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Reviewing the Year of the Rat

Reviewing the Year of the Rat

IT thought leaders look back at 2008 and highlight the success stories, the disappointments, lessons to be learnt and what will be remembered.

If one rat is hard to catch, then a street full of rats must be a major headache. The proverbial rats certainly deserted the sinking ship which has been the year 2008. Nevertheless, on the bright side, chief information officers (CIOs) were blessed with technological advancements in business intelligence, virtualisation, unified communications with an array of collaboration tools, and more conscious efforts in pushing green IT. This year, CIOs also witnessed a sharp turn from a booming IT industry that called for mixed feelings towards mergers and acquisitions of IT companies, to a sober one that is at the doorstep of a global economic recession. In this feature, we invited eight thought leaders in the region to delve into these issues together.

The significant increase, in pre and post reviews of information technology (IT) projects, indicates that CIOs are paying attention to the holistic enterprise alignment of business and IT project initiatives, according to the IDC Dynamic IT Benchmark 2008. Thanks to the credit crunch, this focus will sharpen further, says Patrick Chan, chief technology advisor, emerging technologies research, IDC Asia Pacific. In 2008, Chan saw a trend of increasing specialisation of committees to make collective decisions and to innovate. He says "as much as 45 per cent of participants were pushing for innovation in 2008 with their IT budget, while 15.7 per cent were spending above 10 per cent of their IT budget. There is a good innovation focus in Asia Pacific".

BI reaching maturity

Looking back on 2008, Sunny Lee, executive director of IT, at The Hong Kong Jockey Club (HKJC), says business intelligence (BI) is reaching maturity. "The BI players are offering mature products with good installation experience. Through proper implementation of BI technology, enterprises are realising the ability for them to get ahead of the competition, to understand more about their customer behaviour, competitors, and to capture more market information."

At the HKJC, BI has been used for the past five to six years. Currently, Lee says the club is taking it to the next stage by increasing the depth and breadth of the information for analytics and projections.

Daniel Lai, head of IT, Mass Transit Railway, notices that BI is now embedded in a lot of applications and IT solutions. In the long run, however, "BI tools should be simple enough such that end-users can use them to provide any sort of information."

Virtualisation tops

Whether presented as a cost-effective initiative or a corporate social responsibility measure, virtualisation has nonetheless topped the CIOs agenda this year.

According to analyst Andrew Milroy: "Virtualisation and an increased focus on sustainable IT-offerings packaged as sustainable information and communications technology (ICT)- provide opportunities for cost reduction. The use of virtualisation offers significant cost reductions and reduced carbon emissions." Milroy is research director of the information and communications technology practice, with Frost & Sullivan, Australia. Adds Lai: "Green IT has been a popular topic, but we're still scratching the surface. From a consumer point of view, virtualisation is maturing. At the MTR, we place environmental concerns at the top of our agenda."

As for Chan, he notices that many Asia-Pacific organisations are still in the middle ground of IT efficiency. "While we see Asia-Pacific organisations beginning to act on optimising their competence in business technology governance, a substantial percentage still needs holistic guidance from vendors and analysts. It is imperative for CIOs to start looking into governance with an automation approach to managing IT and business assets," he says.

Maturing UC

In contrast to green IT, Lai says unified communications (UC) is maturing. "While the cost of communications, UC devices and applications dropped significantly during the year, a lot of powerful devices with numerous features can be combined into a single device," he says. Lai envisions that UC will be even more popular in the next one or two years, when mobile devices are combined with Internet protocol (IP) telephony.

Milroy says the growing mobile workforce is a major driver for UC, due to the increased functionality of mobile devices and the increased use of the specialised applications that these devices provide. "For example, many field force management applications are designed to reside on any device and can increase productivity of field workers such as maintenance engineers," he says.

Business collaboration has attracted keen interest this past year. IDC research shows that 72 per cent of participants were interested in leveraging Web 2.0 or portal technologies to solicit ideas from employees. "Organisations in the Asia Pacific are expected to increase their adoption [of blogs and collaboration portals] in the near future. Some organisations are also exploring internal Second-Life, Facebook custom applications, and are engaging bloggers to boost business," says Chan.

Singapore-based real estate company United Premas is currently leveraging a Web 2.0 portal, according to James Lim, the firm's director of information and communications technology division. He says Web 2.0 components are useful to capture tacit knowledge: "We give each staff so-called 'space' to contribute to the wiki or to have their own blog. It can start with something informal like, 'Oh, I'm going to Dubai next week, any suggestions where to eat or shop?' So staff members who have been there can share on how to deal with people there."

However, not all organisations appreciate the full merits of collaboration tools. While some executives worry about the potential harm to employee productivity caused by social networking and instant messaging tools, others find IP phone communication or telepresence costly. Milroy, however, urges organisations to embrace the principles of Web 2.0 technology. "Some new ways of working, such as increased collaboration using Web 2.0 technologies, need not cost a huge amount. Organisations should reach out to customers and prospects to understand their needs and to interact with them more frequently," he says.

Headline-hitting M&As

Mergers and acquisitions frequently hit IT and business news headlines in the first half of 2008, and MIS Strategic 100 has recorded many of them. Of all the M&As, our thought leaders find Hewlett-Packard's EDS buy and Oracle's acquisition of various IT firms the ones with the most impact.

"Perhaps the biggest was the acquisition of EDS by HP which received surprisingly little coverage in the press", says Milroy. "It now surpasses IBM as the world's largest IT company and the second largest IT services company in the world."

Gartner analyst Jones also rates the EDS-HP merger as the top enterprise IT news in 2008, followed by "the continued professionalisation of IT [one small part of which is ITIL V3]. IT budgets continued to grow, but only just. The sourcing market continues to mature. There is also the increase in the choice of IT services [software-as-a-service, technology-as-a-service as well as body shopping, which is the practice of consultancy firms recruiting IT workers in India on short-term contracts]."

"[M&As] do unfortunately affect us," says Lee. From a user's standpoint, we'd like to see competition. From a product provider's aspect, competition gives choices and innovation. The good side of it is we have fewer counterparts to work with.

"The flip side is we're left with fewer choices when we go out to buy something. From time to time, we could be facing issues with migration to the mainstream product after the M&A, as there's bound to be some sort of misalignment."

ICT spending slowdown

CIOs and analysts collectively find the current financial turmoil the first and foremost setback for the ICT industry in 2008. "The financial tsunami is a big disappointment," says Lee. "Over the last year, the IT industry in [Hong Kong] has been developing healthily with an increased need for IT professionals. I foresee that there'll be some cut-back in IT spending. And people may not be able to afford any long-term investments in IT projects."

Innovative strategy

Lim says it was lucky for his company because "we [United Premas] had sufficient time to be innovative in our business strategy and take pre-emptive measures to ensure that we are not impacted. We actually had projections on [the credit crunch in America]. If this comes to Singapore, what is the economic impact, and how can IT go into cost prudence, and things that can help to keep the business viable."

Milroy expects a definite slowdown in ICT spending, brought by the financial crisis, "particularly in new projects". He says businesses are busily dealing with the financial uncertainty, and helping customers manage it. "With the financial crisis, projects funded by debt will most likely be scrapped," he says.

Analysts, who reasonably trusted that IT enabled better governance and compliance in financial services institutions, were caught by surprise. According to John Roberts, research vice president and distinguished analyst, Gartner: "The major disappointment has been the failure of risk management algorithms and BI tools [and people] to prevent the financial crisis, and that service-oriented architecture [SOA] has failed to live up to expectations."

Chan believes that the biggest surprise for 2008 was IT's failure to enable a transparent financial operational environment. He believes the credit crunch will have "a long chain of effects and influence on how financial institutions operate in the future". Believing that IT as an enabler to integrate different business entities, Chan is disappointed that surface anomaly and operational data failed to uncover the chain-linked effects of business flaws. "It goes to underline that flawed business practices will accelerate failure catastrophically, even with the best IT," he says.

Various pain points

This year, IT executives faced a long list of challenges besides the economic brake on IT spending. According to our thought leaders, continued business-IT alignment, cost control, data security and the time-gap in IT service support, were some of the biggest IT challenges.

Andrew Rowsell Jones says CIOs in 2008 were busily delivering projects that enabled business growth, linking business-IT strategies and plans, attracting, developing and retaining IT personnel. Jones is vice president and research director at Gartner executive programs. With 430 staff at HKJC's IT division, Lee still finds an ongoing shortage of IT talent. He believes the challenge lies in how CIOs can develop their existing staff talent and how to find the right IT people. "Since technology changes so fast, you always have people who have a mind-set that is lagging behind and [the CIO's role is to] continuously develop them," he says.

Choosing tools

Lai says: "I think CIOs find it stressful when choosing tools, such as BI, data mining, testing, and stress test tools. It's always a challenge to find the right ones." As a real estate company CIO, Lim finds writing business proposals on technology aspects challenging. "We need to convince the business how [effectively] money is spent on technology and how it gives a tangible return on investment," he says.

To the HKJC CIO Lee, managing the technology portfolio poses another challenge, in terms of "how to ensure that it's free from obsolescence, how to ensure it keeps up with the business requirements, and how to modernise and refresh the technologies in a cost-benefit fashion".

Traditionally viewed as cost centres, IT departments are increasingly tasked to actively adopt cost-control approaches in managing IT, alongside delivering IT-enabled business projects.

Chan says: "Senior IT executives are now being tasked to align more closely with business operative cost and business opportunities. Compared to 2007, executives are now even more focused on aligning IT applications with business strength and in consolidating infrastructure to trim cost and improve agility. Unlike the focus in past years on accelerating application development time, executives are now tasked to align security and cost elements with their reform strategies, which are hard things to do."

Bringing IT to the front

Lim says business-IT alignment in 2007 associated more with the backend, the corporate side. "Now we're bringing technology to the front. When you bring it to the front, the impact on the revenue is more significant because in many traditional businesses, this is how I do my costing, and this is how I present to my customer.

"Now you're going to put IT forward as a delivery model. So how are we going to justify the increase in pricing, or how can we maintain our cost, and not sacrifice the deliverables? So there are a lot more issues. From the operational side, do we have to pay more to retrain staff? In time to come, will that increase labour costs because we need to have more skilled, IT-savvy workers? There are many business issues associated with this," Lim says.

Marianne Broadbent, managing director, Edward W Kelley & Partners. says "there is a twin demand for innovation and ensuring that [IT executives] are running things very cost effectively".

Data security matters

In Hong Kong, data security incidents frequently hit the local headlines in 2008, and, to a certain extent, tarnished the city's image as regional ICT hub.

"We have seen quite a number of instances where personal, or very sensitive data was lost or exposed, especially when data [belonging to the Immigration Department Hong Kong] was leaked via Foxy to the Internet," Lai says. He recognises the efforts that organisations put in for their security, but stresses that IT is not the only responsible party, because every user should be responsible for protecting their own data.

Lai urges organisations and service providers to invest in security protection whenever they invest in systems and solutions, simply because "the Internet is an open world".

"Of course, security is something you can spend a lot on without getting any real return on investment. But any loss of sensitive data, either accidentally, deliberately, or due to malicious damage and threats when security is compromised, can be quite damaging to any organisation, either through monetary loss or poor reputation as a result of security breaches. I think much more has to be done in security," Lai says.

Service support

From the technical standpoint, the HKJC CIO is disappointed by the 'time-gap' in service support offered by some technology companies. Although product innovation is rapidly advancing and technology companies are presenting innovative products and new versions, "I'm starting to see companies having a lot more difficulty in keeping up with their skill set and supporting their products locally," Lee says.

He notes an aggressive cycle of new product offerings in 2008, a year of M&As. "But unfortunately, after they've been sold, [technology companies] are not quick enough to train their own people [at the local fields] nor are there enough people from headquarters to help clients with installation and implementation. There seems to be a time-gap for talent. This is not good because it means that Hong Kong isn't able to leverage the latest technology developed from the major global companies."

Business expertise

According to Broadbent, one major pain point of CIOs in Asia is "achieving the ability to have the business expertise that they need, at all levels in an organisation, and to continue to attract and retain the right level of talent.

"Another is the ability of an executive, or a manager, to be flexible enough to deal with ambiguity and changing circumstances. This attribute becomes more and more important whenever there is uncertainty, so perhaps people are now finding that some of their people just don't have that capability at the level really needed."

Winning CIO strategies

1. Develop a list of what-if scenarios

Effective CIOs should be super agile, and should always be prepared with a range of scenarios for different potential business outcomes, advises Marianne Broadbent, managing director, Edward W Kelley & Partners.

She says: "I know there are some very thoughtful and well-prepared CIOs who always have what-if scenarios in their top drawer: What if we have to cut costs by 10 per cent? What if the company's revenue is being used in a different way? What if this project is suddenly stopped?"

2. Devise better cost control

CIOs should always ensure that IT investments offer clear cost benefits. "Given recent events in the financial markets, risk needs to be managed carefully particularly with finances [too much debt]," says Andrew Milroy, research director of information and communications technology practice, Frost & Sullivan, Australia.

CIOs should have the power to plan a holistic enterprise IT infrastructure that encapsulates the technological traits including virtualisation, SaaS, cloud computing and SOA, which result in trimmed operational costs, says Patrick Chan, chief technology advisor, emerging technologies research, IDC Asia Pacific.

3. Optimising people and processes

CIOs have done the easy things in IT, automating transactions, says John Roberts, research vice president and distinguished analyst, Gartner. "The challenges remain to use technology to optimise people and processes and deliver the high performance workplace," he says.

Information overload can be tackled by simplifying and unifying message chains, says Roberts, "so that every person in the enterprise gets the right information in the right format, at the right time, to make the best decisions".

As part of the C-suite, Broadbent advises CIOs to shift and change depending on the organisation's requirements.

"You might have to come in with a lot of re-investment and expansion. If that's not what the business needs right now, you're the one who has to adapt, and if you can't change, you shouldn't be at the table," she says.

In practical terms, Broadbent advises CIOs to "keep very close to the chief financial officer and business colleagues, so that they are very in-tune to the financial and commercial dynamics of the organisation".

4. Think like the business

IT executives should not only understand business operations, but clearly need an understanding of the competitive edge that IT can provide in the future, says Chan.

Business-IT alignment has never been more important because companies that fail to keep up with the pace of IT that consumers and enterprises expect today, will fall behind. Chan advises that CIOs consolidate and streamline business services where appropriate and focus on evolving a good IT enterprise blueprint. This should be manageable and modular and able to accommodate technological refreshment.

With regard to IT spending, Daniel Lai, head of IT, Mass Transit Railway, says it is not a matter of how much CIOs spend in general, but a matter of maximising the value of the investment. The focus should be on delivering tangible benefits and business value through IT-enabled business projects.

Credibility and respect

"You have to be part of the business, you have to align your IT strategies and objectives with that of the business. This way, the IT team will gain the credibility and respect from the whole organisation," says Lai.

James Lim, director of information and communications technology, United Premas, has been stressing to his IT business heads the importance of CIOs properly understanding the business and the market. They should adopt 'a business position' to provide 'technology advice' or 'consultancy' services to their enterprise.

"If the CIO is not able to demonstrate how IT can empower and advance the business, then the CIO position will be deemed irrelevant."

5. Practise good governance

CIOs should practice good governance no matter how creative they are. When CIOs implement something that is very innovative, it goes back to old-fashioned project management at the end of the day, according to Sunny Lee, executive director of IT, The Hong Kong Jockey Club.

He says: "Good IT governance is essential to ensure that the product or the innovation is properly implemented in a quality fashion."

6. Cultivate a spirit of partnership with vendors

"One thing I've learnt over the years, in terms of using external vendors or service providers, is that it has to be a win-win situation; a partnership," says Lai.

He believes that contracts should be just good enough to protect both parties' interests. "It's common sense that good things do not come cheap, and cheap things are no good. If you undercut the cost of what people would reasonably have to do to deliver, both sides will suffer at the end of the day.

"It's this spirit of partnership that I learnt over the years, which is one of the critical success factors especially if you are outsourcing a project."

7. Keep people for the future

As organisations put in more effort to properly assess their staff, Broadbent reminds CIOs to ensure they are keeping the people they will need in the future, not just those for the immediate task.

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