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Gartner Says CIOs Will Be Challenged to Balance Cost, Risk and Growth in 2010
Analysts Discuss the Future of IT during Gartner Symposium/ITxpo 2009, 2-5 November, in Cannes, France
During the opening keynote today at Gartner Symposium/ITxpo, being held in Orlando through October 22, Gartner analysts said very few IT leaders will receive budget increases in 2010. The "mend and make do" approach that allowed companies to survive the last 12 months will continue. However, they said this does not mean business as usual.
"This year, IT leaders need a new type of budget, a rolling forecast that supports the return to growth," said Barbara Gomolski, managing vice president at Gartner. "IT organisations need a budget that gives them the flexibility to respond to the changes that they know are going to come, and those that they cannot yet identify."
"The pressure to improve efficiency and productivity will increase dramatically," said Brian Gammage, vice president and Gartner Fellow. "If growth is faster, IT leaders will need radically new capabilities. The growth trajectory they follow will be determined by their ability to free up the resources to fund these."
Gartner highlighted some of the key issues that IT leaders must address with a return to business growth:
Control Application Portfolios
Gartner analysts said that when it comes to business applications, the reality is that both business and technology managers are happy to engage in the process of acquiring new applications, but that interest and engagement quickly wane once the system has gone live, once the novelty wears off.
"Business users who go out and acquire applications are not thinking of the long-term consequences of their decision," said Andy Kyte, vice president and Gartner Fellow. "Our research shows that when you own an application for 15 years, the cost to go live is, on average, 8 per cent of the total lifetime cost of ownership. Who is responsible for making sure you get the best possible value from the other 92 per cent of those costs?"
"This has got to stop," Mr Kyte said. He said IT leaders must "revise the template that you use for the business case for new investments, so that it will show the total lifetime cost of ownership, not just the cost of the project."
The existing application portfolio needs to be rationalised and simplified. With scrutiny over operating expenses, it is necessary to examine the costs of running the business in more detail.
It is imperative to prepare for a return to growth without the commensurate budget increase. IT has no choice but to reduce application portfolios, so they have people and resources available for the initiatives needed once pent-up demand is unleashed.
"This can be done by decommissioning and retiring solutions that are no longer delivering acceptable return on asset (ROA), so that you can divert precious resources to where they're really needed," Mr Kyte said. "So prioritising your budget initiatives by using project portfolio management to create a balanced investment portfolio is even more important now than it has ever been."
Living in a Digitally Enabled and Socially Connected World
While many organisations and managers have been focused on cost, innovation and the viral spread of social media has accelerated. Social media instantiates the real relationships that exist in the organisation and it uncovers the people most important to organisational performance. Gartner analysts said most organisations are "flying blind." They don't know how work is really getting done. Social media can help solve this problem.
"IT leaders can use social software to identify and examine the social networks at work in your organisation," said Carol Rozwell, vice president and distinguished analyst at Gartner. "They can use it to make sure they understand who their key performers are, and to look for people who have expertise that they may not be utilising effectively."
Social networking technologies are also being harnessed by an emerging force that Gartner calls "the collective." The "collective" is comprised of individuals, groups, communities, crowds, markets, and firms that shape the direction of society and business.
"They, the people in the collective, always have a presence, whether they gossip around the water cooler, tack a flyer on a bulletin board, notify their blog followers about a service problem, or post pictures of the Sichuan earthquake to Facebook faster than traditional news media," Ms Rozwell said. "What is different is the speed with which information is dispersed. It goes way further, way faster."
The "collective" is pervasive, vocal, and can galvanise quickly around a topic, an issue, or even a global economic policy. Therefore, it's important that organisations understand that banning access to social media from the corporate network is futile. Companies cannot halt the use of social media, but harnessing the passion of employees and educating them about their responsibilities is essential.
"IT leaders need to refresh their organisation's Code of Conduct to be 'social media aware'," said Ms Rozwell. "Make sure employees understand the rationale behind the rules and the potential impact of their actions."
Gartner analysts said that the quality of data underpinning metrics such as measuring business productivity, profits, value, and efficiency of services delivered is inadequate. This stems from siloed and inconsistent business data, and from an over reliance on spreadsheets. Even where there have been investments in business intelligence, it's not giving the business what it needs. The challenge for IT leaders is getting the information that everyone can believe in, and that everyone in the organisation will trust.
"IT leaders need robust information architectures and governance, coupled with data quality and integration capabilities to create an enterprise view across these silos," said Nigel Rayner, research vice president at Gartner. "You will need to rationalise and link performance measures across the business in an enterprise metrics framework. When the data is consistent, and everyone believes it, then you have built trust."
Most organisations don't have a clear picture of the leading indicators that drive business outcomes, and cannot model how changes in these drivers will impact future performance. This means they miss the opportunity to recognise the early signals about what's coming and fail to act on emerging patterns.
"You need to prepare for early pattern-detection and create the ability to model potential outcomes, so that you can adapt, instead of sticking with a one-dimensional, linear strategy that may not reflect changing business reality," Mr Rayner said. "To do this, you will need performance management applications that plan, simulate, and forecast performance at all levels of the organisation, not just report on what has happened. Predictive, pattern-seeking technologies must become an integral part of this modelling environment, not niche tools employed by specialists.
With the accelerating pace of business, and the vast amount of information that's now pumping into and through social networks, companies can't afford to wait to notice what's going on. They have to actively seek out new signals and patterns, and act on them.
"This means technology will have to change and people's outlooks will need to change," Mr Rayner said. "First, start with information management to create believable, trusted data. Second, enable executives to focus on leading indicators of performance, not lagging one. Third, use predictive, pattern-seeking technologies to actively seek signals from outside the four walls of the business. Finally, you're going to have to share all of this more broadly and publicly than ever before."
Balancing Risk Management With Performance
Risk management is about accepting that IT organisations cannot protect the company from everything, so they will have to make conscious decisions about what they will do to protect themselves, and what they will not do. The must learn to balance risk and performance.
People need IT organisations to share information, so that they can trust them. IT leaders should accommodate letting outside information in, and sharing inside information appropriately. CIOs shouldn't think they can shut down the two-way flow of information because they can't stop it.
"Most traditional security programmes are designed only to keep the bad guys out, and protect the information within, rather than allowing the proactive disclosure of information to foster trust in the organisation," said Paul Proctor, vice president and distinguished analyst at Gartner. "Changing your posture from 'need to know' to 'accommodating transparency' is going to be essential as we prepare for the return to growth in the new business environment."
Mr Proctor said IT organisations cannot go back to the old approach of only protecting and restricting. Traditional security, such as antivirus, firewalls, and intrusion detection remain critical, but even the traditional mandate for control expands in the new environment. They must explore the linkage between their areas of traditional security responsibility and the larger context of business risk.
IT has long sought to enable the business, and now risk management and security must follow suit. IT leaders need to embrace transparency and encourage the two-way flow of information, rather than fear it.
"In addition to protecting information, IT organisations also need to learn how to enable and guide the appropriate use of information," Mr Proctor said. "This is essential if IT leaders are going to take advantage of new opportunities as we prepare for the return to growth."
Gartner analysts will further examine the role and contribution of IT to business outcomes at the Gartner Symposium/ITxpo 2009, 2-5 November, in Cannes, France. Additional information is available at www.gartner.com/eu/symposium
Members of the media can register for the event by contacting Laurence Goasduff at Laurence.firstname.lastname@example.org
About Gartner Symposium/ITxpo
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