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2011: A year in review

2011: A year in review

Strapped for cash CIOs will have to think about which technology to pursue as they enter a new year marked by last year's IT hits and misses.

Having entered the year in a relevantly buoyant mood, with budgetary restrictions imposed following the ­global financial crisis having been slowly relaxed, many information chiefs will exit 2011 with cost containment back at the top of the agenda. While organisations pulling resources out of the ground remain a law unto themselves, macro-economic concerns hang over the technology spending intentions of most companies.

In the public sector, Canberra's CIOs must be mindful of the Gillard government's bloody-minded intentions to get the budget back into surplus. Austerity is also seen as a virtue within the states.

Gartner research director Andy Rowsell-Jones recalls that the Australian economy was in fairly good condition at the start of the year and it looked as if the rest of the world was finally coming out of the doom and gloom of recession.

By the end of the first quarter, however, a number of ­European-owned organisations were asking local CIOs not to spend their budgets. For many, those restrictions have since been formalised and allocations have been taken away.

"There was a growth story but unless you happen to be mining in Queensland, northern NSW and particularly Western Australia, the foot has definitely come off the accelerator," he says. "While the CIOs of resources companies are still struggling to manage growth that requires a lot of technological investment, on the east coast there is more focus on cost ­reduction.

"There's been a distinct cooling in the enthusiasm for information technology throughout 2011. The worm has turned and people are going into the new year much less optimistic."

The two biggest technology trends in play this year have been cloud computing and the insatiable demand for mobile access to services from employees as well as customers.

Cloud has been a divisive issue, with heavyweight supporters and detractors in roughly equal measure.

Spruikers proclaimed it would deliver major reductions in business-as-usual spending, freeing up more

resources that could be allocated to strategic projects, but many have struggled to make the numbers stack up. In the short,term at least, most CIOs looking to cloud services are searching for quick ways to add extra capability.

"The real challenge for any organisation of scale is that their business processes are complicated enough that the platform has been optimised," Rowsell-Jones says. "It's become so intertwined that it would take years, if ever possible at all, to move from the on-premise CRM and ERP application they run today. It takes a long time to change anything of any substance."

Kevin Noonan, a public sector research director with advisory firm Ovum, says this has been a big year for the cloud because it has gone from something sales people talked about to a topic of discussion among delivery managers. However, he admits that government rhetoric is still far more cautious than he thought it would be by now. Instead of talking specifically about cloud, agencies are talking about the rapid ability to deliver business outcomes, pay-as-you-go services and every­thing else that describes the model without mentioning the name.

"It's not cool to talk about cloud because there is so much concern about risk and security," Noonan says.

"Those discussions are overshadowed by project failures and shared services debacles, and governments around Australia are losing patience.

"That's created an atmosphere where few people are willing to chance their arm with a good-news cloud story in case it goes bad the next day."

For organisations considering their cloud options, Mallesons Stephen Jaques partner Patrick Gunning says business continuity risks are the most important to address. This has been brought into focus during 2011 with major global providers ­Amazon, Google and Microsoft all suffering service outages.

At the other end of the importance scale, often-cited fears about data privacy related to the US Patriot Act have so far amounted to nothing, with no Australian businesses made to hand over sensitive customer information stored in US data centres.

"The reality is that every jurisdiction has laws that allow enforcement agencies to access data that's held there," Gunning says. "In many respects the US has stronger controls over access to data than Australia. They have a Bill of Rights that offers protections we don't enjoy. It's a matter of going in with your eyes open and seeing what the risk is."

If the benefits of cloud are still being debated, the desire for more mobile services has been apparent anywhere you care to look. Apps designed for smartphones and tablets have quickly become a strategic battleground for major banks and supermarkets, board members are being armed with iPads and employees within all manner of different organisations are being offered the opportunity to use their own devices for work.

The consumerisation trend has had worrying implications for one-time corporate darling Research In Motion, as the BlackBerry falls out of favour with users that demand iPhones or Android devices.

Noonan says 2011 will be remembered as the year of the digital citizen, which started with Twitter feeds and Facebook updates from Queensland Police becoming the most up-to-date guide as to what was going on during the floods.

"That information was coming out in real time and primarily driven by displaced people with mobile phones," he says. "Personal technology is really driving government services because digital citizens have enough computing power in their pockets to drive advanced ways of doing things."

A good example was the South Australian government getting rid of car registration stickers, which removed a whole business process it previously had to manage. Drivers can now download an iPhone app and type in licence plate details for information about the make and model of a car and whether it is registered.

There are no privacy issues, because the app only provides the same information that used to be on windscreen stickers, and drivers can pay their registration through the same app.

Looking ahead, Noonan expects there will be increased levels of co-production, where these digital citizens play an increasingly active role in the creation and dissemination of information that would normally have been provided by government agencies.

"Where the existing model is high-tech government using all of the data at its ­disposal to provide services, part of the processing will increasingly be outsourced to the consumer," he explains.

"Smartphones have moved into the mainstream thinking of how government services are delivered. It's been a big example of social change and yet it's happened without much fanfare."

For CIOs under increased pressure to provide the latest and greatest gadgets to members of staff, the rapid move to mobile brings with it a set of management challenges and additional costs.

They typically have to upgrade wireless networks, buy mobile device management software to comply with security policies and insure the fleet of gadgets against accidents or loss.

They must also stump up for increased data usage which, as smartphones have already demonstrated, can quickly become expensive when they are used overseas.

"At a time when budgets are constrained and other priorities are dominating, CIOs are being forced to do something about mobile," Rowsell-Jones says.

"The sensible ones charge them back to the business units, but fur is going to fly because those business units don't know how much these things can cost to support."

The cost issue is likely to come to a head when departments take a closer look at annual expenses while preparing budgets for the start of the next financial year.

"It will be interesting to see how they view these devices once they realise they are not free," Rowsell-Jones says.

"That's a time bomb."

Two other prominent trends serve as a timely reminder of how things can go very badly wrong. The first, which has predominantly played out in the public sector, is the series of shared services disasters. Until recently seen as the most efficient way of doing things, embarrassing failures and cost blow-outs in the states are causing a rethink.

Western Australia abandoned its shared services program earlier this year after failing to make it work, despite sinking $440 million into something that originally carried an $82 million price tag. Premier Colin Barnett described it as "one of the greatest bungles of public administration".

In Victoria, the Baillieu government has also put shared infrastructure services provider CenITex under the microscope after it emerged that a project had blown its budget by $20 million. Some of its IT contractors earn more than the Premier and two members of staff were fired earlier this year after awarding themselves contracts worth $1.5 million.

"Shared services were seen as the most efficient way of doing things but now that model is starting to unravel at a rate of knots," Noonan says. "We know there are efficiencies to be gained from bringing stuff together but shared services are not the answer. It has crashed and burned in a very public way this year."

All eyes will now be on the biggest shared services project of them all, as the Department of Human Services brings together the technology operations of Centrelink, Medicare, the Department of Veteran Affairs and other smaller agencies. The departure of long-time CIO John Wadeson, who retired in September, adds an extra dimension and piles huge pressure on new arrival Gary Sterrenberg.

"We are looking at an agency that's right on the cusp of significant change because it has to deliver the goods next year and this is a big opportunity to take a fresh look at all of the things that it does," Noonan says. "The challenge will be to drive significant change, while at the same time not putting any of its production systems at risk.

"The good news is that Human Services is slightly behind the curve and can look at what has happened within the states."

In the corporate world, the shared nightmares are focused on high-profile data breaches such as that suffered by Sony. Gunning says this has put reputational risk back near the top of the agenda for chief executives, who collectively wake up in a cold sweat at the thought of having to announce that large numbers of customer records, including credit card details, have been compromised.

At a time when so much of the technology budget is under threat, this is one area at least where CIOs can be assured of a sympathetic ear.

Exceeding expectations

CIOs who can exercise soft skills, and actively contribute in achieving sought-after business outcomes, may unwittingly be setting themselves up for a promotion, whether they like it or not.

Those who "stay out of the heat of the kitchen" where ideas are floated and new initiatives pursued, risk being sidelined and will be the last to learn of major systems changes they have to implement.

Put simply, CIOs, to meet management expectations, have to deliver IT services as agreed with their clients within the expense and capital budgets set for them. Those that do so keep their jobs, but rarely get promoted.

Major challenges today lie in the application systems domain. Increasing systems complexity, as in-house and acquired application systems have to be integrated with ERP and CRM software solutions, is high on the list of concerns. Compounding the problem is the need to thoroughly test each software release before going live, which in turn increases IT costs rather than reducing them. Faced with a target to reduce costs and minimise systems complexity, the CIO is in a "no-win" situation.

CIOs also have to ensure the right technology is used at the right time and for the right solution. This means being aware of what current and emerging technologies can deliver while making an informed assessment of each vendor's value proposition. Failure to do so could cause cost blowouts and scheduling slippages.

Data security management is a preoccupation of most CIOs. Recent media reports, where sensitive Defence data was stored on a memory stick missing from the luggage of staff travelling in Asia, is alarming. Identifying and implementing software solutions and procedures which minimise security risks is an ongoing challenge.

An emerging challenge is the need to manage the increasing proliferation of mobile devices. While it may seem unreasonable to impose controls on mobile devices, CIOs must make business managers aware of the incremental cost of integrating apps on unsuitable devices.

To exceed management's expectations, CIOs have to exercise leadership outside of their service-delivery role. For many, who operate in a structured environment, moving to an unstructured one is a daunting prospect. The move involves using soft skills such as selling ideas, shaping management's expectations of what technology can and cannot deliver, and acting as a thought leader in meetings. MIS Australia

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