On the panel: Tim Sheedy, Senior analyst, IT and information management, Forrester
Mary Ann Maxwell, Group managing vice-president, executive programs, Gartner
Rupert Dodds, IT advisory partner,
Anthony Hafoka, IT advisory director, KPMG
Tony Clear, Associate head — industry and development, School of Computer and Information Sciences,
Sam Higgins, Research director, Longhaus
Sid Huff, Head of School of Information Management,
Victoria University of Wellington
Marcel van den Assum,
Tim Sheedy, Senior analyst, IT and information management, Forrester
We just collected data from an ANZ study of enterprises with more than 1000 employees. Effectively, they are saying there hasn't been a huge amount of change between the priorities in 2006 and what they are going to be this year. A lot of that is around consolidation of servers, operating systems, and applications. The idea is to get a more streamlined IT infrastructure that is easier to manage in order to free up more money and time to be able to focus on new projects that the business wants. We are seeing things such as SOA and virtualisation coming to the fore. It is all about making sure they can do what the business wants to do, which has been a real challenge for them for a couple of years.
On the technology front, security is still up there. We are seeing IT organisations taking on more than just IT security. We are once more seeing money being spent on security and it is not just around traditional security products. It is everything from ensuring the organisation is complying to specific regulations, to allowing the organisation to continue in case of a disaster or major changes. And the more your requirements are for business continuity, the more your requirements will be for storage.
Organisations are coming up with strategies to manage unstructured data. Obviously that is driving growth in technologies such as storage. This is part of a longer term trend towards a better information management strategy by corporations. You will see the different technologies that we are using to manage this area, and a lot of these technologies coming together. I don't think there is a lot of maturity happening in this market. Managing unstructured data will continue to be a problem. I don't see any simple solutions on the horizon.
This year will be a pivotal year for CIOs in terms of their ability to finally gain control of their infrastructure. I think they will start to get more business wins. There will be less people complaining and more people saying "thank you". That is a positive turnaround.
The measurement of the success of an IT organisation continues to be an issue and a challenge for a lot of CIOs. I suggest that CIOs look at the metrics that the organisation uses and make sure they use the same metrics to measure their own success. For instance, a lot of businesses are starting to measure themselves using the "customer advocacy index". The point is, if your business is using that index, then IT should be using that same index to measure itself.
Mary Ann Maxwell, Group managing vice-president, executive programs, Gartner
There is going to be a slight difference in emphasis over the next 12 months. Cost and business enablement will not be going away but what we are seeing is, and this is supported by surveys, the movement is underway at least from the CEO perspective to stop looking at the cost line and start looking at the revenue line.
CIOs will be asked to look at how they can drive ideas and innovation into the business. In other words, how can they create business value faster than just cutting costs?
In financial services, for instance, these include looking for opportunities to identify cross selling within the existing customer base. How can IT use business intelligence to identify the opportunities within the current customer base for new products and services?
The one area you can't lose focus on is security. You have to continue to protect that customer trust and your brand whatever industry you are in. The quickest way to lose customer trust and your brand value is by not focusing on the security side.
You also have to take a look at and take care of your people. You have to make sure the staff in your IT organisations can look at things from a business perspective, have business skills and knowledge, and program and project management skills.
Rupert Dodds, IT advisory partner and Anthony Hafoka, IT advisory director, KPMG
There will be a range of challenges in the areas of rationalisation, governance and resourcing. In some respects, they are interlinked. If you think rationalisation and the drive on cost optimisation, you have to have a good governance framework in place and you have got to have your appropriate resources.
The term "governance" is widely used, but with inconsistent meaning. Many organisations define it as overseeing major IT projects. Governance is much more than this and includes strategic alignment, risk management and performance.
In the area of governance, we see the following trends for 2007: How to obtain better connections between the business and IT; how to show the business that IT is producing optimal value; improved IT risk management; and how to demonstrate value out of compliance. If IT cannot show value through operational effectiveness, the result will inevitably be to outsource the major components.
In the area of resourcing, New Zealand has many jobs entitled "CIO" but few involve true strategic management. Few New Zealand companies can provide environments to nurture the CIOs of the future — therefore New Zealand must attract talent from offshore. Successful New Zealand companies are being purchased by overseas companies, with the CIO role consequently moving away from our shores. Few New Zealand companies can offer an up-and-coming CIO a project on the scale that equips him or her well for future challenges. New Zealand, meanwhile, has too few entrants to IT graduate programmes and must position [itself] to attract overseas talent.
Thus, the challenges and trends ahead include introducing or improving career planning for IT staff across all generations. There are now four generations in the workplace, which means we need to adapt our style to recruit and retain the good people.
CIOs need to add to strategic value or the CEO will focus on cost containment and charge them only with "keeping the lights on".
In the past year, there has been a focus on rationalising, and getting more value from existing IT investments rather than embarking upon significant new projects. Sourcing strategies (including shared services and outsourcing) are driven by a focus on containing TCO rather than value drivers.
Thus, the challenge will be to balance rationalisation as too much cost cutting or under-investment will lead to medium-term problems as organisations need to catch up. Rationalisation will remain a strong focus through 2007 for many organisations and there will be further consolidation within enterprise software and service vendors, although on a smaller scale than the last couple of years.
Tony Clear, Associate head — industry and development, School of Computer and Information Sciences, AUT University
Organisations have become too lean because they have run IT as an operation cost centre and their businesses are now trying to run IT as an innovation venture. That is a totally different space. They don't have the people and they probably don't know that, and they don't know who they don't have. They have gutted capability to such an extent that it is almost criminal the way some IT organisations are run in terms of capability management. I have seen very strong software teams and technical teams being blown away because of some change in management structure or direction.
If you look at innovation capability, this is a team of people who understand your business in depth and are ready to make changes and help things grow. Now, if there are always new people brought in with the latest consultancy thing they did somewhere else, then you are getting someone else's canned solutions. Where is the innovation in that?
What you are seeing [too] is the challenge of everyone wanting the five-year-experience employee. They are all stealing those from one another. New Zealand salaries are crap so you also lose them overseas. That's a no win situation, so you need to be able to employ new people. And then, we are seeing challenges in generating IT graduates, let alone have them migrate seamlessly into the workforce, especially if nobody is going to hire the new people. So who is going to make tomorrow's five-year-experience people?
Organisations see IT as this technical thing and [think] they just really need hired guns to do technical stuff and bugger off. The business has to own some of the issues in getting IT closer to the business by acknowledging these business processes are encapsulated in mystical software.
It needs a team of people who understand those. Often, people who understand the software actually understand the business process. If you don't have a standing team of seasoned analysts who can understand your business to that level, then you will just continually be changing packages, changing business processes, disrupting things, losing momentum and losing innovation opportunities.
You need to build a core technical team that has the skills to understand your business, is capable of managing and mentoring younger technical people and dealing confidently with external providers and contractors and consultants, and representing the businesses' interests.
Sam Higgins, Research director, Longhaus
The life of a CIO is never easy and a cursory environmental scan reveals more opportunities and threats than even industry analysts can count. But Longhaus recommends CIOs keep an eye on the following trends in 2007:
- Impacts of the Y2K asset bubble: Pre-Y2K, a firm's technology renewal cycle was determined by its own business needs. Y2K projects changed the status quo, as companies were forced into an artificial round of major repairs and upgrades — essentially a "big reset" for soft and hard ICT asset cycles. The implication is that replacement of core ICT infrastructure of the economy is now aligned. This means intense competition in 2007 for a limited pool of resources both within ICT and the business people addressing the associated change management. Smart CIOs should look for solutions to shorten asset renewal cycles. However, in the short term, the best strategy is to defer as much critical spending as possible until post-boom, which will hit its peak in 2008 to 2009.
- Managing the inevitable infiltration of SOA into the organisation: SOA within organisations is now inevitable as the latest round of upgrades of everything from ERP systems to operating systems brings SOA capabilities firmly into the hands of end users. Try telling Microsoft to turn off the SOA-capabilities of Vista or Office or SAP to turn off Netweaver. The challenge for CIOs is not development, but rather effective management technologies to govern, secure and provide service continuity.
- Learning to adopt virtualisation and the consumption mindset: Virtualisation is becoming a mainstream practice within all service providers. Virtualisation provides the real means to move to utility computing (at least for hosting). Once you move to a truly utility or consumption-based approach, sudden fluctuations in demand mean you need to be good at planning future ICT capacity. Otherwise you must either maintain spare capacity (which costs money) or rely on suppliers' ability to deliver additional hardware on demand --— both risky and costly options. CIOs face many challenges, but picking the right strategy when working with the business is by far the biggest. Here are several business changes CIOs need to get across in order to improve rapport with their non-ICT counterparts:
- Collaborating with the CMO to define the new customer experience: As institutional power (top-down) is replaced by consumer power (bottom-up) in all markets, the chief marketing officer (CMO) will rise up as the next major player at the boardroom table. Smart CIOs will partner with the CMO early to provide them with a core set of operational support mechanisms beyond CRM. If nurtured properly, this relationship could see a new lock-step duo that will jointly own the customer and drive the strategy for progressive organisations.
- Increased authority for CIOs will test ICT operations leadership: As CIOs are given greater authority to pursue a focused organisational push for increased ICT and business alignment, major organisations will be challenged to maintain a lights-on concentration in the areas of operational (ITIL-based) ICT management. While such alignment has been the much sought-after nirvana for many years, newfound authority for CIOs in driving traditional business projects will test the leadership capability and management depth of many companies. This looks set to be the year that any lack of focus on the ICT operational home front arrests the upward climb of many ambitious CIOs.
- Ignore the arrival of software-as-a-service (SaaS) at your peril: CIOs should look to set policy early on the use of SaaS. The zero footprint of most SaaS offerings means traditional governance arguments such as environment compatibility do not apply. Instead, service continuity, security and information management issues become the focus.
Sid Huff, Head of School of Information Management, Victoria University of Wellington
In the area of technology, the two biggest challenges for CIOs these days are developing a deep understanding of the possibilities created by the forthcoming raft of new mobile technologies, and figuring out how best to integrate third-party web-based services into an organisation's enterprise architecture.
Cellphones and PDAs are commonplace, but we'll be seeing a massive wave of creativity and innovation in the mobile ‘space' in the near future. But deciding on what mobile technologies make the most sense and provide the best cost-benefit isn't as easy as it sounds; getting the most out of the coming mobile opportunities will require changes in the way we think about business task execution.
One example: How can current and emerging mobile technologies best be used to allow a team of people to make "distributed, remote" decisions — decisions on the run — wherein the team never actually has an opportunity to meet face-to-face, because they are constantly on the move, in different locations, possibly even different parts of the world? The reality will be a team of harried, time-pressed managers in various airport lounges or hotel rooms, scattered across the country or the globe, with precious little contemplative time, but still needing to work together effectively to reach a quality decision. Current mobile technology would be very hard pressed to fully support such a process. The technology in the pipeline will have such capacity, but we all need to figure out how best to tap that capability.
As for "working with the business", the biggest challenges for CIOs remain how to properly align the technology function with the business strategy, and how to best help the business achieve competitiveness (or "competitive advantage", to use the time-worn phrase). In some ways, the real underlying issue is actually understanding what is meant by "aligning technology with the business". I find that every CIO out there can rattle off that phrase almost like a mantra, but when pressed to explain exactly what he or she thinks that means, in detail, they come up short. This is a place where academic research can add some real value, and hopefully will be doing in the near future.
Marcel van den Assum, Independent advisor
From the business perspective, there is going to be an ongoing focus on the enterprise as opposed to functional silos; and there are business, cultural and technology issues that flow out of that.
It is shifting the thinking from a relatively self-centred selfish silo view — not just looking into marketing department, product management people or supply chain — but looking across these functions. This requires more of a holistic mindset and it has to be driven by different incentives perhaps for the leaders within those functions, whether they be government agencies or business structures. From a business process point of view, it is primarily recognising there is a need for clear ownership of processes that link across functionally. This will require new disciplines in terms of governance and leadership.
The CIO is one of the few people in the new organisation that does see across the enterprise. The CIO has a great opportunity to implement this thinking but certainly the other leadership needs to take a look beyond their immediate influence.
There will be more specific accountability of the CIO, such as the issue of agility and flexibility particularly as it pertains to legacy environments. Most of them struggle to apply the changes rapidly due to some of the historical technology decisions [which are] now potentially impediments. They were good decisions at that time.
The pressure is building to take a more aggressive approach to legacy transformation and CIOs that get their heads around how to drive what will be sought after. These are CIOs that maintain a three to five-year view as opposed to continue to build on the legacy environment to facilitate a short-term demand.
Certainly the information asset — the access to and management of it, both structured and unstructured — will be a key technology opportunity. I think it is inevitable that information assets will appear on the balance sheet and there will be demand to formally measure the performance of those assets. We better get our act together there and be prepared for that.
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