By Stephen Pritchard
Published: October 27 2010 09:25 | Last updated: October 27 2010 09:25
As businesses emerged from the last recession, following the dotcom bust in 2001, the recovery in IT spending lagged behind.
Companies that had invested heavily during the good years found they had overspent on IT and had more than enough equipment to support their operations. It was 2004 before investment in technology recovered fully. By at least one measure, IT spending also became less effective during the dotcom induced downturn.
Businesses that had shed staff, or cut back other areas of their operations, found that their per capita IT costs increased.
Move forward to today, and a tentative economic recovery in most mature markets is once again putting a brake on IT spending. But businesses – as well as public sector organisations – are also being forced to look again at their cost bases, and IT is by no means immune from scrutiny.
At the same time, business leaders have to balance two competing demands: creating a leaner IT operation and creating a leaner business.
Although cutting budgets can produce quick savings, most enterprises spend only between 2 and 5 per cent of revenues (turnover) on technology; smaller companies, typically, will invest rather more.
But across the board, a small increase in IT spending can drive far greater gains in overall productivity.
“Steps towards recovery are still tentative,” cautions David Elton, an IT and change management expert at PA Consulting.
“The pressure on IT departments is still about money. There are signs that people are investing but most clients are still concerned about controlling costs.”
Boards remain cautious about a return to unfettered spending, where large sums of money seemingly vanished into long-term IT projects that failed, or failed to deliver the promised results.
This is prompting chief financial officers and chief information officers to look both at newer technologies, such as cloud computing, which can be deployed to reduce costs – and at improved methodologies for delivering IT services. In particular, there is growing interest in applying “lean” processes to IT.
“The CIO’s role is rapidly changing,” says Alexander Peters, a principal analyst at Forrester Research. “The recession accelerated this change but the drivers – social technologies, service oriented applications and the cloud – are strategic and require changes beyond tactical cost-cutting.”
Mr Peters is the co-author of a report that looks at how IT departments can apply “lean” thinking to their operations. In the report, he argues that CIOs can draw on methods developed in fields such as manufacturing, and use them to make IT not only cheaper, but more effective.
Lean thinking includes considering whether an enterprise should build or buy its IT infrastructure and services, moving on to newer, more efficient, platforms and making greater use of standardised processes.
But at its heart, Mr Peters argues, “lean” is about ensuring IT is more closely aligned to the business. This makes for more effective technology, and less waste.
“Best-practice executives view lean as a performance improvement strategy, rather than merely a cost-cutting exercise,” he says.
Bringing IT closer to the business, and ensuring it is more flexible and responsive, are key to lean thinking.
However, it also requires businesses to reconsider the way they run IT, both to cut costs and make it more responsive.
Moving to newer platforms and technologies should also provide businesses with a stronger foundation for a return to growth.
Strategies such as virtualisation – allowing a single computer to host multiple “virtual” machines – and server and storage consolidation, where those machines are run on fewer physical computers, will save money quite quickly, for businesses that have the expertise to implement them.
Some steps will require more initial investment. Installing computer and other equipment that draws less power can save significant sums over its lifetime, but businesses need to find the capital budgets for the hardware.
Research by IBM, for example, suggests that power consumption accounts for 75 per cent of data centre operating costs. Power costs are also growing much more rapidly than staffing, building or real estate expense, or taxes.
The cost of buying computer equipment, and of building data centres, is prompting more companies to look either at software as a service, outsourcing, or cloud computing.
IBM estimates that the construction cost of a 2,000 sq m data centre now runs to between $30m and $50m, putting it out of reach of all but the largest businesses or service providers.
Then there is the challenge of owning and running an asset based on technology that is both complex, and that rapidly becomes out of date.
A wholesale move to cloud computing might not be appropriate, although some commodity services, such as e-mail, archiving and software test and development, are already being hosted in the cloud for large businesses.
Frank Modruson, CIO of Accenture, the consultancy, points out that businesses with older and more complex IT infrastructures may have to update those before they can outsource the technology itself.
But making such investments is perhaps one of the few ways IT departments can free up cash to support new business initiatives, such as new online sales channels or social networking.
“Coming out of the recession, companies have started to redirect spending to the top line,” says Mark Hillman, vice-president for strategy at Compuware, an IT services company.
“They still have cost reduction initiatives in place, such as server consolidation, but they are limiting spending on the back office, to allow them to invest in areas that give them better connections to partners or customers, or in areas that affect their brand.”
Financial data for the Facebook generation
The financial services companies that buy the data services Thomson Reuters provide may have had a tough couple of years but they have not become less demanding.
Thomson Reuters provides financial market data to businesses including banks, brokerages and investment houses. The company supplies this information via traditional trading room terminals, but more traffic is being carried over the internet, in a business worth $15bn annually.
According to Kevin Blanco, vice-president of global application support and engineering at Thomson Reuters, ensuring clients receive good service across a worldwide network is a challenge.
As a data provider to fast-moving financial markets, Thomson Reuters has to meet two targets for its services: the availability and the responsiveness of data feeds.
This is especially critical for internet-based services, since it is these that are growing most quickly.
Thomson Reuters sets a target of 99.9 per cent “uptime” for its web-based products and a maximum eight-second response time.
“Connections over dedicated circuits are expensive,” explains Mr Blanco. “There are some large banks that require dedicated circuits and we maintain them. But the majority of our products and of our strategic initiatives will be web based. There will be very few dedicated workstation installs or dedicated circuits in the future.”
But newly cost-conscious bankers want to maintain service levels to customers and this places demands on the services they buy from suppliers such as Thomson Reuters.
For Mr Blanco, this means maintaining or improving service quality levels, while controlling costs.
Financial services companies have come to expect from web-based services the reliability and responsiveness they got from dedicated links, as well as the ease of use associated with sites such as Amazon or even social media sites.
“Our user base is no longer [just] financial professionals in their 40s and 50s. The primary user is a junior banker who also uses Facebook or MySpace. Our interface and speed have to match that demographic.”
Researchers who study consumers’ online behaviour have found that visitors to websites often abandon a transaction and go elsewhere if a page takes more than two seconds to respond.
“We are not seeing [demand for] two seconds now, but it is certainly four to five seconds,” says Mr Blanco. “But I do feel that the demand will continue for response times to compress, especially for transactional services.”
Controlling latency – the speed at which trades can be completed – and network quality for a company operating global services can be expensive and demand large numbers of skilled staff to diagnose and fix problems.
Like many other IT-dependent businesses, Thomson Reuters is increasingly relying on automation to cut the cost of delivering its technology.
Streamlining systems for updating services or deploying new applications to servers has cut support costs and, vitally, has improved system uptime.
And, Mr Blanco says, Thomson Reuters is making more use of automated monitoring and diagnostic tools to control the quality of its network.
In particular, web performance and monitoring software from specialist vendor Gomez has brought some rapid and significant improvements.
“In our corporate services business, we brought their website availability up to [99.9 per cent] in two months,” says Mr Blanco.
“We’ve also done the same for the rest of the business.”
IT, with its large fixed cost base and three to four year project life cycles, was not well placed to respond to relatively rapid changes in the business climate.
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Showing posts with label IT. Show all posts
Showing posts with label IT. Show all posts
Thursday, November 11, 2010
Tuesday, May 18, 2010
Successful mergers rely on taming the systems
Successful mergers rely on taming the systems
By Alan Cane
Published: May 18 2010 16:39 | Last updated: May 18 2010 16:39
As any business school student knows, the classic motives for a merger or acquisition are economies of scale or scope, synergies and market share.
But information technology is simultaneously the biggest enabler of those aims and the biggest constraint for most large businesses. As Vimi Grewel-Carr of Deloitte, the consultancy, points out: “Successfully merging the technology systems of two organisations is an imperative for the delivery of the benefits.”
Too few companies, however, take this into account when carrying out due diligence: it means the merger process can limp on for longer than is commercially acceptable while incompatible systems are persuaded to talk to each other – with the risk that they might even collapse entirely.
Accenture, the consultancy, reports that almost half the top executives involved in M&A point to a weakness in combining IT operations as the main reason for integration failure.
Andrew Morlet, head of IT strategy and M&A at Accenture, argues that bringing IT into the planning process at an early stage is critical.
Neil Louw, European chief technology officer for the IT services group Dimension Data, points out that as IT is now the production engine for most organisations, a thorough understanding is required – how it works, what its limitations are and where the differences lie between the two organisations. Without this “the acquisition could easily fall flat on its face”.
But he says that in the majority of cases, the IT team is only brought in at the planning or even post-acquisition stage: “Having chief information officers and their teams involved from the due diligence stage of any acquisition is more important than having a tight timetable during the merger process.
“Involvement from the IT department at this stage enables a focus on the right technical questions that other members of the M&A team ignore.”
Giles Nelson, chief technology strategist for the computer services group Progress Software, says companies are increasingly hampered by a lack of an M&A process, over-integration, loss of IT staff and a failure to realise assets and economies of scale.
“Working to specific timetables and quick decisions are of paramount importance. IT people are good at vacillating,” he says.
“Leadership and objectives are vital to ensure that things move forward apace. Quickly identify the top three areas of integration – for example, giving customer service access to all customer information systems – and get something done quickly.”
Success depends on a clear vision and a determined management. One battle-scarred veteran of the very public merger of two UK companies recalls the difficulties: “We would arrange a meeting between the two IT teams. We would go through the plans for integration, making sure everybody understood and agreed what they were being asked to do. Then they would go off and carry on just as before.”
Hugely frustrated, he left to pursue other objectives – and still prefers to remain anonymous.
Mark Nutt, general manager for computing services company Morse, warns that too many companies have too little knowledge of what IT assets they possess and how they work together: a first step, therefore, is a full IT audit before settling on a platform.
He recommends an agile and scalable architecture, with software development taking place in short phases with continuous feedback and modification.
“The problem is that this is still relatively rare,” he says. “Often, organisations have a diverse range of legacy platforms that have been in place for a number of years, resulting in an overly complex environment. In the event of a great upheaval such as a merger, the complexity and potential for increased downtime present a significant challenge.”
Lack of knowledge of the software assets – that is, the software licences – each party holds can also spell trouble.
Martin Mutch, chief executive of the Rocela consultancy, which specialises in Oracle software, says most companies fail to understand or even consider the implications of M&A on their licensing of enterprise software. Yet it constitutes a large part of the IT budget, he says.
A number of technology options are available to companies seeking to integrate incompatible systems.
There are, for example, commercially available architectures such as Avaya’s “Aura”.
Michael Bayer, president of field operation for the company in the EMEA region, describes it as “an open-systems based architecture designed to integrate applications and devices across multi-vendor, multi-location and multi-modal businesses”.
“By taking an open-standards approach,” he says, “existing systems can be left in place and will interoperate easily with the new partner systems, meaning that systems do not clash and there is no need for a complete IT overhaul.”
David Davies of Corizon, which describes itself as the “enterprise mashup company”, not surprisingly advocates this technology, which unites two or more external sets of data or functionality to create a new, web-based service.
It “allows companies quickly and simply to combine different systems into a single, virtual desktop that makes it easy for employees to carry out their tasks”, he says.
Cloud computing – internet-based, on-demand computing – offers yet another approach.
Ewen Anderson, managing director of Centralis, the computing services group, says: “If neither organisation has a clear best of breed advantage (in IT), moving to a shared service or externally hosted cloud solution may well be a better option than trying to co-habit or merge.”
Mike Altendorf, European director for EMC Consulting, agrees, saying a private cloud can be the perfect bridge: “It facilitates the secure movement of information both between and within organisations.
“It centralises and consolidates the infrastructure from both companies in a time-frame the merger requires. We have even seen the cloud acting as a holding function to enable companies to migrate their systems.”
But even if one party’s systems are clearly superior, there can be dangers. Philip Keown, partner at Grant Thornton, the chartered accountant, warns that each head of IT will champion their own systems, “just as every parent will say their baby is beautiful”.
“In any merger situation, the integration into a single culture is key and this is as important for IT people as it is for the rest of the firm.
“Businesses need to look at the resources, technical and managerial skills needed in the merged organisation and then decide which people best fit the roles.”
Yet another approach is advocated by Colin Rowland of OpTier, the computing services group.
He argues that management should see IT from a business transaction perspective, which, he says, enables managers to see the impact of every action the business takes and gain early warning of problems.
“Rather than stumbling around in the dark, you are creating operational intelligence to get the job done right and ensure IT is underpinning the success of the M&A, not undermining it.”
But returning to the initial question: how important is IT in the merger process?
Mr Keown of Grant Thornton says it depends on how important IT is to the business as a whole. For some companies, IT is the business; for others, getting it wrong might be an irritant rather than a calamity.
He adds: “If a business reached a position, say three years down the line, in which two supposedly merged companies are both still using their legacy systems, then you have to question why they merged in the first place.”
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
By Alan Cane
Published: May 18 2010 16:39 | Last updated: May 18 2010 16:39
As any business school student knows, the classic motives for a merger or acquisition are economies of scale or scope, synergies and market share.
But information technology is simultaneously the biggest enabler of those aims and the biggest constraint for most large businesses. As Vimi Grewel-Carr of Deloitte, the consultancy, points out: “Successfully merging the technology systems of two organisations is an imperative for the delivery of the benefits.”
Too few companies, however, take this into account when carrying out due diligence: it means the merger process can limp on for longer than is commercially acceptable while incompatible systems are persuaded to talk to each other – with the risk that they might even collapse entirely.
Accenture, the consultancy, reports that almost half the top executives involved in M&A point to a weakness in combining IT operations as the main reason for integration failure.
Andrew Morlet, head of IT strategy and M&A at Accenture, argues that bringing IT into the planning process at an early stage is critical.
Neil Louw, European chief technology officer for the IT services group Dimension Data, points out that as IT is now the production engine for most organisations, a thorough understanding is required – how it works, what its limitations are and where the differences lie between the two organisations. Without this “the acquisition could easily fall flat on its face”.
But he says that in the majority of cases, the IT team is only brought in at the planning or even post-acquisition stage: “Having chief information officers and their teams involved from the due diligence stage of any acquisition is more important than having a tight timetable during the merger process.
“Involvement from the IT department at this stage enables a focus on the right technical questions that other members of the M&A team ignore.”
Giles Nelson, chief technology strategist for the computer services group Progress Software, says companies are increasingly hampered by a lack of an M&A process, over-integration, loss of IT staff and a failure to realise assets and economies of scale.
“Working to specific timetables and quick decisions are of paramount importance. IT people are good at vacillating,” he says.
“Leadership and objectives are vital to ensure that things move forward apace. Quickly identify the top three areas of integration – for example, giving customer service access to all customer information systems – and get something done quickly.”
Success depends on a clear vision and a determined management. One battle-scarred veteran of the very public merger of two UK companies recalls the difficulties: “We would arrange a meeting between the two IT teams. We would go through the plans for integration, making sure everybody understood and agreed what they were being asked to do. Then they would go off and carry on just as before.”
Hugely frustrated, he left to pursue other objectives – and still prefers to remain anonymous.
Mark Nutt, general manager for computing services company Morse, warns that too many companies have too little knowledge of what IT assets they possess and how they work together: a first step, therefore, is a full IT audit before settling on a platform.
He recommends an agile and scalable architecture, with software development taking place in short phases with continuous feedback and modification.
“The problem is that this is still relatively rare,” he says. “Often, organisations have a diverse range of legacy platforms that have been in place for a number of years, resulting in an overly complex environment. In the event of a great upheaval such as a merger, the complexity and potential for increased downtime present a significant challenge.”
Lack of knowledge of the software assets – that is, the software licences – each party holds can also spell trouble.
Martin Mutch, chief executive of the Rocela consultancy, which specialises in Oracle software, says most companies fail to understand or even consider the implications of M&A on their licensing of enterprise software. Yet it constitutes a large part of the IT budget, he says.
A number of technology options are available to companies seeking to integrate incompatible systems.
There are, for example, commercially available architectures such as Avaya’s “Aura”.
Michael Bayer, president of field operation for the company in the EMEA region, describes it as “an open-systems based architecture designed to integrate applications and devices across multi-vendor, multi-location and multi-modal businesses”.
“By taking an open-standards approach,” he says, “existing systems can be left in place and will interoperate easily with the new partner systems, meaning that systems do not clash and there is no need for a complete IT overhaul.”
David Davies of Corizon, which describes itself as the “enterprise mashup company”, not surprisingly advocates this technology, which unites two or more external sets of data or functionality to create a new, web-based service.
It “allows companies quickly and simply to combine different systems into a single, virtual desktop that makes it easy for employees to carry out their tasks”, he says.
Cloud computing – internet-based, on-demand computing – offers yet another approach.
Ewen Anderson, managing director of Centralis, the computing services group, says: “If neither organisation has a clear best of breed advantage (in IT), moving to a shared service or externally hosted cloud solution may well be a better option than trying to co-habit or merge.”
Mike Altendorf, European director for EMC Consulting, agrees, saying a private cloud can be the perfect bridge: “It facilitates the secure movement of information both between and within organisations.
“It centralises and consolidates the infrastructure from both companies in a time-frame the merger requires. We have even seen the cloud acting as a holding function to enable companies to migrate their systems.”
But even if one party’s systems are clearly superior, there can be dangers. Philip Keown, partner at Grant Thornton, the chartered accountant, warns that each head of IT will champion their own systems, “just as every parent will say their baby is beautiful”.
“In any merger situation, the integration into a single culture is key and this is as important for IT people as it is for the rest of the firm.
“Businesses need to look at the resources, technical and managerial skills needed in the merged organisation and then decide which people best fit the roles.”
Yet another approach is advocated by Colin Rowland of OpTier, the computing services group.
He argues that management should see IT from a business transaction perspective, which, he says, enables managers to see the impact of every action the business takes and gain early warning of problems.
“Rather than stumbling around in the dark, you are creating operational intelligence to get the job done right and ensure IT is underpinning the success of the M&A, not undermining it.”
But returning to the initial question: how important is IT in the merger process?
Mr Keown of Grant Thornton says it depends on how important IT is to the business as a whole. For some companies, IT is the business; for others, getting it wrong might be an irritant rather than a calamity.
He adds: “If a business reached a position, say three years down the line, in which two supposedly merged companies are both still using their legacy systems, then you have to question why they merged in the first place.”
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Technology takes a lead in cutting carbon
Technology takes a lead in cutting carbon
By Jessica Twentyman
Published: May 18 2010 16:39 | Last updated: May 18 2010 16:39
Compelling viewing: in an otherwise sluggish year for the IT sector, the worldwide market for videoconferencing technology grew 16.7% in 2009
IT teams have been battling to overturn the data centre’s reputation as a vast and inefficient contributor to the corporate energy bill and to its carbon footprint.
Widespread adoption of virtualisation technology – running multiple systems on each piece of hardware – has allowed big reductions in the number of power-hungry and under-utilised servers, which are replaced by fewer, larger machines capable of processing several workloads and operating closer to full capacity.
This has allowed many companies to report significant reductions in the amount of power and cooling needed to keep their data centres running.
But the transformation of IT from sinner to saint still has some way to go, according to Gary Hird, technical strategy manager at the John Lewis Partnership, the UK retailer.
As he and his colleagues have met – and even exceeded – their goals for data centre efficiency, they have started looking to other areas where technology can help reduce the company’s environmental impact.
For example, IT staff are working on transport optimisation and fuel monitoring, and are making improvements to the company’s demand forecasting system, with the aim of reducing food waste.
In a recent blog, Doug Washburn, an analyst with Forrester Research, an IT market research company, described how the scope of green IT is expanding: “While the industry’s initial and continued focus is on the data centre, organisations are realising they have bigger opportunities in distributed IT and, even more so, outside IT altogether.”
He pointed to Forrester data that show about 55 per cent of the IT department’s power use is consumed by other assets, such as PCs, monitors, printers and phones.
More importantly, he says, the IT industry is only responsible for about 3 per cent of the world’s greenhouse gas emissions – making the case for using technology to reduce environmental impact across broader business operations compelling.
Forrester now distinguishes between “green for IT” (the effort to reduce the environmental impact of IT operations) and “IT for green” (the use of technology to drive sustainability beyond the IT department).
Videoconferencing is one early example of using “IT for green”. Visual collaboration – whether conducted via dedicated, state-of-the-art telepresence suites or simple desktop PCs or laptops equipped with webcams – has become commonplace, reducing travel budgets and miles travelled.
In an otherwise sluggish year for the IT sector, the worldwide market for videoconferencing technologies achieved 16.7 per cent growth in 2009 and is expected to grow from $1.9bn last year to more than $8.7bn in 2014, according to IDC, the analysis company.
“The videoconferencing market is in the midst of a transition – from meeting over video as an option of last resort, to an alternative that’s preferred over travelling,” says Jonathan Edwards, an IDC analyst.
Events such as the travel chaos in northern Europe, caused by volcanic ash from Iceland highlight the benefits.
Danske Bank, for example, avoided drastic upheaval in spite of having a team from its Danica life assurance group stranded with its CIO in Bangalore.
Using the newest of the company’s 17 telepresence suites across 10 countries, they were able to work “just as if they were back in Denmark”, says Tom Soderholm, Danske Bank’s head of collaborative user technologies.
The company began rolling out Cisco telepresence suites in May 2008, supplemented by PC-based e-meeting technology from Microsoft, as part of its wider goal to become carbon-neutral in time for the COP15 United Nations climate conference, held in its hometown of Copenhagen last December.
Replacing business trips with telepresence sessions, he says, has led to a 15 per cent reduction in greenhouse gas emissions from air miles since 2008.
Each month, Mr Soderholm meets colleagues in Danske Bank’s travel management department to calculate how many miles have been replaced by videoconferencing sessions – and then with colleagues in the social responsibility department to calculate the CO2 reductions achieved as a result.
“We’re now discussing replacing our corporate travel policy with a corporate meetings policy, where travel is only one option. Travel should be the last resort,” he says.
For other companies, moving goods, rather than people, is the priority.
At Kimberly-Clark, Peter Surtees, European supply chain director, has been working with the company’s IT department on a roll-out of transport management software to reduce the miles travelled by its haulage contractors delivering tissues, paper towels, nappies and other products from its manufacturing plants to retailers.
The system, from i2 Technologies, a US supply chain management software specialist acquired by JDA Software last November, has enabled the company to optimise allocation of delivery contracts to a wider range of smaller and niche operators.
“The more carriers we have, the more likely we’ll find a contractor with trucks scheduled to return empty from deliveries. If we can fill those returning trucks, there’s less ‘empty running’, and so fewer carbon emissions,” says Mr Surtees.
The company estimates that it is saving £1m annually in transport costs and securing more competitive deals from its expanded list of haulage contractors. It is reducing distances travelled on its behalf by 380,000 miles a year, with an annual saving of 540,000kg of CO2.
Analytical tools are also being used by IT teams. These enable them to measure energy consumption and greenhouse gas emissions – a task that has so far been accomplished by manual effort and spreadsheets.
Big IT vendors are accelerating this process by adding environmental modules to their enterprise resource planning (ERP) software. SAP, for example, acquired carbon monitoring tools specialist Clear Standards in May last year; Oracle has teamed up with IBM to offer its own carbon monitoring product; and Microsoft last year launched its Environmental Sustainability Dashboard for users of its Microsoft Dynamics ERP suite.
“With the dashboard, we wanted to make it easy for companies to extract environmental intelligence from information that, in many cases, they already collect,” says Jennifer Pollard, senior product manager for Microsoft Dynamics.
Data from electricity bills, including units, quantity and price, might be fed into the dashboard directly from financial accounting applications. The dashboard is implemented on clients’ behalf by Microsoft’s global partner network.
In France, for example, André Krief, a manufacturer and distributor of kosher meat products, is working with Prodware, a local implementation specialist, to measure the water and electricity consumed in its manufacturing processes and its resulting carbon emissions.
Gilles Krief, the company’s managing director, says the aim is to use the dashboard to simulate the impact that using different machinery in its processing plants would have on overall emissions.
Other suppliers are suggesting software-as-a-service (SaaS) as a quick and easy way for companies to manage carbon. Cloud Apps, for example, was launched in April 2010 by Simon Wheeldon, the company’s director for the EMEA region and a former Salesforce.com executive.
While the company’s cloud applications aim to manage carbon right across the business – including IT, buildings, business travel, freight transport and so on – he sees an important role for IT in collecting data from different systems and ensuring its accuracy.
“Some of the data that companies will want to feed into Cloud Apps are readily available, in the form of half-hourly meter readings from utilities companies. But some of it is hidden away in core business systems in HR, finance and facilities management departments.
“Close integration and the help of IT staff will be needed to gather it all, in order to get the most accurate picture possible of a company’s overall footprint,” he says.
Edmond Cunningham, an IT and sustainability expert at PA Consulting Group, agrees: “IT leaders are in a unique position to reinvent themselves as green advocates or visionaries, and not just within their own departments.
“The knowledge around how to make green decisions is still not readily available in most companies and IT can play a role in providing the information and data required.”
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
By Jessica Twentyman
Published: May 18 2010 16:39 | Last updated: May 18 2010 16:39
Compelling viewing: in an otherwise sluggish year for the IT sector, the worldwide market for videoconferencing technology grew 16.7% in 2009
IT teams have been battling to overturn the data centre’s reputation as a vast and inefficient contributor to the corporate energy bill and to its carbon footprint.
Widespread adoption of virtualisation technology – running multiple systems on each piece of hardware – has allowed big reductions in the number of power-hungry and under-utilised servers, which are replaced by fewer, larger machines capable of processing several workloads and operating closer to full capacity.
This has allowed many companies to report significant reductions in the amount of power and cooling needed to keep their data centres running.
But the transformation of IT from sinner to saint still has some way to go, according to Gary Hird, technical strategy manager at the John Lewis Partnership, the UK retailer.
As he and his colleagues have met – and even exceeded – their goals for data centre efficiency, they have started looking to other areas where technology can help reduce the company’s environmental impact.
For example, IT staff are working on transport optimisation and fuel monitoring, and are making improvements to the company’s demand forecasting system, with the aim of reducing food waste.
In a recent blog, Doug Washburn, an analyst with Forrester Research, an IT market research company, described how the scope of green IT is expanding: “While the industry’s initial and continued focus is on the data centre, organisations are realising they have bigger opportunities in distributed IT and, even more so, outside IT altogether.”
He pointed to Forrester data that show about 55 per cent of the IT department’s power use is consumed by other assets, such as PCs, monitors, printers and phones.
More importantly, he says, the IT industry is only responsible for about 3 per cent of the world’s greenhouse gas emissions – making the case for using technology to reduce environmental impact across broader business operations compelling.
Forrester now distinguishes between “green for IT” (the effort to reduce the environmental impact of IT operations) and “IT for green” (the use of technology to drive sustainability beyond the IT department).
Videoconferencing is one early example of using “IT for green”. Visual collaboration – whether conducted via dedicated, state-of-the-art telepresence suites or simple desktop PCs or laptops equipped with webcams – has become commonplace, reducing travel budgets and miles travelled.
In an otherwise sluggish year for the IT sector, the worldwide market for videoconferencing technologies achieved 16.7 per cent growth in 2009 and is expected to grow from $1.9bn last year to more than $8.7bn in 2014, according to IDC, the analysis company.
“The videoconferencing market is in the midst of a transition – from meeting over video as an option of last resort, to an alternative that’s preferred over travelling,” says Jonathan Edwards, an IDC analyst.
Events such as the travel chaos in northern Europe, caused by volcanic ash from Iceland highlight the benefits.
Danske Bank, for example, avoided drastic upheaval in spite of having a team from its Danica life assurance group stranded with its CIO in Bangalore.
Using the newest of the company’s 17 telepresence suites across 10 countries, they were able to work “just as if they were back in Denmark”, says Tom Soderholm, Danske Bank’s head of collaborative user technologies.
The company began rolling out Cisco telepresence suites in May 2008, supplemented by PC-based e-meeting technology from Microsoft, as part of its wider goal to become carbon-neutral in time for the COP15 United Nations climate conference, held in its hometown of Copenhagen last December.
Replacing business trips with telepresence sessions, he says, has led to a 15 per cent reduction in greenhouse gas emissions from air miles since 2008.
Each month, Mr Soderholm meets colleagues in Danske Bank’s travel management department to calculate how many miles have been replaced by videoconferencing sessions – and then with colleagues in the social responsibility department to calculate the CO2 reductions achieved as a result.
“We’re now discussing replacing our corporate travel policy with a corporate meetings policy, where travel is only one option. Travel should be the last resort,” he says.
For other companies, moving goods, rather than people, is the priority.
At Kimberly-Clark, Peter Surtees, European supply chain director, has been working with the company’s IT department on a roll-out of transport management software to reduce the miles travelled by its haulage contractors delivering tissues, paper towels, nappies and other products from its manufacturing plants to retailers.
The system, from i2 Technologies, a US supply chain management software specialist acquired by JDA Software last November, has enabled the company to optimise allocation of delivery contracts to a wider range of smaller and niche operators.
“The more carriers we have, the more likely we’ll find a contractor with trucks scheduled to return empty from deliveries. If we can fill those returning trucks, there’s less ‘empty running’, and so fewer carbon emissions,” says Mr Surtees.
The company estimates that it is saving £1m annually in transport costs and securing more competitive deals from its expanded list of haulage contractors. It is reducing distances travelled on its behalf by 380,000 miles a year, with an annual saving of 540,000kg of CO2.
Analytical tools are also being used by IT teams. These enable them to measure energy consumption and greenhouse gas emissions – a task that has so far been accomplished by manual effort and spreadsheets.
Big IT vendors are accelerating this process by adding environmental modules to their enterprise resource planning (ERP) software. SAP, for example, acquired carbon monitoring tools specialist Clear Standards in May last year; Oracle has teamed up with IBM to offer its own carbon monitoring product; and Microsoft last year launched its Environmental Sustainability Dashboard for users of its Microsoft Dynamics ERP suite.
“With the dashboard, we wanted to make it easy for companies to extract environmental intelligence from information that, in many cases, they already collect,” says Jennifer Pollard, senior product manager for Microsoft Dynamics.
Data from electricity bills, including units, quantity and price, might be fed into the dashboard directly from financial accounting applications. The dashboard is implemented on clients’ behalf by Microsoft’s global partner network.
In France, for example, André Krief, a manufacturer and distributor of kosher meat products, is working with Prodware, a local implementation specialist, to measure the water and electricity consumed in its manufacturing processes and its resulting carbon emissions.
Gilles Krief, the company’s managing director, says the aim is to use the dashboard to simulate the impact that using different machinery in its processing plants would have on overall emissions.
Other suppliers are suggesting software-as-a-service (SaaS) as a quick and easy way for companies to manage carbon. Cloud Apps, for example, was launched in April 2010 by Simon Wheeldon, the company’s director for the EMEA region and a former Salesforce.com executive.
While the company’s cloud applications aim to manage carbon right across the business – including IT, buildings, business travel, freight transport and so on – he sees an important role for IT in collecting data from different systems and ensuring its accuracy.
“Some of the data that companies will want to feed into Cloud Apps are readily available, in the form of half-hourly meter readings from utilities companies. But some of it is hidden away in core business systems in HR, finance and facilities management departments.
“Close integration and the help of IT staff will be needed to gather it all, in order to get the most accurate picture possible of a company’s overall footprint,” he says.
Edmond Cunningham, an IT and sustainability expert at PA Consulting Group, agrees: “IT leaders are in a unique position to reinvent themselves as green advocates or visionaries, and not just within their own departments.
“The knowledge around how to make green decisions is still not readily available in most companies and IT can play a role in providing the information and data required.”
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Wednesday, March 24, 2010
Business technology: a mess – or a thing of beauty?
Business technology: a mess – or a thing of beauty?
By Stephen Pritchard
Published: March 24 2010 13:00 | Last updated: March 24 2010 13:00
Business technology all too often divides its users: does it bring value to the business and therefore needs tending; or is it out of control and in need of being tamed?
Those who use IT in their daily jobs – today, almost all white collar workers – complain that it is slow and restrictive. Complex workplace systems certainly lack the simplicity, and often the power, of consumer applications such as Amazon, eBay, Google or iTunes.
Business management, for its part, frequently sees IT as a necessary evil. Even managers who favour investment in IT might have little hard understanding of how IT works in their business.
“Our surveys say that CEOs see technology as valuable,” says Mark Raskino, vice president and Fellow at Gartner, the industry research firm. “But when you ask them what IT is doing, you get vague and mushy answers.”
He argues that business leaders spend too much time looking backwards at the last generation of technology, such as customer relationship management or business process management, rather than emerging trends such as social computing, mobility and sustainability.
At the same time, management teams are often fearful of IT and see change or investment as a risk. As a result, he points out, companies’ core business systems may be several decades old.
IT systems have grown through additions, patches, mid-life upgrades and modifications, and the result is often a sprawl of interconnected applications, with duplication and inefficiency – and possibly systems that no one uses.
“The current IT wave started 50 years ago with Cobol, but we have yet to have a proper refresh [of many systems],” says Mr Raskino. “Companies change their HQ or factories or even their locations but a lot of core IT has yet to go through its main refresh. It has been in the same data centre for 30 years.”
Over the next few years, some companies will have to tear down their old systems and move to an entirely new IT set up. Others, especially newer or fast-growing companies, will move their systems online, through cloud computing.
Mr Raskino likens the process of managing IT to gardening. Too often, the metaphor for IT is engineering or architecture, and this suggests a degree of design and permanence that is unrealistic.
“IT won’t remain orderly,” he says. Architecture gives you one insight but if you leave IT it gets out of shape very fast. It is more an organic thing that needs constant renewal and refresh,” he suggests.
How businesses go about this – without undue risk or cost but also in a way that delivers the capabilities the business will need tomorrow – is a matter for debate.
PA Consulting, for example, has helped its clients set up “guerrilla” IT teams to glook at business units. These teams aim to solve a business problem quickly. If a task cannot be completed in three months, the teams will not take it on.
Such teams will not fix all of a business’s IT problems, concedes Karl Boone, an IT change management specialist and a member of the firm’s management team. “It is not a long-term fix,” he says. “It will add complexity, but [some] complexity is inevitable.”
The key point is for IT to be able to show that it understands the business, hence “embedding” IT staff in the business unit, and that it can deliver incremental improvements at a time when there is little appetite for large, monolithic IT upgrades.
Large projects, though, have not gone away and for some businesses they will be the only way either to clear out older IT systems, or move to new ways of working that bring genuine competitive advantage. As the financial climate improves, the challenge will be to manage the transition process.
“Almost every business has enormous exposure in operations, production and service delivery to the health of their core IT systems,” says Gary Curtis, co-head of Accenture Technology Consulting.
“Today IT is far more than simply the back office: it is embedded either in the product, or the delivery of the product. But the focus on the health of core IT systems has pushed management focus away from optimising business processes. And that will only continue as IT becomes even more critical to the delivery of products.”
Yet businesses, Mr Curtis suggests, spend far less time planning and managing IT projects than they do on capital investments in plant, machinery or property of a similar value. This lack of management involvement and due diligence leads both to IT project delays and failures, and to complexity and IT “mess”.
“If you take a manufacturing business that is capital intensive, such as auto makers or aero engines, it costs $300m-$400m to build a new plant. That business case is done rigorously and is pressure tested and examined by everyone. But the same companies are not good at doing that with IT. You don’t have the same level of scrutiny, whether it is a desktop refit, or a new financial or ERP system.”
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
By Stephen Pritchard
Published: March 24 2010 13:00 | Last updated: March 24 2010 13:00
Business technology all too often divides its users: does it bring value to the business and therefore needs tending; or is it out of control and in need of being tamed?
Those who use IT in their daily jobs – today, almost all white collar workers – complain that it is slow and restrictive. Complex workplace systems certainly lack the simplicity, and often the power, of consumer applications such as Amazon, eBay, Google or iTunes.
Business management, for its part, frequently sees IT as a necessary evil. Even managers who favour investment in IT might have little hard understanding of how IT works in their business.
“Our surveys say that CEOs see technology as valuable,” says Mark Raskino, vice president and Fellow at Gartner, the industry research firm. “But when you ask them what IT is doing, you get vague and mushy answers.”
He argues that business leaders spend too much time looking backwards at the last generation of technology, such as customer relationship management or business process management, rather than emerging trends such as social computing, mobility and sustainability.
At the same time, management teams are often fearful of IT and see change or investment as a risk. As a result, he points out, companies’ core business systems may be several decades old.
IT systems have grown through additions, patches, mid-life upgrades and modifications, and the result is often a sprawl of interconnected applications, with duplication and inefficiency – and possibly systems that no one uses.
“The current IT wave started 50 years ago with Cobol, but we have yet to have a proper refresh [of many systems],” says Mr Raskino. “Companies change their HQ or factories or even their locations but a lot of core IT has yet to go through its main refresh. It has been in the same data centre for 30 years.”
Over the next few years, some companies will have to tear down their old systems and move to an entirely new IT set up. Others, especially newer or fast-growing companies, will move their systems online, through cloud computing.
Mr Raskino likens the process of managing IT to gardening. Too often, the metaphor for IT is engineering or architecture, and this suggests a degree of design and permanence that is unrealistic.
“IT won’t remain orderly,” he says. Architecture gives you one insight but if you leave IT it gets out of shape very fast. It is more an organic thing that needs constant renewal and refresh,” he suggests.
How businesses go about this – without undue risk or cost but also in a way that delivers the capabilities the business will need tomorrow – is a matter for debate.
PA Consulting, for example, has helped its clients set up “guerrilla” IT teams to glook at business units. These teams aim to solve a business problem quickly. If a task cannot be completed in three months, the teams will not take it on.
Such teams will not fix all of a business’s IT problems, concedes Karl Boone, an IT change management specialist and a member of the firm’s management team. “It is not a long-term fix,” he says. “It will add complexity, but [some] complexity is inevitable.”
The key point is for IT to be able to show that it understands the business, hence “embedding” IT staff in the business unit, and that it can deliver incremental improvements at a time when there is little appetite for large, monolithic IT upgrades.
Large projects, though, have not gone away and for some businesses they will be the only way either to clear out older IT systems, or move to new ways of working that bring genuine competitive advantage. As the financial climate improves, the challenge will be to manage the transition process.
“Almost every business has enormous exposure in operations, production and service delivery to the health of their core IT systems,” says Gary Curtis, co-head of Accenture Technology Consulting.
“Today IT is far more than simply the back office: it is embedded either in the product, or the delivery of the product. But the focus on the health of core IT systems has pushed management focus away from optimising business processes. And that will only continue as IT becomes even more critical to the delivery of products.”
Yet businesses, Mr Curtis suggests, spend far less time planning and managing IT projects than they do on capital investments in plant, machinery or property of a similar value. This lack of management involvement and due diligence leads both to IT project delays and failures, and to complexity and IT “mess”.
“If you take a manufacturing business that is capital intensive, such as auto makers or aero engines, it costs $300m-$400m to build a new plant. That business case is done rigorously and is pressure tested and examined by everyone. But the same companies are not good at doing that with IT. You don’t have the same level of scrutiny, whether it is a desktop refit, or a new financial or ERP system.”
Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Thursday, November 26, 2009
Introducing the IT Market Clock
Introducing the IT Market Clock
By Brian Gammage, vice president and Fellow, Gartner
Published: November 26 2009 16:15 | Last updated: November 26 2009 16:15
IT is no longer an emerging set of capabilities and markets – it is a maturing business tool and must be managed as such.
Although new capabilities continue to appear in the market, their adoption and use require them to be integrated into a portfolio of existing IT assets, many of which are already mature.
Some IT assets are no longer required, or no longer deliver sufficient business value to justify the costs of maintaining them. Usually, working to budget means new IT products and services can only be adopted if existing IT assets are retired or replaced.
Every IT product and service has a finite useful life and must eventually be retired or replaced. Correct timing of this retirement/replacement is critical.
The second part of useful life, from maturity to obsolescence, must be considered when managing IT assets throughout their whole life cycles. Most organisations require more-holistic mechanisms for planning IT divestment and reinvestment activity.
Gartner’s IT Market Clock is a new framework that supports strategic investment and divestment decisions. Tools and methodologies that focus only on technology adoption are no longer sufficient to support the decisions required to manage portfolios of IT assets throughout their full lifetime of use.
Gartner’s Hype Cycle for example, which the Gartner Market Clock complements, is a buyer’s decision framework for technology adoption, but its view ends when mainstream adoption begins, which typically equates to an adoption level of between 20 and 50 per cent.
Simply, the Hype Cycle supports “technology hunting” decisions, while the IT Market Clock supports “farming” decisions for assets already in use.
The IT Market Clock uses a clock-face metaphor to represent relative market time. Each point positioned on the IT Market Clock represents an IT asset or asset class: for example, desktop PCs, packaged maintenance and support services or corporate learning systems.
Technology assets are positioned on the IT Market Clock using two parameters. The first is where they currently lie within their own useful market life, from the first time the technology product or service can be acquired and used to the last time it can be viably used.
This determines the rotational position of the asset on the Market Clock – each begins at 0 (called ”Market Start”), and moves clockwise round to 12 o’clock.
The second is relative level of commoditisation, ie the ease with which the technology product or service can be interchanged with alternatives. Relative commoditisation determines the distance from the centre of the Market Clock; assets further from the centre are more commoditised.
Commoditisation is a proxy for the balance of market power between buyers/users and suppliers. For most asset classes, relative commoditisation levels begin low, increase steadily as the market matures and then decrease again toward end of life.
The IT Market Clock is divided into quarters, each representing one of four market phases of the useful market life of an IT asset.
The Advantage quarter represents the first stage of market life, during which technologies are often proprietary or highly customised and assets provide differentiated technology, service or capability.
There will usually be limited supply options and high dependence on relevant skills. Users should focus on benefits received.
Choice is the second phase of market life, during which technology assets are subject to increasing levels of standardisation and growing supply options. Users should re-evaluate the level of required customisation, prices and supply choices periodically as assets in this phase offer the greatest scope for cost savings.
The Cost quarter is the third phase of market life, during which assets reach their highest levels of commoditisation. Differentiation between alternative sources is at its minimum level and competition centres on price. Users should focus on acquisition and switching costs and ensure minimal skill-set dependencies.
Replacement is the final phase of market life, during which assets begin to move towards end of life, usually because they comprise legacy technologies, services or capabilities.
Supply choices and access to available skill sets will be decreasing, leading to rising operational costs. Their retirement or upgrade is essential. User organisations need to monitor operating costs for IT products and services in the disfavoured phase of their market life.
Operating costs rise toward end of market life, highlighting a growing urgency for retirement or replacement. For example, the skills needed to support and maintain mainframes and business applications at end-of-life are in increasingly short supply.
Suppliers and buying organisations can move to offset these issues during the Replacement phase, as, for example, has happened in the UK, with leading financial institutions encouraging universities to place Assemble and Cobol (which is now 50 years old) back on their curriculums.
But while such moves can alleviate immediate problems, each initiative to extend useful life typically comes at higher cost.
Moreover, as more companies move off legacy technologies, the burden of responsibility for maintaining associated skill sets falls to a diminishing number of organisations. The marginal costs of continuing to use technologies as they approach the end of their useful lives will increase.
With a holistic decision framework, user organisations will be able to manage their asset portfolios proactively and determine the right time to adopt and deploy emerging or adolescent technology options, establish road map plans for replacement and upgrade of existing technology assets, and perform reviews with suppliers for best saving opportunities.
Although such a framework is focused on technology assets, the same approach could also be extended and applied to any class of business assets.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
By Brian Gammage, vice president and Fellow, Gartner
Published: November 26 2009 16:15 | Last updated: November 26 2009 16:15
IT is no longer an emerging set of capabilities and markets – it is a maturing business tool and must be managed as such.
Although new capabilities continue to appear in the market, their adoption and use require them to be integrated into a portfolio of existing IT assets, many of which are already mature.
Some IT assets are no longer required, or no longer deliver sufficient business value to justify the costs of maintaining them. Usually, working to budget means new IT products and services can only be adopted if existing IT assets are retired or replaced.
Every IT product and service has a finite useful life and must eventually be retired or replaced. Correct timing of this retirement/replacement is critical.
The second part of useful life, from maturity to obsolescence, must be considered when managing IT assets throughout their whole life cycles. Most organisations require more-holistic mechanisms for planning IT divestment and reinvestment activity.
Gartner’s IT Market Clock is a new framework that supports strategic investment and divestment decisions. Tools and methodologies that focus only on technology adoption are no longer sufficient to support the decisions required to manage portfolios of IT assets throughout their full lifetime of use.
Gartner’s Hype Cycle for example, which the Gartner Market Clock complements, is a buyer’s decision framework for technology adoption, but its view ends when mainstream adoption begins, which typically equates to an adoption level of between 20 and 50 per cent.
Simply, the Hype Cycle supports “technology hunting” decisions, while the IT Market Clock supports “farming” decisions for assets already in use.
The IT Market Clock uses a clock-face metaphor to represent relative market time. Each point positioned on the IT Market Clock represents an IT asset or asset class: for example, desktop PCs, packaged maintenance and support services or corporate learning systems.
Technology assets are positioned on the IT Market Clock using two parameters. The first is where they currently lie within their own useful market life, from the first time the technology product or service can be acquired and used to the last time it can be viably used.
This determines the rotational position of the asset on the Market Clock – each begins at 0 (called ”Market Start”), and moves clockwise round to 12 o’clock.
The second is relative level of commoditisation, ie the ease with which the technology product or service can be interchanged with alternatives. Relative commoditisation determines the distance from the centre of the Market Clock; assets further from the centre are more commoditised.
Commoditisation is a proxy for the balance of market power between buyers/users and suppliers. For most asset classes, relative commoditisation levels begin low, increase steadily as the market matures and then decrease again toward end of life.
The IT Market Clock is divided into quarters, each representing one of four market phases of the useful market life of an IT asset.
The Advantage quarter represents the first stage of market life, during which technologies are often proprietary or highly customised and assets provide differentiated technology, service or capability.
There will usually be limited supply options and high dependence on relevant skills. Users should focus on benefits received.
Choice is the second phase of market life, during which technology assets are subject to increasing levels of standardisation and growing supply options. Users should re-evaluate the level of required customisation, prices and supply choices periodically as assets in this phase offer the greatest scope for cost savings.
The Cost quarter is the third phase of market life, during which assets reach their highest levels of commoditisation. Differentiation between alternative sources is at its minimum level and competition centres on price. Users should focus on acquisition and switching costs and ensure minimal skill-set dependencies.
Replacement is the final phase of market life, during which assets begin to move towards end of life, usually because they comprise legacy technologies, services or capabilities.
Supply choices and access to available skill sets will be decreasing, leading to rising operational costs. Their retirement or upgrade is essential. User organisations need to monitor operating costs for IT products and services in the disfavoured phase of their market life.
Operating costs rise toward end of market life, highlighting a growing urgency for retirement or replacement. For example, the skills needed to support and maintain mainframes and business applications at end-of-life are in increasingly short supply.
Suppliers and buying organisations can move to offset these issues during the Replacement phase, as, for example, has happened in the UK, with leading financial institutions encouraging universities to place Assemble and Cobol (which is now 50 years old) back on their curriculums.
But while such moves can alleviate immediate problems, each initiative to extend useful life typically comes at higher cost.
Moreover, as more companies move off legacy technologies, the burden of responsibility for maintaining associated skill sets falls to a diminishing number of organisations. The marginal costs of continuing to use technologies as they approach the end of their useful lives will increase.
With a holistic decision framework, user organisations will be able to manage their asset portfolios proactively and determine the right time to adopt and deploy emerging or adolescent technology options, establish road map plans for replacement and upgrade of existing technology assets, and perform reviews with suppliers for best saving opportunities.
Although such a framework is focused on technology assets, the same approach could also be extended and applied to any class of business assets.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Monday, January 19, 2009
How to get value from IT in a downturn
How to get value from IT in a downturn
Richard Bhanap says now is the time to shake up the IT landscape in ways that might not be tolerated in more prosperous times
Published: January 19 2009 08:50 | Last updated: January 19 2009 08:50
In turbulent times, standard cost containment exercises such as tightening expense approval procedures, limiting new work commissions and restricting recruitment and travel can be effective. But they are rarely game changing. Typically, they must be backed by more sustainable cuts.
Here is a three-pronged approach to cost reduction that paid off for a global manufacturing company which found its €560m annual spend on application management unsustainable.
Its disparate systems, applications and management teams were spread across geographies and business units. Duplication, complexity and a high degree of local customisation made it difficult to extract value.
Over a 20 month period, it reduced its like-for-like yearly applications management spend by 12 per cent, broke even on its investment by the start of the third year, and is on target to achieve 30 per cent reduction in annual spend by the end of year three.
As the programme leader says: “The analysis, strategising and execution for a programme like this needs careful thought, design and planning. But it’s really all about the power and the politics. You need a burning platform to stand a chance of getting the mandate to do this.”
That’s exactly the opportunity that current business conditions present. So what is required?
Like it or not, one of the fastest and most effective ways to reduce IT spend is to abandon projects. However, the reasons why the expenditure was needed in the first place will inevitably resurface, probably more acutely, further down the line.
Rather than taking a hatchet to the IT project investment portfolio, effective cost-cutting techniques include:
● raising the bar in terms of what constitutes an IT priority;
● eliminating duplicate initiatives across business units;
● leveraging investments to deliver value across multiple geographies; and
● re-scoping and re-phasing projects to fit within tighter funding constraints.
Meanwhile, the resulting IT project investment portfolio must tell a coherent story that is tightly aligned to current business priorities.
Longer-term structural change is more painful. But tough times call for tough measures. Relatively uncontentious are savings from rationalising the IT infrastructure footprint through global data centre consolidation and server virtualisation.
More highly charged, both politically and emotionally, are attempts to optimise the business application systems landscape. Business units, which tend to own these systems and their associated spend, guard them fiercely. A proliferation of overlapping or duplicate systems and applications may evolve when business units operate in silos and pursue unilateral solutions to similar problems.
As a consequence, some large organisations admit that their IT application landscapes cost up to one-third more to maintain than they should. For a company spending £1bn a year on IT, that’s £100m or more in wasted value.
Now, armed with tighter budgets and a pressing need to cut costs, IT executives have more clout to optimise spend. There are three steps to optimisation:
1. Gain control and establish transparency of applications-related spend and activity.
2. Constrain demand for change to applications systems.
3. Reduce the cost of executing each change.
IT executives need to break the mentality that has led to the proliferation of applications. Greater savings are typically achieved by taking a cross-organisation approach to optimisation rather than a business unit, function or geographic focus.
First, establish the current total spend for maintaining the applications landscape. Then, unify responsibility for managing this spend. Finally, for the overall applications landscape, create heat maps that identify:
● those applications which consume the greatest spend, and the business or technical drivers of that spend;
● the degree of duplication or overlap of applications.
To control investment and drive convergence, applications on the heat map should be labelled:
● Strategic – technically sound and key to the future success of the business.
● Sunset – tagged for future decommission.
● Legacy – non-strategic; no replacement plans currently in place.
It then requires a disciplined approach to sift out changes that do not genuinely and directly address business imperatives.
Heat maps help pinpoint opportunities to rationalise or decommission high-cost applications and can be used to prioritise change requests and to challenge or block “sunset” and “legacy” application modifications. The simpler the resulting applications landscape, the lower its cost of maintenance.
Heat maps also highlight applications that are prone to failure or which need frequent change due to poor design. So, by remediating critical applications which consume significant spend, the effort and costs of implementing change are reduced.
Other actions are also needed: rethink the application delivery model; assess whether the unit cost of change and effort can be reduced by changing the mix of onshore, nearshore or offshore working; identify whether application management resources can be relocated and concentrated into fewer larger solution centres to achieve economies of scale and meaningful productivity improvements; and consolidate spend with vendors to fewer strategic suppliers aligned to the new IT delivery model.
Richard Bhanap is the outgoing head of KPMG’s European IT Strategy and Performance practice
Copyright The Financial Times Limited 2009
Richard Bhanap says now is the time to shake up the IT landscape in ways that might not be tolerated in more prosperous times
Published: January 19 2009 08:50 | Last updated: January 19 2009 08:50
In turbulent times, standard cost containment exercises such as tightening expense approval procedures, limiting new work commissions and restricting recruitment and travel can be effective. But they are rarely game changing. Typically, they must be backed by more sustainable cuts.
Here is a three-pronged approach to cost reduction that paid off for a global manufacturing company which found its €560m annual spend on application management unsustainable.
Its disparate systems, applications and management teams were spread across geographies and business units. Duplication, complexity and a high degree of local customisation made it difficult to extract value.
Over a 20 month period, it reduced its like-for-like yearly applications management spend by 12 per cent, broke even on its investment by the start of the third year, and is on target to achieve 30 per cent reduction in annual spend by the end of year three.
As the programme leader says: “The analysis, strategising and execution for a programme like this needs careful thought, design and planning. But it’s really all about the power and the politics. You need a burning platform to stand a chance of getting the mandate to do this.”
That’s exactly the opportunity that current business conditions present. So what is required?
Like it or not, one of the fastest and most effective ways to reduce IT spend is to abandon projects. However, the reasons why the expenditure was needed in the first place will inevitably resurface, probably more acutely, further down the line.
Rather than taking a hatchet to the IT project investment portfolio, effective cost-cutting techniques include:
● raising the bar in terms of what constitutes an IT priority;
● eliminating duplicate initiatives across business units;
● leveraging investments to deliver value across multiple geographies; and
● re-scoping and re-phasing projects to fit within tighter funding constraints.
Meanwhile, the resulting IT project investment portfolio must tell a coherent story that is tightly aligned to current business priorities.
Longer-term structural change is more painful. But tough times call for tough measures. Relatively uncontentious are savings from rationalising the IT infrastructure footprint through global data centre consolidation and server virtualisation.
More highly charged, both politically and emotionally, are attempts to optimise the business application systems landscape. Business units, which tend to own these systems and their associated spend, guard them fiercely. A proliferation of overlapping or duplicate systems and applications may evolve when business units operate in silos and pursue unilateral solutions to similar problems.
As a consequence, some large organisations admit that their IT application landscapes cost up to one-third more to maintain than they should. For a company spending £1bn a year on IT, that’s £100m or more in wasted value.
Now, armed with tighter budgets and a pressing need to cut costs, IT executives have more clout to optimise spend. There are three steps to optimisation:
1. Gain control and establish transparency of applications-related spend and activity.
2. Constrain demand for change to applications systems.
3. Reduce the cost of executing each change.
IT executives need to break the mentality that has led to the proliferation of applications. Greater savings are typically achieved by taking a cross-organisation approach to optimisation rather than a business unit, function or geographic focus.
First, establish the current total spend for maintaining the applications landscape. Then, unify responsibility for managing this spend. Finally, for the overall applications landscape, create heat maps that identify:
● those applications which consume the greatest spend, and the business or technical drivers of that spend;
● the degree of duplication or overlap of applications.
To control investment and drive convergence, applications on the heat map should be labelled:
● Strategic – technically sound and key to the future success of the business.
● Sunset – tagged for future decommission.
● Legacy – non-strategic; no replacement plans currently in place.
It then requires a disciplined approach to sift out changes that do not genuinely and directly address business imperatives.
Heat maps help pinpoint opportunities to rationalise or decommission high-cost applications and can be used to prioritise change requests and to challenge or block “sunset” and “legacy” application modifications. The simpler the resulting applications landscape, the lower its cost of maintenance.
Heat maps also highlight applications that are prone to failure or which need frequent change due to poor design. So, by remediating critical applications which consume significant spend, the effort and costs of implementing change are reduced.
Other actions are also needed: rethink the application delivery model; assess whether the unit cost of change and effort can be reduced by changing the mix of onshore, nearshore or offshore working; identify whether application management resources can be relocated and concentrated into fewer larger solution centres to achieve economies of scale and meaningful productivity improvements; and consolidate spend with vendors to fewer strategic suppliers aligned to the new IT delivery model.
Richard Bhanap is the outgoing head of KPMG’s European IT Strategy and Performance practice
Copyright The Financial Times Limited 2009
Friday, September 12, 2008
The next generation gap: IT and Web 2.0 (FT.com)
The next generation gap: IT and Web 2.0
By Gerhard Eschelbeck, chief technology officer for Webroot
Published: September 12 2008 17:15 | Last updated: September 12 2008 17:15
Once, if you were “twittering” you would be nervous, and a “face book” was a catalogue of known criminals. Now, Twitter and Facebook are two of the fastest growing Web 2.0 collaboration applications. Until recently they merely kept a younger generation of technology-fluent “Generation Ys” up late at night; now they are causing sleepless nights for IT management because of the security holes they represent.
Over the past decade, many fundamental business activities – marketing, advertising, customer support, sales transactions – have become web dependent. At the same time, the web is now considered the number one delivery mechanism for malware. This poses a significant security challenge to companies due to adoption of Web 2.0 technology (blogs, video, wikis, internet messaging, social networking sites, RSS feeds and similar elements) – the communication tools of choice for Gen Y.
In the next 10 years 71m Gen Y (18-30 year-olds) will enter the workforce with their favored tools for communication, researching and collaborating. Gen Y thrives on flexibility and is used to having information a click away using Web 2.0 technology. In a recent survey by Blessingwhite of employees in the UK and Ireland, 23 per cent of Gen Y employees felt they were fully engaged and taking pride in helping the organisation achieve its goals when they felt it was aligned with their own values, goals and aspirations. This alignment is the best method for achieving sustainable employee engagement.
Even though there are a number of social software tools that IT managers can comfortably deploy within their enterprise network, such Microsoft SharePoint and IBM Lotus Connections, they don’t compare with Web 2.0 sites such as Facebook. The latest ComScore data show that Facebook’s 90m user network grew 153 per cent last year globally and by more than 303 per cent in Europe where the site recorded 37m unique visitors in June alone. Gen Y youngsters depend on social-networking to organise their lives and interact with colleagues. Blocking access or using URL filtering alone is not the answer because they don’t fully answer the problem and a restrictive corporate environment will not be appealing to these bright college graduates.
And, with 85 per cent of all threats coming from the web, and with at least 5 per cent of heavily trafficked “trusted” web sites now harbouring malware, URL filtering systems and blocking alone can’t begin to protect a network since they can’t detect or stop malware or phishing attacks.
In a recent exploit, Facebook users received a post on their “wall” to view a video. Viewers were then redirected to a fake Google site with a message telling them to download a viewer. The payload was actually a Trojan Horse that downloaded spyware and keyloggers. According to Gartner, almost 50 per cent of companies do not block access or monitor this type of activity on social networking sites. With this type of web threat, it’s no wonder that IT departments are struggling to clean up malware pouring through these gaping security holes, let alone preventing data breaches, monitoring policy and employee productivity, and minimizing corporate liability to objectionable content.
What IT managers can do:
•Only block social-networking or websites after careful review (from legal and HR departments) where there is significant corporate risk that can’t be mitigated any other way
•Employ a dynamic, perimeter web security solution that can filter inbound pages for spyware and viruses; provides URL filtering for known inappropriate sites (sexual content, violence, etc); supports outbound data leak prevention by content scanning; and, can respond instantly to changing threats
•Work with HR and Legal to update employee guidelines to support acceptable Internet use policies and guidelines
•Train users on the hazards of indiscriminate use of social-networking and web sites
•Protect mobile laptop users.
What employees should do
•When using personal web mail accounts, do not click on links in your e-mail
•When visiting social networking sites, do not download applications without checking on the vendor
•Don’t download videos without proper security against spyware and viruses
•Don’t post your profile on a public social networking site if it identifies your employer and it can have a negative impact on the company’s reputation.
•Always be sure your antispyware and antivirus protection is up to date and that your personal data is protected using a secure online backup system.
Copyright The Financial Times Limited 2008
By Gerhard Eschelbeck, chief technology officer for Webroot
Published: September 12 2008 17:15 | Last updated: September 12 2008 17:15
Once, if you were “twittering” you would be nervous, and a “face book” was a catalogue of known criminals. Now, Twitter and Facebook are two of the fastest growing Web 2.0 collaboration applications. Until recently they merely kept a younger generation of technology-fluent “Generation Ys” up late at night; now they are causing sleepless nights for IT management because of the security holes they represent.
Over the past decade, many fundamental business activities – marketing, advertising, customer support, sales transactions – have become web dependent. At the same time, the web is now considered the number one delivery mechanism for malware. This poses a significant security challenge to companies due to adoption of Web 2.0 technology (blogs, video, wikis, internet messaging, social networking sites, RSS feeds and similar elements) – the communication tools of choice for Gen Y.
In the next 10 years 71m Gen Y (18-30 year-olds) will enter the workforce with their favored tools for communication, researching and collaborating. Gen Y thrives on flexibility and is used to having information a click away using Web 2.0 technology. In a recent survey by Blessingwhite of employees in the UK and Ireland, 23 per cent of Gen Y employees felt they were fully engaged and taking pride in helping the organisation achieve its goals when they felt it was aligned with their own values, goals and aspirations. This alignment is the best method for achieving sustainable employee engagement.
Even though there are a number of social software tools that IT managers can comfortably deploy within their enterprise network, such Microsoft SharePoint and IBM Lotus Connections, they don’t compare with Web 2.0 sites such as Facebook. The latest ComScore data show that Facebook’s 90m user network grew 153 per cent last year globally and by more than 303 per cent in Europe where the site recorded 37m unique visitors in June alone. Gen Y youngsters depend on social-networking to organise their lives and interact with colleagues. Blocking access or using URL filtering alone is not the answer because they don’t fully answer the problem and a restrictive corporate environment will not be appealing to these bright college graduates.
And, with 85 per cent of all threats coming from the web, and with at least 5 per cent of heavily trafficked “trusted” web sites now harbouring malware, URL filtering systems and blocking alone can’t begin to protect a network since they can’t detect or stop malware or phishing attacks.
In a recent exploit, Facebook users received a post on their “wall” to view a video. Viewers were then redirected to a fake Google site with a message telling them to download a viewer. The payload was actually a Trojan Horse that downloaded spyware and keyloggers. According to Gartner, almost 50 per cent of companies do not block access or monitor this type of activity on social networking sites. With this type of web threat, it’s no wonder that IT departments are struggling to clean up malware pouring through these gaping security holes, let alone preventing data breaches, monitoring policy and employee productivity, and minimizing corporate liability to objectionable content.
What IT managers can do:
•Only block social-networking or websites after careful review (from legal and HR departments) where there is significant corporate risk that can’t be mitigated any other way
•Employ a dynamic, perimeter web security solution that can filter inbound pages for spyware and viruses; provides URL filtering for known inappropriate sites (sexual content, violence, etc); supports outbound data leak prevention by content scanning; and, can respond instantly to changing threats
•Work with HR and Legal to update employee guidelines to support acceptable Internet use policies and guidelines
•Train users on the hazards of indiscriminate use of social-networking and web sites
•Protect mobile laptop users.
What employees should do
•When using personal web mail accounts, do not click on links in your e-mail
•When visiting social networking sites, do not download applications without checking on the vendor
•Don’t download videos without proper security against spyware and viruses
•Don’t post your profile on a public social networking site if it identifies your employer and it can have a negative impact on the company’s reputation.
•Always be sure your antispyware and antivirus protection is up to date and that your personal data is protected using a secure online backup system.
Copyright The Financial Times Limited 2008
Wednesday, April 02, 2008
FT.com / Technology - What IT means to me: ‘I’m a fan of IT, but I’m still a bit cynical’
FT.com / Technology - What IT means to me: ‘I’m a fan of IT, but I’m still a bit cynical’
What IT means to me: ‘I’m a fan of IT, but I’m still a bit cynical’
By Stephen Pritchard
Published: April 2 2008 02:23 | Last updated: April 2 2008 02:23
Alan Middleton has the builders in. The London headquarters of PA Consulting, where Mr Middleton is chief executive, smells of fresh paint. Hoardings in the lobby and atrium show how the new, extended offices will look, with space for more staff and – vitally – more space for meetings, too.
Perhaps surprisingly for a CEO who has done much to bring his company into the digital world, meetings matter for Mr Middleton. On his watch, PA has become one of the first management consultancies to build a presence in Second Life, the online virtual world, providing experience that PA has drawn on to build virtual worlds for clients.
Mr Middleton previously served as head of IT for PA, overseeing significant advances in the company’s technology infrastructure and its ability to support remote and mobile working. He has backed investment in knowledge management, blogging, wikis and podcasts at PA. But he still puts much store on face-to-face meetings.
“I am not fearful of IT,” he explains. “I live in a 17th century house which is fully automated: the heating, light, sound system and even the garden. I can switch on the electric blanket from Hong Kong and toast my wife! In that sense I am a fan of IT, but I’m still a bit cynical.
“I get very frustrated by people’s dependence on e-mail, and everything else that reduces personal contact, but I’ve not been able to reduce it. We are a people business and we need to bring people together.”
Connecting people, he says, should really be why large companies invest in enterprise resource planning (ERP) and knowledge management systems.
“Our system captures who was in the team that worked on a project,” he says. “We publish that information internally, so I can run a simple search to find out who knows what. At that point we have a human bond, I ring that person and say ‘give me a hand’. The human link is simple but very powerful knowledge management.”
Such systems, Mr Middleton concedes, fall short of the sophistication often demanded by the knowledge management purists, with their multi-tiered systems and complex tables of metadata that require hours of consultants’ time to fill out. Yet they work. “If you come at it purely from an IT angle, these projects will fail,” he says.
According to Mr Middleton, PA’s internal business system Mipac (management information, planning and control) is driven by one objective: to connect people.
The first generation of Mipac, created in 1995, used Microsoft Exchange for messaging and accounting; and for HR, one of the first UK installations of PeopleSoft. On top of this came KnowledgeNet, the company’s knowledge management system, and the whole was linked by a hard-wired global network at “enormous cost”.
“That was five to eight years ahead of its time,” says Mr Middleton. “We still use the same business solution, but have evolved to what you would expect: lower cost, delivering the same functionality on new technologies and over IP networks and VPNs.”
PA was also an early adopter, and advocate, of mobile working. “We had some of the early [Apple] Macs and the first Mac laptops; I ruined several suits carrying those,” recalls Mr Middleton. “Then we moved to Toshiba laptops. Within a year, we had 2,500 consultants using them. At that time, it was a genuine business advantage and a differentiator.”
The challenge for chief executives, he suggests, is to keep up with technological change and not to become too satisfied with the status quo.
“Attitudes to technology are age-dependent,” he says. “If we have a partner joining us from another firm, he or she will say that our core stuff is fabulous and makes their life hugely easier. That is the traditional role of IT.
“But our younger people have a different view. I think that this is happening everywhere: the existing generation see new joiners as anarchists, while the younger generation sees existing business people as fuddy-duddies.
“People joining see technology as bringing the capability to interact with others, an enabler for their networking and zany ideas. This is a healthy tension that will drive change.”
One example was a presentation, eight years ago, of something that looked like today’s mobile e-mail devices.
“A partner from the PA Technology Centre held up a thing that we had built: a Palmpilot with a GSM module,” says Mr Middleton.
“He told us this was the future, and that in a few years we would all have a device with a camera on it, access to our diaries and corporate e-mail. It would be a phone and we would use it to surf the web – and that it would be about the size of a cigarette packet. Many said that the chap must be past his sell-by date. But he was right.”
One way companies can learn to spot such changes is to ensure their future managers spend time in IT.
Mr Middleton firmly believes that time spent running an IT project is just as important for executives as, say, a spell in finance.
All too often, large companies ask senior executives to “sponsor” IT projects, but those executives often lack the depth of knowledge, not to mention the time, to do so effectively.
At the same time, Mr Middleton has sympathy for the plight of the CIO, who is expected to innovate but also to deliver more with less.
“In recent times, by and large, CIOs have been squeezed really hard on cost. That is in a sense counter-intuitive, as revenues and profitability have been looking great in most organisations, yet CIOs were still being pushed to cut costs. “Now, as the world wobbles, the danger for CIOs is that the very things that bring value to the bottom line, the innovative things, have been squeezed in the last six years and there is no financial or human capacity left.
“Our business leaders are saying ‘be more innovative and funky’ but there is not a lot of bandwidth to play with.”
Increasingly, companies will look beyond conventional sources of business technology to deliver that innovation. PA, for example, has turned to social networking and user-generated content to help its own business.
“We are looking at how to further our knowledge management through the power of social networking techniques – such as Facebook and Bebo – in a business context. These approaches and technologies will need to reach their second generation before they are fully usable, but they offer exciting opportunities,” he says.
PA’s excursion into virtual worlds, in the shape of Second Life, raised eyebrows both within and outside the company, but has resulted in business wins from organisations as diverse as telecoms operator Telenor and the Hong Kong Jockey Club.
“We built the Hong Kong Jockey Club in Second Life, new branch layouts for banks and have shown how it can be used to train oil tanker drivers and emergency services when responding to forecourt incidents,” Mr Middleton points out.
“We were the first management consulting firm to develop a presence in Second Life. When we started doing that, people said ‘It’s for the birds’. But I said that in 1994 about the internet. Yet within three years, you were dinosaurs if you were not online.
“I’m sure we’ve all made mistakes like that time and time again. If you don’t respond to the opportunities offered by the relentless change, then you’ll struggle.”
Copyright The Financial Times Limited 2008
What IT means to me: ‘I’m a fan of IT, but I’m still a bit cynical’
By Stephen Pritchard
Published: April 2 2008 02:23 | Last updated: April 2 2008 02:23
Alan Middleton has the builders in. The London headquarters of PA Consulting, where Mr Middleton is chief executive, smells of fresh paint. Hoardings in the lobby and atrium show how the new, extended offices will look, with space for more staff and – vitally – more space for meetings, too.
Perhaps surprisingly for a CEO who has done much to bring his company into the digital world, meetings matter for Mr Middleton. On his watch, PA has become one of the first management consultancies to build a presence in Second Life, the online virtual world, providing experience that PA has drawn on to build virtual worlds for clients.
Mr Middleton previously served as head of IT for PA, overseeing significant advances in the company’s technology infrastructure and its ability to support remote and mobile working. He has backed investment in knowledge management, blogging, wikis and podcasts at PA. But he still puts much store on face-to-face meetings.
“I am not fearful of IT,” he explains. “I live in a 17th century house which is fully automated: the heating, light, sound system and even the garden. I can switch on the electric blanket from Hong Kong and toast my wife! In that sense I am a fan of IT, but I’m still a bit cynical.
“I get very frustrated by people’s dependence on e-mail, and everything else that reduces personal contact, but I’ve not been able to reduce it. We are a people business and we need to bring people together.”
Connecting people, he says, should really be why large companies invest in enterprise resource planning (ERP) and knowledge management systems.
“Our system captures who was in the team that worked on a project,” he says. “We publish that information internally, so I can run a simple search to find out who knows what. At that point we have a human bond, I ring that person and say ‘give me a hand’. The human link is simple but very powerful knowledge management.”
Such systems, Mr Middleton concedes, fall short of the sophistication often demanded by the knowledge management purists, with their multi-tiered systems and complex tables of metadata that require hours of consultants’ time to fill out. Yet they work. “If you come at it purely from an IT angle, these projects will fail,” he says.
According to Mr Middleton, PA’s internal business system Mipac (management information, planning and control) is driven by one objective: to connect people.
The first generation of Mipac, created in 1995, used Microsoft Exchange for messaging and accounting; and for HR, one of the first UK installations of PeopleSoft. On top of this came KnowledgeNet, the company’s knowledge management system, and the whole was linked by a hard-wired global network at “enormous cost”.
“That was five to eight years ahead of its time,” says Mr Middleton. “We still use the same business solution, but have evolved to what you would expect: lower cost, delivering the same functionality on new technologies and over IP networks and VPNs.”
PA was also an early adopter, and advocate, of mobile working. “We had some of the early [Apple] Macs and the first Mac laptops; I ruined several suits carrying those,” recalls Mr Middleton. “Then we moved to Toshiba laptops. Within a year, we had 2,500 consultants using them. At that time, it was a genuine business advantage and a differentiator.”
The challenge for chief executives, he suggests, is to keep up with technological change and not to become too satisfied with the status quo.
“Attitudes to technology are age-dependent,” he says. “If we have a partner joining us from another firm, he or she will say that our core stuff is fabulous and makes their life hugely easier. That is the traditional role of IT.
“But our younger people have a different view. I think that this is happening everywhere: the existing generation see new joiners as anarchists, while the younger generation sees existing business people as fuddy-duddies.
“People joining see technology as bringing the capability to interact with others, an enabler for their networking and zany ideas. This is a healthy tension that will drive change.”
One example was a presentation, eight years ago, of something that looked like today’s mobile e-mail devices.
“A partner from the PA Technology Centre held up a thing that we had built: a Palmpilot with a GSM module,” says Mr Middleton.
“He told us this was the future, and that in a few years we would all have a device with a camera on it, access to our diaries and corporate e-mail. It would be a phone and we would use it to surf the web – and that it would be about the size of a cigarette packet. Many said that the chap must be past his sell-by date. But he was right.”
One way companies can learn to spot such changes is to ensure their future managers spend time in IT.
Mr Middleton firmly believes that time spent running an IT project is just as important for executives as, say, a spell in finance.
All too often, large companies ask senior executives to “sponsor” IT projects, but those executives often lack the depth of knowledge, not to mention the time, to do so effectively.
At the same time, Mr Middleton has sympathy for the plight of the CIO, who is expected to innovate but also to deliver more with less.
“In recent times, by and large, CIOs have been squeezed really hard on cost. That is in a sense counter-intuitive, as revenues and profitability have been looking great in most organisations, yet CIOs were still being pushed to cut costs. “Now, as the world wobbles, the danger for CIOs is that the very things that bring value to the bottom line, the innovative things, have been squeezed in the last six years and there is no financial or human capacity left.
“Our business leaders are saying ‘be more innovative and funky’ but there is not a lot of bandwidth to play with.”
Increasingly, companies will look beyond conventional sources of business technology to deliver that innovation. PA, for example, has turned to social networking and user-generated content to help its own business.
“We are looking at how to further our knowledge management through the power of social networking techniques – such as Facebook and Bebo – in a business context. These approaches and technologies will need to reach their second generation before they are fully usable, but they offer exciting opportunities,” he says.
PA’s excursion into virtual worlds, in the shape of Second Life, raised eyebrows both within and outside the company, but has resulted in business wins from organisations as diverse as telecoms operator Telenor and the Hong Kong Jockey Club.
“We built the Hong Kong Jockey Club in Second Life, new branch layouts for banks and have shown how it can be used to train oil tanker drivers and emergency services when responding to forecourt incidents,” Mr Middleton points out.
“We were the first management consulting firm to develop a presence in Second Life. When we started doing that, people said ‘It’s for the birds’. But I said that in 1994 about the internet. Yet within three years, you were dinosaurs if you were not online.
“I’m sure we’ve all made mistakes like that time and time again. If you don’t respond to the opportunities offered by the relentless change, then you’ll struggle.”
Copyright The Financial Times Limited 2008
Monday, December 10, 2007
FT.com / Technology - Where do IT vendors think business’s focus should be?
FT.com / Technology - Where do IT vendors think business’s focus should be?
Where do IT vendors think business’s focus should be?
By Alan Cane
Published: December 5 2007 04:40 | Last updated: December 5 2007 04:40
Vendors large and small believe that many – perhaps most – large organisations are capable of making big improvements in their use of IT.
They believe several technologies that had promised much in the past without necessarily delivering have now developed to the point where they can be used, for example, to re-engineer legacy applications or control data centres remotely.
These possibilities could be prejudiced, however, by factors including a deteriorating financial climate, which could place extra pressure on strained budgets, and a tenacious if mistaken belief among some managers that IT represents a cost rather than a source of innovation. These could hamper willingness to invest in new technologies.
In its 2007 global IT survey, however, published today, the consultancy Accenture found a close relationship between IT innovation, execution and productivity. “Those organisations that keep their IT investment steady in good and bad times have progressed most in using IT to transform the way they do business,” it says, arguing that organisations that are most advanced in adopting new mobility, collaboration and insight technologies performed better than their slower contemporaries across a range of benchmarks.
It found, for example, that the majority of what it describes as “high performers” – companies that excel in both innovation and execution – have shed most of their legacy systems and are investigating innovations such as software as a service and service-oriented architectures, which, it suggests, may lead to organisations owning only the software they have developed themselves to seek competitive advantage.
Vendors are aware that the “green agenda” is weighing heavily on CIO’s minds and pockets, although most seem more prepared to pay lip service to reducing their carbon footprint than actually doing anything about it.
A survey carried out by the software giant Symantec concluded that improving sustainability and meeting “green” policies set out at corporate level were not high priorities for IT departments in Europe. CIOs were driven to adopt green policies – improving energy efficiency, cutting cooling costs – in their data centres for operational rather than altruistic goals.
Only one in seven, Symantec found, had successfully implemented a green data centre. European organisations, however, were ahead of the US in adopting green policies.
John Hughman, senior technology analyst at the consultancy Ernst & Young, warns of the consequences of the explosion in IT usage and subsequent growth in data, which has put heavy pressures on the data centre.
The lifecycle costs of running a data centre now exceed the initial capital expenditure and a significant proportion of these costs can be attributed to power use – about half the budget goes on cooling.
Organisations must invest in virtualisation, running several operating systems and/or applications on a single machine, he says, to reduce the number of physical machines, pointing out that most servers only run at about 20 per cent utilisation.
He also calls for the relationship between data centre budgets and the cost of powering them to be made explicit. “It is unusual for CIOs to own this cost and therefore few are incentivised to help reduce it,” he says.
Most vendors think the pressure to “go green” will intensify and force change. Joe Hemming, chief executive of computing services group LogicaCMG, expects to be asked to undertake projects to help companies reduce their carbon footprint: “Whether this is through smart metering of energy use, green supply chains or the outsourcing of functions to low carbon environments such as India, this will characterise the year ahead.”
Mark Pearce, head of product marketing for the US-based networking group Enterasys agrees that top of the list for most CIOs will be managing down operational costs, data centre space and environmental impact.
“All three are going to drive virtualisation up the strategic agenda,” he says, adding the warning: “The CIO must not allow his team to rush into virtualisation without due diligence on key issues such as security. Virtualisation impacts a number of other disciplines and to allow a headlong rush into this area could prove extremely costly if done in isolation.”
Some vendors, however, think the IT department still has to win its corporate spurs on a decidedly difficult battlefield.
Steve Gedney, managing director of Borland’s UK operations sees next year as a tipping point. “Put simply, 2008 is the year when CIOs have to prove IT really can work with the business to transform processes and benefit the organisations they serve.”
“This year has seen new levels of large-scale IT project failure with organisations still working in silos using disconnected business and IT processes. The priority for CIOs in 2008 is to drive change to improve this situation,” he said, arguing for better IT metrics so that performance can be measured and improvements demonstrated.
Cisco, the company whose routers underpin much of the traffic on the internet, has for some years been expanding its presence in videoconferencing, in the belief that collaboration will be high up the CIO agenda.
According to Nick Earle of the company’s European markets division, business video will be the next big thing, as executives seek ways to collaborate without enlarging their carbon footprint.
“Some of the latest virtual conferencing technologies make the meeting experience almost as good as being face-to-face without the hassle of travelling. That is why I believe collaboration, enabled by business video, will top the IT agenda in 2008.”
Better communications are also high on the list for the networking group ntl:Telewest. Stephen Beynon, managing director of its business division, says he expects continued strong demand for ethernet services. “We expect this trend to continue in 2008, especially as users evolve beyond point-to-point and move to virtual private networks (VPNs). Ethernet VPNs are more complicated, which will see more customers seeking increased control over, and visibility of, the performance of their network.”
That, he thinks, is the job of the network provider, with simplicity and transparency the key.
Finding ways to cut costs so as to free resources for innovation is also expected to occupy the CIO’s attention.
Mirapoint of the US provides a simple example of where cost-savings can be madein the realm of e-mail. Commercial offerings are costly and should be limited to knowledge workers. It supplies staff with low collaboration needs with a simple e-mail appliance that cuts costs by half.
According to Alan Elliot, the company’s head of marketing, for every 10,000 employees who are shifted to the Mirapoint systems the company saves $1m a year: “This money can be spent on new technologies instead of an expensive e-mail platform,” he says.
Copyright The Financial Times Limited 2007
Where do IT vendors think business’s focus should be?
By Alan Cane
Published: December 5 2007 04:40 | Last updated: December 5 2007 04:40
Vendors large and small believe that many – perhaps most – large organisations are capable of making big improvements in their use of IT.
They believe several technologies that had promised much in the past without necessarily delivering have now developed to the point where they can be used, for example, to re-engineer legacy applications or control data centres remotely.
These possibilities could be prejudiced, however, by factors including a deteriorating financial climate, which could place extra pressure on strained budgets, and a tenacious if mistaken belief among some managers that IT represents a cost rather than a source of innovation. These could hamper willingness to invest in new technologies.
In its 2007 global IT survey, however, published today, the consultancy Accenture found a close relationship between IT innovation, execution and productivity. “Those organisations that keep their IT investment steady in good and bad times have progressed most in using IT to transform the way they do business,” it says, arguing that organisations that are most advanced in adopting new mobility, collaboration and insight technologies performed better than their slower contemporaries across a range of benchmarks.
It found, for example, that the majority of what it describes as “high performers” – companies that excel in both innovation and execution – have shed most of their legacy systems and are investigating innovations such as software as a service and service-oriented architectures, which, it suggests, may lead to organisations owning only the software they have developed themselves to seek competitive advantage.
Vendors are aware that the “green agenda” is weighing heavily on CIO’s minds and pockets, although most seem more prepared to pay lip service to reducing their carbon footprint than actually doing anything about it.
A survey carried out by the software giant Symantec concluded that improving sustainability and meeting “green” policies set out at corporate level were not high priorities for IT departments in Europe. CIOs were driven to adopt green policies – improving energy efficiency, cutting cooling costs – in their data centres for operational rather than altruistic goals.
Only one in seven, Symantec found, had successfully implemented a green data centre. European organisations, however, were ahead of the US in adopting green policies.
John Hughman, senior technology analyst at the consultancy Ernst & Young, warns of the consequences of the explosion in IT usage and subsequent growth in data, which has put heavy pressures on the data centre.
The lifecycle costs of running a data centre now exceed the initial capital expenditure and a significant proportion of these costs can be attributed to power use – about half the budget goes on cooling.
Organisations must invest in virtualisation, running several operating systems and/or applications on a single machine, he says, to reduce the number of physical machines, pointing out that most servers only run at about 20 per cent utilisation.
He also calls for the relationship between data centre budgets and the cost of powering them to be made explicit. “It is unusual for CIOs to own this cost and therefore few are incentivised to help reduce it,” he says.
Most vendors think the pressure to “go green” will intensify and force change. Joe Hemming, chief executive of computing services group LogicaCMG, expects to be asked to undertake projects to help companies reduce their carbon footprint: “Whether this is through smart metering of energy use, green supply chains or the outsourcing of functions to low carbon environments such as India, this will characterise the year ahead.”
Mark Pearce, head of product marketing for the US-based networking group Enterasys agrees that top of the list for most CIOs will be managing down operational costs, data centre space and environmental impact.
“All three are going to drive virtualisation up the strategic agenda,” he says, adding the warning: “The CIO must not allow his team to rush into virtualisation without due diligence on key issues such as security. Virtualisation impacts a number of other disciplines and to allow a headlong rush into this area could prove extremely costly if done in isolation.”
Some vendors, however, think the IT department still has to win its corporate spurs on a decidedly difficult battlefield.
Steve Gedney, managing director of Borland’s UK operations sees next year as a tipping point. “Put simply, 2008 is the year when CIOs have to prove IT really can work with the business to transform processes and benefit the organisations they serve.”
“This year has seen new levels of large-scale IT project failure with organisations still working in silos using disconnected business and IT processes. The priority for CIOs in 2008 is to drive change to improve this situation,” he said, arguing for better IT metrics so that performance can be measured and improvements demonstrated.
Cisco, the company whose routers underpin much of the traffic on the internet, has for some years been expanding its presence in videoconferencing, in the belief that collaboration will be high up the CIO agenda.
According to Nick Earle of the company’s European markets division, business video will be the next big thing, as executives seek ways to collaborate without enlarging their carbon footprint.
“Some of the latest virtual conferencing technologies make the meeting experience almost as good as being face-to-face without the hassle of travelling. That is why I believe collaboration, enabled by business video, will top the IT agenda in 2008.”
Better communications are also high on the list for the networking group ntl:Telewest. Stephen Beynon, managing director of its business division, says he expects continued strong demand for ethernet services. “We expect this trend to continue in 2008, especially as users evolve beyond point-to-point and move to virtual private networks (VPNs). Ethernet VPNs are more complicated, which will see more customers seeking increased control over, and visibility of, the performance of their network.”
That, he thinks, is the job of the network provider, with simplicity and transparency the key.
Finding ways to cut costs so as to free resources for innovation is also expected to occupy the CIO’s attention.
Mirapoint of the US provides a simple example of where cost-savings can be madein the realm of e-mail. Commercial offerings are costly and should be limited to knowledge workers. It supplies staff with low collaboration needs with a simple e-mail appliance that cuts costs by half.
According to Alan Elliot, the company’s head of marketing, for every 10,000 employees who are shifted to the Mirapoint systems the company saves $1m a year: “This money can be spent on new technologies instead of an expensive e-mail platform,” he says.
Copyright The Financial Times Limited 2007
FT.com / Technology - What’s on CIO wishlists?
FT.com / Technology - What’s on CIO wishlists?
What’s on CIO wishlists?
By Alan Cane
Published: December 5 2007 04:40 | Last updated: December 5 2007 04:40
Aligning technology with the business, while dealing with the pressure on space and power in the data centre and addressing green issues are the priorities for many chief information officers next year.
Security is now so critical that it automatically figures near the top of every agenda. Steven Bandrowczak, CIO for Nortel, the Canadian telecommunications manufacturer, points out that a security contingency plan is there to prevent a breach of security that can badly damage a brand.
A thoroughly unscientific straw poll of CIOs, principally from the US and UK, revealed, nevertheless, that a few other themes come to the fore. Steve Bozzo, CIO of New York based online florist 1-800-Flowers.com, places business alignment at the top of his list.
“For 2008, as always,” he says, “companies will be most successful if IT is strongly aligned with the businesses it supports” going on to point out that companies must migrate to an “agile” architecture if they are to bring products to market that will have a meaningful impact on earnings and revenue: “Migrating to a Services Oriented Architecture will be the only way to accomplish this.”
This is in line with preliminary findings on 2008 priorities by research firm Gartner, which shows CIOs seeking to focus on aligning IT with growth and innovation. “Looking at costs is straightforward but prioritising growth and innovation is much more challenging,” says Dave Aron, a Gartner analyst looking at CIO issues.
Guy Lidbetter, chief technology officer for the big European computing services group Atos Origin, agrees, noting that the CIO agenda is being driven by a need for managed innovation.
He emphasises the importance of demonstrating to managers the value that IT investments bring to the business and ensuring IT is agile enough to support changing business needs. “In the context of infrastructure, standardisation, virtualisation and automation will deliver. In applications, enterprise architecture, service-oriented architecture and – potentially – Web 2.0 and collaboration will deliver.”
Note how quickly methodologies such as “agility” – developing software in a quicker, less formal way – and “service-oriented architecture” – ways of persuading legacy systems to work with the smart, new stuff – have moved from “might have” to “must have”.
Bryan Doerr, chief technology officer of Savvis, a US-managed service group, says, however, that to make the most of virtualisation, businesses need to invest in a secure and robust IT infrastructure. He says: “Both vendors and organisations are embracing new, virtualised technologies to yield more flexible and cost effective solutions. As it continues to mature, I predict it will become less of a differentiator for businesses and more of a commodity.”
Rorie Devine, chief technology officer for the online gambling organisation Betfair, concurs: “Virtualisation is definitely part of the mainstream now.”
Mr Devine’s chief priority next year will be to execute the business plan while helping to shape the business strategy. The processing load will be substantial: “The number of transactions we process will again be more than all the other years of our existence added together.”
Web 2.0 and social networking may be becoming candidates for the mainstream, although some CIOs have their reservations. Bob Worrall, for example, CIO of Sun Microsystems, reckons to have talked to well over 100 of his contemporaries over the past year and believes that social networking represents a new threat. “There is a lot of information out there on blogs and wiki, but there is no easy way to harvest that information and make it available to the organisation” he says.
Sun, however, has created a virtual Californian building in cyberspace and is experimenting with its use as a meeting place for remote staff.
Mr Worrall says that every CIO is struggling with the problem of power and space in the data centre. Sun itself is downsizing from seven corporate data centres to three, aided by a combination of new, more powerful servers based on novel chip technology and virtualisation – running several operating systems and/or applications on the same server.
Brian Jones, a former CIO for both the spirits group Allied Domecq and Scottish Power, says that IT in large companies often grows in an uncontrolled fashion. “There is often a need to remove the complexity that has grown up over time and set a simplification agenda directly linked to the objectives of the business overall,” he says, arguing that this latter aim can often be lost if the transformation is poorly focused.
He expects pressure on IT costs will not ease and that CIOs will be forced to balance the need for innovation against tightening budgets. “One trick that CIOs are going to have to learn, if they have not already, is how to take advantage of the latent value in their suppliers.” Suppliers have often spent millions on research and development which could benefit a company. While at Allied Domecq, for example, he formed a partnership with the telecommunications group that transformed Allied’s messy, “basket case” of a communications network, while reducing costs by £3m a year.
Mr Bandrowczak of Nortel, is using virtualisation and centralisation to get more efficiencies out of the IT assets the company already has and the investments it has already made. “That’s my first big trend. Second is how to integrate all these disparate and separate technologies. One trend I am driving at Nortel is unified messaging, handling voice, text and fax in one mailbox, so it can be retrieved by any device. Moving between applications causes inefficiencies – I call it business latency.”
His ambition is to combine a single log-on with authentication, so that if an individual was on the road and logged on, and another individual in the company wanted to share information with them, the system would indicate he or she was travelling and therefore available only by SMS but that they had the time to discuss that particular issue. “But we’re not there yet,” Mr Bandrowczak says.
RM, the supplier of IT to UK schools, places collaboration and mobility at the top of its list. Chris Clements, the CIO comments: “Our vision for collaboration goes beyond our employees and includes our customers. We have a large candidate list of opportunities to add value to our core systems by providing tools that will enable customers directly to influence product development and enable them to do business at any time of the school day that is convenient to them. One of the biggest challenges is to evaluate Web 2.0 opportunities and select those which will add real value to the business.”
And the green agenda? A study by Symantec (see “Vendors’ View”, Page 4) suggests organisations are not yet successfully rolling out green centres.
But the bandwagon is on the move. The consultancy Quocirca thinks companies will finally make better use of advanced communications capabilities such as web 2.0 and videoconferencing to reduce travel. But it concludes a little wearily that style will defeat substance in some cases. “There will still be those who want to be seen to be green but who do not really take the issue on board and resort to half measures such as carbon off-setting.”
One thing all those questioned agreed on, however, was that it is going to be an interesting year.
CIO priorities, based on Alan Cane’s informal straw poll:
1 Business alignment and strategy
2 Hiring and retaining the best staff
3 IT innovation/new methodologies
4 Security
5 Collaboration technologies
6 Controlling costs
7 Compliance and regulation
8 Virtualisation
9 Customer service
10 Mobility (Green issues came 11th)
Copyright The Financial Times Limited 2007
What’s on CIO wishlists?
By Alan Cane
Published: December 5 2007 04:40 | Last updated: December 5 2007 04:40
Aligning technology with the business, while dealing with the pressure on space and power in the data centre and addressing green issues are the priorities for many chief information officers next year.
Security is now so critical that it automatically figures near the top of every agenda. Steven Bandrowczak, CIO for Nortel, the Canadian telecommunications manufacturer, points out that a security contingency plan is there to prevent a breach of security that can badly damage a brand.
A thoroughly unscientific straw poll of CIOs, principally from the US and UK, revealed, nevertheless, that a few other themes come to the fore. Steve Bozzo, CIO of New York based online florist 1-800-Flowers.com, places business alignment at the top of his list.
“For 2008, as always,” he says, “companies will be most successful if IT is strongly aligned with the businesses it supports” going on to point out that companies must migrate to an “agile” architecture if they are to bring products to market that will have a meaningful impact on earnings and revenue: “Migrating to a Services Oriented Architecture will be the only way to accomplish this.”
This is in line with preliminary findings on 2008 priorities by research firm Gartner, which shows CIOs seeking to focus on aligning IT with growth and innovation. “Looking at costs is straightforward but prioritising growth and innovation is much more challenging,” says Dave Aron, a Gartner analyst looking at CIO issues.
Guy Lidbetter, chief technology officer for the big European computing services group Atos Origin, agrees, noting that the CIO agenda is being driven by a need for managed innovation.
He emphasises the importance of demonstrating to managers the value that IT investments bring to the business and ensuring IT is agile enough to support changing business needs. “In the context of infrastructure, standardisation, virtualisation and automation will deliver. In applications, enterprise architecture, service-oriented architecture and – potentially – Web 2.0 and collaboration will deliver.”
Note how quickly methodologies such as “agility” – developing software in a quicker, less formal way – and “service-oriented architecture” – ways of persuading legacy systems to work with the smart, new stuff – have moved from “might have” to “must have”.
Bryan Doerr, chief technology officer of Savvis, a US-managed service group, says, however, that to make the most of virtualisation, businesses need to invest in a secure and robust IT infrastructure. He says: “Both vendors and organisations are embracing new, virtualised technologies to yield more flexible and cost effective solutions. As it continues to mature, I predict it will become less of a differentiator for businesses and more of a commodity.”
Rorie Devine, chief technology officer for the online gambling organisation Betfair, concurs: “Virtualisation is definitely part of the mainstream now.”
Mr Devine’s chief priority next year will be to execute the business plan while helping to shape the business strategy. The processing load will be substantial: “The number of transactions we process will again be more than all the other years of our existence added together.”
Web 2.0 and social networking may be becoming candidates for the mainstream, although some CIOs have their reservations. Bob Worrall, for example, CIO of Sun Microsystems, reckons to have talked to well over 100 of his contemporaries over the past year and believes that social networking represents a new threat. “There is a lot of information out there on blogs and wiki, but there is no easy way to harvest that information and make it available to the organisation” he says.
Sun, however, has created a virtual Californian building in cyberspace and is experimenting with its use as a meeting place for remote staff.
Mr Worrall says that every CIO is struggling with the problem of power and space in the data centre. Sun itself is downsizing from seven corporate data centres to three, aided by a combination of new, more powerful servers based on novel chip technology and virtualisation – running several operating systems and/or applications on the same server.
Brian Jones, a former CIO for both the spirits group Allied Domecq and Scottish Power, says that IT in large companies often grows in an uncontrolled fashion. “There is often a need to remove the complexity that has grown up over time and set a simplification agenda directly linked to the objectives of the business overall,” he says, arguing that this latter aim can often be lost if the transformation is poorly focused.
He expects pressure on IT costs will not ease and that CIOs will be forced to balance the need for innovation against tightening budgets. “One trick that CIOs are going to have to learn, if they have not already, is how to take advantage of the latent value in their suppliers.” Suppliers have often spent millions on research and development which could benefit a company. While at Allied Domecq, for example, he formed a partnership with the telecommunications group that transformed Allied’s messy, “basket case” of a communications network, while reducing costs by £3m a year.
Mr Bandrowczak of Nortel, is using virtualisation and centralisation to get more efficiencies out of the IT assets the company already has and the investments it has already made. “That’s my first big trend. Second is how to integrate all these disparate and separate technologies. One trend I am driving at Nortel is unified messaging, handling voice, text and fax in one mailbox, so it can be retrieved by any device. Moving between applications causes inefficiencies – I call it business latency.”
His ambition is to combine a single log-on with authentication, so that if an individual was on the road and logged on, and another individual in the company wanted to share information with them, the system would indicate he or she was travelling and therefore available only by SMS but that they had the time to discuss that particular issue. “But we’re not there yet,” Mr Bandrowczak says.
RM, the supplier of IT to UK schools, places collaboration and mobility at the top of its list. Chris Clements, the CIO comments: “Our vision for collaboration goes beyond our employees and includes our customers. We have a large candidate list of opportunities to add value to our core systems by providing tools that will enable customers directly to influence product development and enable them to do business at any time of the school day that is convenient to them. One of the biggest challenges is to evaluate Web 2.0 opportunities and select those which will add real value to the business.”
And the green agenda? A study by Symantec (see “Vendors’ View”, Page 4) suggests organisations are not yet successfully rolling out green centres.
But the bandwagon is on the move. The consultancy Quocirca thinks companies will finally make better use of advanced communications capabilities such as web 2.0 and videoconferencing to reduce travel. But it concludes a little wearily that style will defeat substance in some cases. “There will still be those who want to be seen to be green but who do not really take the issue on board and resort to half measures such as carbon off-setting.”
One thing all those questioned agreed on, however, was that it is going to be an interesting year.
CIO priorities, based on Alan Cane’s informal straw poll:
1 Business alignment and strategy
2 Hiring and retaining the best staff
3 IT innovation/new methodologies
4 Security
5 Collaboration technologies
6 Controlling costs
7 Compliance and regulation
8 Virtualisation
9 Customer service
10 Mobility (Green issues came 11th)
Copyright The Financial Times Limited 2007
Monday, November 05, 2007
FT.com / By sector - Study urges IT valuation rethink
FT.com / By sector - Study urges IT valuation rethink
Study urges IT valuation rethink
By Pan Kwan Yuk in Paris and Philip Stafford in London
Published: November 4 2007 23:52 | Last updated: November 4 2007 23:52
Companies need to dramatically rethink the way they manage and value their information technology assets if they are to extract better returns from these investments, according to a study published on Monday.
Describing IT hardware and software as the “last remaining hidden corporate asset”, the study, commissioned by Micro Focus, a UK software developer, said core IT assets should be valued with the same rigour and discipline as other corporate assets such as brand and goodwill.
Insead, the Paris-based business school that carried out the research, said that while IT now plays a vital role in driving corporate performance, companies have continued to treat their IT not as assets for value creation but as an expense item to be minimised.
“It’s astounding,” said Soumitra Dutta of Insead.
“While firms have long focused on creating value from physical assets such as factory or store space and intangible assets such as brands, IT assets as a vehicle for value creation have remained largely ignored.”
One problem, according to Prof Dutta, is that even though companies spend billions on IT every year, few boardrooms know the value of their hardware and software and the contributions that they make to their business.
In a study released last month, Micro Focus and Insead found that of the 250 chief information officers and chief finance officers surveyed from companies in the US, UK, France, Germany and Italy, fewer than half had tried to value their IT assets, while 60 per cent did not know the worth of their software.
“When it comes to technology, people tend to get lost in jargon and focus on the new and shiny,” said Stephen Kelly, chief executive of Micro Focus. “Very little thought goes into the benefits that result from the new system and almost none to deriving maximum value from it.”
Yet Prof Dutta said that the potential savings for companies who take the time to analyse the value of their software assets could be huge.
“Think of a house,” he says.
“Would you knock down an entire house when what you need is to update the kitchen? No.
“Yet we see companies spending millions of dollars to build a new IT system every other year when, in many cases, what they needed was just to update the existing one.”
One way Prof Dutta says companies can measure the business value of their core IT assets is through conjoint analysis, a statistical technique used in market research in which people make trade-offs across different attributes.
Copyright The Financial Times Limited 2007
Study urges IT valuation rethink
By Pan Kwan Yuk in Paris and Philip Stafford in London
Published: November 4 2007 23:52 | Last updated: November 4 2007 23:52
Companies need to dramatically rethink the way they manage and value their information technology assets if they are to extract better returns from these investments, according to a study published on Monday.
Describing IT hardware and software as the “last remaining hidden corporate asset”, the study, commissioned by Micro Focus, a UK software developer, said core IT assets should be valued with the same rigour and discipline as other corporate assets such as brand and goodwill.
Insead, the Paris-based business school that carried out the research, said that while IT now plays a vital role in driving corporate performance, companies have continued to treat their IT not as assets for value creation but as an expense item to be minimised.
“It’s astounding,” said Soumitra Dutta of Insead.
“While firms have long focused on creating value from physical assets such as factory or store space and intangible assets such as brands, IT assets as a vehicle for value creation have remained largely ignored.”
One problem, according to Prof Dutta, is that even though companies spend billions on IT every year, few boardrooms know the value of their hardware and software and the contributions that they make to their business.
In a study released last month, Micro Focus and Insead found that of the 250 chief information officers and chief finance officers surveyed from companies in the US, UK, France, Germany and Italy, fewer than half had tried to value their IT assets, while 60 per cent did not know the worth of their software.
“When it comes to technology, people tend to get lost in jargon and focus on the new and shiny,” said Stephen Kelly, chief executive of Micro Focus. “Very little thought goes into the benefits that result from the new system and almost none to deriving maximum value from it.”
Yet Prof Dutta said that the potential savings for companies who take the time to analyse the value of their software assets could be huge.
“Think of a house,” he says.
“Would you knock down an entire house when what you need is to update the kitchen? No.
“Yet we see companies spending millions of dollars to build a new IT system every other year when, in many cases, what they needed was just to update the existing one.”
One way Prof Dutta says companies can measure the business value of their core IT assets is through conjoint analysis, a statistical technique used in market research in which people make trade-offs across different attributes.
Copyright The Financial Times Limited 2007
Wednesday, September 05, 2007
FT.com / Companies / IT - Race for ‘next big thing’ in Silicon Valley
FT.com / Companies / IT - Race for ‘next big thing’ in Silicon Valley
Race for ‘next big thing’ in Silicon Valley
By Richard Waters in San Francisco
Published: September 5 2007 20:15 | Last updated: September 5 2007 20:15
Silicon Valley’s annual coming-out season for tech start-ups is about to turn into a stampede.
In the next few weeks, the wraps will be removed from some 150 new companies and products at a handful of events in California competing to identify the tech industry’s Next Big Thing.
The race to find the Valley’s hottest new idea reflects growing investor interest triggered by the high prices paid for recent internet start-ups such as YouTube, as well as the increasingly fierce Darwinian struggle among the newcomers to get noticed.
The large number of companies formed around hot trends such as web search, social networking and online video has added spice to the importance of the autumn events, according to entrepreneurs and venture capitalists.
“At this stage of the frothiness, it’s extremely difficult to get attention,” says Munjal Shah, founder of Like.com, an image search engine.
“The capital cost of starting a business today is very low,” says Chris Shipley, producer of Demo, one of the first tech events. “We’re seeing a lot of ideas make it from the spare bedroom to a showcase or the marketplace very quickly.”
Like.com was the sole start-up featured two years ago at a party thrown by Mike Arrington, whose widely read TechCrunch blog has made him the Valley’s latest kingmaker.
For his first formal conference this month, Mr Arrington has just doubled the number of companies presenting to 40 because, according to his website, there are “just too many strong start-ups”.
Other events that hope to unveil hot companies and products in the coming weeks include the Web 2.0 conference, the event that gave its name to the latest wave of online innovation, and Demo, which has expanded to two events a year.
The scramble for attention is another symptom of Silicon Valley’s latest start-up boom. The amount of venture capital being invested in the US is at its highest level since 2001 and it has led to a rash of “me-too” companies.
The flood of copycat companies is a sign of the over-heated phase of the investment cycle, according to observers.
However, for most of those that make it to the big showcase events, the attention from being in the spotlight is likely to be fleeting.
Being named “the coolest, hottest thing” can produce a “drug-induced traffic high” as users rush to try out the latest websites.
Once that initial surge of interest falls off, the hard work of building a lasting business really begins.
Copyright The Financial Times Limited 2007
Race for ‘next big thing’ in Silicon Valley
By Richard Waters in San Francisco
Published: September 5 2007 20:15 | Last updated: September 5 2007 20:15
Silicon Valley’s annual coming-out season for tech start-ups is about to turn into a stampede.
In the next few weeks, the wraps will be removed from some 150 new companies and products at a handful of events in California competing to identify the tech industry’s Next Big Thing.
The race to find the Valley’s hottest new idea reflects growing investor interest triggered by the high prices paid for recent internet start-ups such as YouTube, as well as the increasingly fierce Darwinian struggle among the newcomers to get noticed.
The large number of companies formed around hot trends such as web search, social networking and online video has added spice to the importance of the autumn events, according to entrepreneurs and venture capitalists.
“At this stage of the frothiness, it’s extremely difficult to get attention,” says Munjal Shah, founder of Like.com, an image search engine.
“The capital cost of starting a business today is very low,” says Chris Shipley, producer of Demo, one of the first tech events. “We’re seeing a lot of ideas make it from the spare bedroom to a showcase or the marketplace very quickly.”
Like.com was the sole start-up featured two years ago at a party thrown by Mike Arrington, whose widely read TechCrunch blog has made him the Valley’s latest kingmaker.
For his first formal conference this month, Mr Arrington has just doubled the number of companies presenting to 40 because, according to his website, there are “just too many strong start-ups”.
Other events that hope to unveil hot companies and products in the coming weeks include the Web 2.0 conference, the event that gave its name to the latest wave of online innovation, and Demo, which has expanded to two events a year.
The scramble for attention is another symptom of Silicon Valley’s latest start-up boom. The amount of venture capital being invested in the US is at its highest level since 2001 and it has led to a rash of “me-too” companies.
The flood of copycat companies is a sign of the over-heated phase of the investment cycle, according to observers.
However, for most of those that make it to the big showcase events, the attention from being in the spotlight is likely to be fleeting.
Being named “the coolest, hottest thing” can produce a “drug-induced traffic high” as users rush to try out the latest websites.
Once that initial surge of interest falls off, the hard work of building a lasting business really begins.
Copyright The Financial Times Limited 2007
Sunday, April 08, 2007
FT.com / Companies / IT - Californian IT surges into London
FT.com / Companies / IT - Californian IT surges into London
Californian IT surges into London
By Maija Palmer, IT Correspondent
Published: April 8 2007 22:04 | Last updated: April 8 2007 22:04
A record number of Californian information technology companies including Google, MySpace and Bebo have opened offices in London in the past year, leading a surge of investment by foreign business in the capital.
There were a record 250 foreign direct investment projects into London in 2006, up more than 40 per cent on the previous year, according to new figures from Think London, the capital’s foreign direct investment agency.
The number outstrips activity during the dotcom boom in 2000, when 182 investment projects came to London from abroad.
Some 25 Californian IT companies invested in London last year, making them the largest identifiable group of foreign businesses coming to the city.
The US as a whole accounted for 54 per cent of projects, with Californian companies, including non-IT businesses, making up 15 per cent of all London foreign investment projects.
This compares with 10 per cent from India and 7 per cent from Canada, the next biggest investors.
In response to the influx, Think London recently opened offices in San Francisco, in addition to those in New York and Beijing.
Key projects include the rapid growth of Google’s UK operations during the last 12 months. The company now employs hundreds of UK staff and runs a significant part of its mobile and wireless development work out of its huge office complex in Victoria.
Some of the investments have been relatively modest in financial terms. Bebo, the social networking site, opened a UK office this year with the hire of a single executive, Joanna Shields, poached from Google. Sling Media, the video-streaming company, similarly employs just one person in London.
But such small beachheads can grow quickly. MySpace, a social networking rival to Bebo, sent three managers from California to London in January 2006. A year later it had an office of 55 people in Soho.
Californian IT companies say they see London as a centre for convergence of the technology and media industries.
The fact that many global media companies, advertising agencies and telecommunications operators have headquarters in London makes the city a good place for dealmaking.
Google, for example, has signed key deals with Vodafone, the UK mobile phone operator, and with British Sky Broadcasting, Rupert Murdoch’s satellite television business, in the past year. MySpace has done a deal with Vodafone. And Bebo is working with Orange in the UK on the first deal to give mobile phone users access to the social networking site.
Copyright The Financial Times Limited 2007
Californian IT surges into London
By Maija Palmer, IT Correspondent
Published: April 8 2007 22:04 | Last updated: April 8 2007 22:04
A record number of Californian information technology companies including Google, MySpace and Bebo have opened offices in London in the past year, leading a surge of investment by foreign business in the capital.
There were a record 250 foreign direct investment projects into London in 2006, up more than 40 per cent on the previous year, according to new figures from Think London, the capital’s foreign direct investment agency.
The number outstrips activity during the dotcom boom in 2000, when 182 investment projects came to London from abroad.
Some 25 Californian IT companies invested in London last year, making them the largest identifiable group of foreign businesses coming to the city.
The US as a whole accounted for 54 per cent of projects, with Californian companies, including non-IT businesses, making up 15 per cent of all London foreign investment projects.
This compares with 10 per cent from India and 7 per cent from Canada, the next biggest investors.
In response to the influx, Think London recently opened offices in San Francisco, in addition to those in New York and Beijing.
Key projects include the rapid growth of Google’s UK operations during the last 12 months. The company now employs hundreds of UK staff and runs a significant part of its mobile and wireless development work out of its huge office complex in Victoria.
Some of the investments have been relatively modest in financial terms. Bebo, the social networking site, opened a UK office this year with the hire of a single executive, Joanna Shields, poached from Google. Sling Media, the video-streaming company, similarly employs just one person in London.
But such small beachheads can grow quickly. MySpace, a social networking rival to Bebo, sent three managers from California to London in January 2006. A year later it had an office of 55 people in Soho.
Californian IT companies say they see London as a centre for convergence of the technology and media industries.
The fact that many global media companies, advertising agencies and telecommunications operators have headquarters in London makes the city a good place for dealmaking.
Google, for example, has signed key deals with Vodafone, the UK mobile phone operator, and with British Sky Broadcasting, Rupert Murdoch’s satellite television business, in the past year. MySpace has done a deal with Vodafone. And Bebo is working with Orange in the UK on the first deal to give mobile phone users access to the social networking site.
Copyright The Financial Times Limited 2007
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