid-dleton, Wis., says revenue is downduring this recession, but the compa-ny remains profitable. “We’ve beenimplementing efficiencies such as amultiyear IT campaign to re-placepolicy administration systems andfocused on reducing our expenses,so although business is down, thecompany has improved profitabilityduring this time,” he says.
There are exceptions to the budg-et crunch. Ted Maulucci, CIO atTridel Group of Companies, a pri-vately held condominium builderbased in Toronto, says he has seenhis 2010 budget go up a whopping
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30%. “I don’t see it continuing thatway. It happens there were a lot ofprojects and investments that hadto be made this year and gotapproved,” Maulucci says. It helpsthat Canada is in the midst of a realestate boom.
One of Maulucci’s big projects isreplacing an aging private branchexchange (PBX) with VoIP. Mauluccihas leveraged the PBX replacementto address an Achilles’ heel—poorcommunications among the compa-ny’s many remote sites. “The remoteoffices have their own phone linesand Internet connections, but it washard to make it work well becausethey can’t afford to put in the beststuff,” he says. By putting in a Multi-protocol Label Switching networkand running VoIP through the mainoffice, Maulucci was able to take themoney saved on telephony and plowthat into better connections.
PENDING TECH BOOM?“Smart CIOs are balancing the needto cut with the need to upgrade.Sometimes two needs overlap, aswith virtualization, for example,which saves money and provides atechnical upgrade,” says AndrewBartels, an analyst at Cambridge,Mass.-based Forrester Research.
Bartels said he is not surprisedthat CIOs, when asked, will say theirbudgets are flat or down for 2010.“They are coming out of a recessionand they want to be cautious,” he
says. “If you are a CIO you want tosee the whites of the eyes of therecovery, so to speak, before youstart talking budget increases.”
But, he adds, he also expects CIOswill be given leave to spend overtheir official budgets. In fact, unless
the economy slips back into a reces-sion, which can’t be ruled out, For-rester is predicting a “tech boom“this year. “We have defined a techboom as a situation where the techmarket grows twice as fast as theeconomy. If, as we expect, the econ-omy grows 3% to 4%, then 6.6% isabout double that,” Bartels says.
The growth will be fueled more bylarge enterprises, as opposed tosmall and medium-sized business-es, according to Bartels, partlybecause large companies can tapcredit markets and capital marketsthrough bonds or commercial paper.For small and midsized businessesthat depend on the banks, access to
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“Smart CIOs are balancing the need to cutwith the need to upgrade. Sometimes two needs overlap.”—ANDREW BARTELSanalyst, Forrester Research Inc.
capital has been much more prob-lematic, and they are more likely tokeep their wallets shut.
In addition, sectors of the econo-my that have enjoyed the federalstimulus program, such as healthcare utilities and the federal govern-ment, are more likely to spend ontechnology than retail, which hasbeen weak, and state and local gov-ernments, which are hurting, Bartelssays. Services companies and man-ufacturing are showing signs ofcoming back, and telecom should doall right in 2010. Financial servicesare “still a wild card,” he says.Mature IT organizations are morelikely to invest for the future in 2010than shops where basic delivery ofIT services and responding to busi-ness needs are still concerns.
UPGRADES PLANNEDUpgrading and replacing “classicgeneration technology,” such asPCs, servers and licensed software,will be part of the recovery, accord-ing to Bartels.
CIOs who are thinking strategic-ally about the future will invest in“smart computing,” Bartels says. So, in platforms, that means service-oriented architecture (SOA), virtual-ization and cloud computing.
“We’ve seen a lot of CIOs in theproject portfolio, trying to protectthings like virtualization, like service-oriented architecture, because theyunderstand if they don’t make these
infrastructure updates, then theywill be caught exposed,” he says.
Interest in unified communica-tions platforms to pull email, voiceand instant messaging continues todraw investment dollars, as well as
video conferencing and collabora-tion, Bartels says. And CIOs are alsolooking at software designed to getbetter results from existing activities,such as contract lifecycle manage-ment, financial performance man-agement or IT asset optimization.
Like Forrester, Gartner also seesaccelerating interest in “lighter-weight technologies,” like virtualiza-tion, cloud computing and Web 2.0platforms. The SOA projectsMcDonald hears about from CIOclients are of the “quick-and-dirtyvariety,” leveraging Web-basedservices. According to McDonald,the trend toward smaller projectswith quick returns will continue in2010, but it will shift from cost cut-ting to improving productivity. �
Linda Tucci is a senior news writer for Search-CIO.com. Write to her at [email protected].
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Sectors that have enjoyed thefederal stimulusprogram are morelikely to spend on technology.
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IT BUDGETS MAY be at an all-time low,leading to smaller staffs and delayedbusiness projects, but this lull is aprime time for CIOs to introduceagile IT best practices designed toreduce waste and realize faster ITresponse times.
Project portfolio management andIT Service Management are twoapproaches that CIOs are employ-ing either in conjunction or sepa-rately to achieve agile IT.
With IT Service Management, oneof the first steps toward betterresponse times is the creation of aservice catalog. Users or groups canpick and choose preapproved serv-ices through a Web-based interfacewith minimal interaction with IT.
Before creating a business-facingIT services catalog, the CIO shouldtake stock of utilization rates of thesoftware and hardware in place andtransform IT’s chargeback model.
Instead of charging business units
based on the number of servers orhow much support is tied to a par-ticular application, charges need tobe translated into business termssuch as email service, says CraigSymons, an analyst at ForresterResearch Inc. in Cambridge, Mass.
“Ultimately, IT can then sit downwith the business and say, ‘Here arethe services we provide, this is whatthey cost, and this is what you con-sume,’” Symons says.
As a service catalog is created,the CIO can also start to see wherethe organization has redundancies,or if there are high-cost services withlow demand that can be outsourcedat a lower cost, Symons says.
An overall IT assessment will alsoboost response time by identifyingwhere IT is spending the majority ofits money—typically on ongoingmaintenance and support, saysGeorge Spalding, executive vicepresident of IT management con-
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Respond to the
Business—FastLearn how to use ITSM methodologies to prove
IT value to the business. BY CHRISTINA TORODE
sulting firm Pink Elephant in RollingMeadow, Ill. “We get asked thesame question a lot—’I have a $1million budget for this project and$700,000 of that is just to keep thelights on; the other $300,000 is forbusiness innovation,’” he says.
A key way to flip this breakdownis through IT capacity management.“Sure, [tackling capacity manage-ment] will involve re-engineeringsome processes, but you don’t haveto run out and buy more equipmentthat in turn has to be managed,”Spalding says. “At the same time,you can look for redundancies inmanagement tools.”
Spalding said he has seen largecompanies with 10 or more monitor-ing tools. A glut of managementtools can cause communicationbreakdowns and in turn slow downprojects and reinforce IT’s tendencyto work in silos.
CIO Chris Brady has cut throughsilos at Dealer Services Corp., aCarmel, Ind.-based financer for cardealerships, by gathering all IT-relat-ed projects in a single report devel-oped in its Information Builders Inc.’sbusiness intelligence tool. Businessand IT teams receive a weekly reportlisting all projects in the queue.
“There was no managementaround project timelines from abusiness point of view,” Brady says.“[A business unit] would put in anIT request and wait, thinking that[IT] wasn’t responding at all.”
Now all business department
heads can see just how many re-quests IT gets and why their fiveparticular requests may not be a toppriority among the 2,300 other onesIT is working on at the moment, shesays.
Since the dashboard reportingsystem was introduced, businessusers are less likely to put in requestsfor reasons of convenience, such as arequest to cut down on the numberof steps it takes them to complete atask, she says. They’re more likely tomake requests from which the busi-ness would derive real value.
Another agile IT practice Bradyintroduced was the use of visualiza-tion prototypes. Instead of develop-ing a product prototype for loan offi-cers, for example, the IT team wouldcreate a visual representation ofhow a product would look and howthe features would work. The loanofficers would sign off on the visualprototype or make changes before aprototype was made. “This hassaved us a lot of time developingnew products for the business,”Brady says.
PPM BOOSTS IT PRODUCTIVITYBefore Mentor Graphics Corp.brought in Hewlett-Packard Co.’sproject and portfolio managementtool a few years back, the productdivisions at the electronic designautomation software maker didn’thave much visibility into what otherprojects were being worked on in
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their own divisions, never mindcompanywide. Project leads weretracking work in Excel spreadsheets,sometime in Microsoft Project, andcommunicating through email.
Along with HP, Mentor Graphicshired Austin, Texas-based systemsintegrator Results Positive Inc. tobuild a prototype system.
“We were up on the new systemin about four weeks and could seeeach of the project’s requirements,associated resources and theprogress being made on each aspectof a project real-time using dash-boards,” says Mark Kresge, actingdirector, IT program managementoffice at Portland, Ore.-based Men-tor Graphics.
Once the tool was in the hands ofproject managers and IT, risks suchas going over budget, not meeting adeadline or under- or overstaffing aproject could be identified in realtime. On the flip side, a few peoplebecame overzealous with the work-flow features of the tool, potentiallyslowing projects down. “We had tohave a friendly intervention with onegroup because they started to over-model,” Kresge says. “They began torealize that they were spamming allthe senior managers and overbuild-ing with the tool, and that it wouldbecome cumbersome to maintain.
“Our responsiveness has im-proved simply because of the levelof confidence [business depart-ments] now have in us,” he says.“They no longer try to cram every
aspect of a project into a singlerequest, fearing that we’ll never getto another one of their projects.”
The tool has brought order to bothIT and business projects, but Kresge
is quick to note that a PPM tooldoes not represent project manage-ment as a process. That is some-thing users will still have to betaught, including planning, how toget the right project assumptions,recognizing risks or having a com-munication plan.
“You will run into users who say,‘Just give me access to the tool andI’ll build a schedule,’“ he says. “Theymisunderstand what the tool ismeant for and, in the end, this willslow projects down.” �
Christina Torode is news director for SearchCIO.com. Write to her at [email protected].
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“You will run intousers who say,‘Just give me access to the tooland I’ll build aschedule.’ Theymisunderstandwhat the tool ismeant for.”—MARK KRESGE, acting director,IT program management office, Mentor Graphics
Access free expert resources for health care IT leaders at
SearchHealthIT.com
THE ECONOMIC DOWNTURN is provid-ing strong incentive for CIOs topractice vendor contract manage-ment—and there isn’t a contractterm or condition that isn’t immuneto some nitpicking: Does the cost-of-living or inflation-rate clause inthat outsourcing contract still repre-sent what I should be paying forlabor? Does that currency conver-sion clause need adjusting?
Staffing augmentation labor ratescontinue to be targets of cost sav-ings for CIOs—as seen by suchquestions above.
“CIOs are saying we’ve looked atour labor contracts, now let’s have a closer look at what else we can dowith our other vendor contracts orsoftware maintenance contracts,and are willing to look at it clause byclause, and term by term,” saysChristine Ferrusi Ross, an analyst at
Cambridge, Mass.-based ForresterResearch Inc.
Also under way are efforts to con-solidate vendor contracts and soft-
ware licenses across business unitsto get better pricing and eliminatecontract redundancies. In othercases, enterprises are opting toeliminate aspects of their contractscompletely.
Some enterprises are droppingapplication maintenance from theirIT vendor contracts, for example.
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CuttingCosts
Save money with these tips for renegotiating your service contracts. BY CHRISTINA TORODE
Enterprises are opting to eliminateaspects of their contractscompletely.
This is generally happening in casesin which an application is lightlyused or has minimal performanceproblems throughout the year.
“There are companies cancelingsupport altogether with major ERPvendors or switching those supportcontracts away from the OEMs tothird parties to reduce costs,” saysBill Snyder, an analyst at Stamford,Conn.-based Gartner Inc. “Both situ-ations can carry with it a lot of risk,but customers are making dramaticcuts in that area.”
A less risky option is to re-evalu-ate software maintenance contracts.Enterprises often sign off on pre-existing maintenance and supportcontracts because they have been inplace for so long, but CIOs can lookat support clauses to find ways tolessen these costs, says Ferrusi Ross.
A software maintenance contractcould be renegotiated down from apremium support level to a standardone, or the contract could be rene-gotiated to cover only bugs and fixesbut not help desk support. “You caneven renegotiate to pay for helpdesk support on an ad hoc basis—which is not worth it if you have alot of support calls, but makes senseif the application is fairly stable,”Ferrusi Ross says.
SWITCHING VENDORS WHEN CONTRACT NEGOTIATIONS FAILKroll Factual Data, a subsidiary ofrisk consultancy Kroll in Loveland,
Colo., is trying to renegotiate con-tracts with big-iron vendors, but itisn’t making much headway. “Thereality is we’re locked into multiyearcontracts, and the big vendors aren’twilling to budge, despite the way theeconomy is,” says Christopher Stef-
fen, a principal technical architect atKroll Factual Data.
Smaller, hungrier vendors, howev-er, are willing to give price breaksthat may sway enterprises awayfrom incumbent vendors. One net-working vendor cut the price for apiece of hardware by nearly 50%—asavings of more than $50,000 forKroll Factual Data, Steffen says.
“You can save money with thesmaller vendors because they’remore interested in relationshipbuilding,” he says. “They’re willing togive you a deal if it means that you’llcome back to them for more busi-ness.”
The on-demand model in whichcloud computing or Software as aService providers essentially rentout infrastructure or an application
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Enterprises often sign off on preexisting contracts becausethey have been inplace for so long.
can also be used as a renegotiationtool for lower prices with on-premise vendors. But be sure youare willing to go through the pain ofchanging technology vendors. Someincumbent vendors just might callyour bluff if contract renegotiationsbreak down, Ferrusi Ross says.
FINDING CONCESSIONS THROUGH VENDOR CONTRACTMANAGEMENT“There are a lot of concessionsbeing made by vendors that aren’tappearing on the contract,” Snydersays. “They’ll agree to drop pricesfor a period of time with the agree-ment that prices will go back uponce things are better. It isn’t sus-tainable for vendors to keep theirprices low.”
In other cases, vendors are con-ceding on some price reductions ifthe customer does more businesswith the vendor, Snyder said.
It is not uncommon these days tosee companies consolidating con-tracts down to one vendor in specif-ic areas or across the board to gainvolume pricing discounts and cutout the costs of dealing with dozensof suppliers. Virgin Atlantic AirwaysLtd., for example, recently consoli-dated contracts with 40 suppliers ofvoice and data services down to oneprovider, SITA, based in Atlanta. Inanother case, the governor of thestate of New York recently laid out acost-cutting proposal to merge and
consolidate several state agencies’related technologies, includingemail and call centers.
If the choice is made to go with aless expensive provider of any ITproduct, and in particular out-sourced IT staffing for applicationdevelopment, keep in mind thatservice-level agreement (SLA)terms should remain the same,despite cost reductions for labor. Ifthe SLA terms are not upheld in therenegotiated contract, the staffingagency or outsourcer may putemployees with less experience onyour project or deem your requestsless of a priority in terms ofresponse times, Ferrusi Ross says.
RATIONALIZE CONTRACTS ACROSS BUSINESS UNITSBusiness units often buy their ownIT, which can lead to the enterpriselosing out on volume license dis-counts or buying too many licenses.
In the case of layoffs, for example,the CIO can step in and ask the ven-dor if unused licenses can be takenoff the contract, or if licenses forone business unit can be reused byanother department. The CIO canalso switch a licensing contract fromthe business-unit level to a parent-company level to realize strongerbuying power and steeper dis-counts. �
Christina Torode is news director for SearchCIO.com. Write to her at [email protected].
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THE WALL STREET crowd might beready to spend again, buoyed bybailouts and record bonuses, butCIOs don’t seem inclined to go onany technology spending sprees in2010, our annual IT Priorities Surveyof senior IT executives and man-agers shows.
With two-thirds of the 171 respon-dents facing flat or declining ITbudgets this year, CIOs and seniorIT managers remain focused ontechnologies and projects that miti-gate risk, boost efficiency andreduce IT costs. For example:
� Compliance is the top manage-ment initiative for 2010, cited by33% of respondents, followed bybusiness process automation (29%)and data retention and lifecyclemanagement (26%).
� Disaster recovery/business
continuity is the most likely infra-structure project to get the go-ahead this year for 53% of ourrespondents, followed by server virtualization (43%) and Windowsserver 2008 (26%).
The widespread migration to thecloud we’ve been reading so muchabout? That isn’t happening forCIOs in 2010, with only 12% ofrespondents likely to implement aninternal cloud this year and a mere8% planning to work with an exter-nal cloud computing provider.
The conservative focus for tech-nology spending in 2010 extends to the realm of security, where dataprotection (40%) and network-based security and antimalwaredeployments (40%) trump mobileendpoint security (19%), a so-calledhot commodity.
Software spending, which took a
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ReduceRisk,Boost EfficiencyStorage virtualization, business intelligence
top enterprise technology wish lists. BY LINDA TUCCI
beating in 2009, shows few signs of making a roaring comeback. The two top priorities of our surveyrespondents are business intelli-gence (26%) and custom applica-tions (24%), but both of those cate-gories were outpolled by “none ofthe above,” cited by 27% of respon-dents. Meanwhile, service-orientedarchitecture (SOA) remains a lowpriority (11%), contrary to reportsfrom Gartner Inc. and ForresterResearch Inc. that CIOs are showingdeep interest in what the analystfirms consider “lighter-weight” solutions like SOA.
IT BUDGETS FOCUS ON COST-CUTTING AND RISK REDUCTIONIn follow-up interviews with surveyrespondents on their 2010 technol-ogy spending plans, CIOs remainrisk-averse. Several, like Tom Gainer,CIO at FirstBank Southwest, aregional bank based in Amarillo,Texas, have given the green light toonly the most critical projects. Gain-er, whose 2010 budget is actuallyless than in 2009, plans to bolsternetwork security and upgrade thebank’s Voice over Internet Protocoland virtual private network. Laterthis year, the bank will migrate toWindows 7 as part of a long-post-poned computer refresh.
Who can blame CIOs for theircaution? While IT budgets were notsingled out for cost reduction in2009, as they were after the dot-
com bust, many IT departmentswere strained to the breaking point.
Stamford, Conn.-based Gartner,which initially forecast modest ITbudget increases for 2009, recentlypronounced the last 12 months the
worst year for IT budgets since itbegan tracking the numbers in 1999.According to Gartner, IT budgetsdropped by 8.1% in 2009, essential-ly erasing four years of growth.
Our survey corroborates the sig-nificance of the economic downturn.Asked to gauge the impact of theeconomy on their budgets, 52% ofour respondents said it was “signifi-cant” and another 30% said it wasthe “biggest single factor.” Whenasked to describe their IT approachin 2009, 51% said they weatheredthe recession by “doing more withless.” Another 23% said they sur-vived by “doing more with thesame.” When they did try new tech-nologies or products in 2009, 42%of respondents said it was “toreduce cost.”
That isn’t likely to change quicklyin 2010. Cambridge, Mass.-basedForrester, which is forecasting
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Asked about the impact of the economy onbudgets, 52% saidit was significant.
between 6% and 7% growth in ITbudgets in 2010, said that althoughthe tech outlook has brightened,CIOs do not plan to move forwardwith new projects and investmentsunless their business executivesreport that business is getting bet-ter. For the start of 2010, the few ITinvestments that will get approvedwill be directly related to reducingbusiness costs, says Forrester ana-lyst Andrew Bartels. If the economypicks up, Bartels says he expectsCIOs will get leave to spend overtheir official budgets, and shift fromcost-cutting to supporting businessgrowth.
One technology trend that mayend up saving money and helpingthe business grow? Storage virtual-ization: 35% of the IT executivessaid they intend to invest in it in2010, well above the 19% whonamed storage security as their top priority or the 12% investing in iSCSI.
What’s behind the interest? Theinvestment in storage virtualizationlikely stems from companies’ con-tinued adoption of server virtualiza-tion to save money and their grow-ing interest in desktop virtualization.Overall investments in storage didnot fare as well, with 45% of re-spondents saying they don’t plan to invest in storage security, iSCSI or storage virtualization this year. �
Linda Tucci is a senior news writer for Search-CIO.com. Write to her at [email protected].
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2010 BUDGETS
IN FLUX
RESPOND TO
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REDUCE RISK,
BOOST
EFFICIENCY
4 REDUCE RISK, BOOST EFFICIENCY
Enterprise CIO Decisions Ezine is produced by TechTarget CIO/IT Strategy Media, © 2010 TechTarget.
Jacqueline BiscobingManaging Editor
Scot PetersenEditorial Director
Linda KouryArt Director of Digital Content
Rachel LebeauxAssociate Editor
Christina TorodeNews Director
Linda TucciSenior News [email protected]
Theron ShreveSenior Product [email protected]
(617) 431-9360.
©2010 TECHTARGET. ALL RIGHTS RESERVED.
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