CIOs speak up

For some time now, it’s been said CIOs have been moving from less of a technical foundation to a business orientation. And findings from our First Annual RBC/IT Business Group CIO IT Spending Survey confirm this trend.

CIOs are focusing less on infrastructure upgrades and more on strategic benefits, according to Mike Abramsky, who leads the software and wireless research division at RBC Capital Markets and is the main author of the report.

“The spending is focused on benefits that are ROI-focused,” says Abramsky. “There’s a lot of scrutiny on spending. It seems CIOs are moving beyond the infrastructure upgrade cycle that dominated past IT budgets and more into improving existing infrastructure.”

In conjunction with the IT Business Group, RBC surveyed 50 CIO-level executives across North America with an average budget of US$75 million in its 2006 CIO IT Spending Survey.

The report indicates also that CIOs plan modest increase in spending. For the remainder of 2006, 68 per cent of respondents indicated they intend to increase technology spending, with an average increase of six per cent. And 12 per cent indicated spending increases of more than 10 per cent. Spending next year is expected to remain stable at six per cent.

The top spending priority was software, including business intelligence and enterprise content management. “The rationale here is both unstructured and structured data in enterprises are starting to be viewed as a key requirement for growth — managing that data, extracting it, adding to it and supporting decision-making,” said Abramsky.

On-demand applications is a new category and one that is experiencing high growth. More than 40 per cent of CIOs plan to increase spending in on-demand applications such as Web conferencing, HR/payroll and sales force automation. Spending on wireless and networking represents one of the fastest-growing segments; CIOs intend to increase spending to nine per cent. Top categories include voice over IP, wireless data and Wi-Fi.

Spending on hardware, however, is lagging, which reflects a downward trend in pricing, along with a trend to do more with less. PC and notebook spending at three per cent suggests normal replacement cycles.

For CIOs contacted by the IT Business Group in conjunction with the report, while there is an overall movement to a greater strategic role in their organizations, some of the technical issues cannot be left behind.

For Seneca College, one of its top spending priorities revolves around business continuity. “These days we have to be on all the time,” said Terrence Verity, Seneca’s CIO. “We can’t have even 10 seconds of downtime.”

The college runs an enterprise resource planning system for student information, human resources, finance and learning management. “The issue for us now is implementing that,” he said, “and implementation means we have to look at data centres because you can’t put things together in the same data centre.” That raises some challenges, he said, such as architecture and cost.

Another focus is storage, which is being driven by applications. “Storage is growing by leaps and bounds,” said Verity. “If you run a big enterprise e-mail system — and we have 45,000 users on our e-mail — you have to design your systems in better ways to manage the volumes of data.” Some programs are data-intensive, with video and digital media that students use, save and store. “We’re finding this is an interesting challenge for us — where we put this, how we make it available,” he said.

On the strategic side, one area where Seneca is putting a lot of emphasis this year is business intelligence. It has already made an investment in data warehousing. “The issue is how you actually implement this and do some transformation of business processes around business intelligence,” said Verity. “[We have] a lot of data, but we need more knowledge, so how do we start to ask the right questions?” Seneca is working hard to individualize data delivery, he said, which includes a personalized portal system.

“Things have really moved from talking about IT value and alignment to being more of a strategic contributor and driver to the business,” said Andrew Dillane, CIO of CNC Global. “IT is not about technology anymore and CIOs are focused less and less on infrastructure issues. It’s much more about business results.”

XML, for example, is a great technology, he said, but nobody talks about it from a technology perspective. “We really talk about how some new standards in our industry, such as HR-XML, allow us to deliver more business results and integrate with our clients and partners,” he said.

But being more like the business means measuring IT like the rest of the business, he said. “Metrics like uptime are really becoming a thing of the past,” he said. “For our business, nothing less than 100 per cent is acceptable, so why even bother measuring it?” For true alignment, he said, IT must use the same metrics as the rest of the business.

From CNC’s perspective as a provider of IT and contact centre staffing, that means focusing on time-to-hire, quality of hire and ultimately customer satisfaction. “This spells out how CIOs are becoming more business and financial savvy,” said Dillane.

A high-performing infrastructure to enable the business is a given today, he said, and CIOs need to do a lot more with their technology to be strategic — and that means adding value for clients as well as making the business more effective.

“My main role is to have a high-level understanding of technology but a much deeper understanding of the business,” said Catherine Boivie, CIO of Pacific Blue Cross. “You still need the technology background, but you must know the business and you must be an excellent communicator to relay how it will contribute.”

PBC recently rolled out a business intelligence tool that allows the business to pick and choose information from multiple sources and thereby speed up decision-making, she said. PBC is also looking to replace its enrolment system; for this, it’s considering a packaged solution as opposed to building it in-house, which is a shift in mindset for the organization.

“Everything is measured in business terms,” said Boivie. “Technology is no longer an island by itself, it’s no longer this not-understood thingamajig.” A project must contribute to PBC’s balanced scorecard. “We have a corporate governance that does project prioritization,” she said, “so whatever the project is it has to show, in terms of our balanced scorecard, what it will contribute.”

Brenda Kerton, lead research analyst with Info-Tech Research, is seeing a growing interest in enterprise applications, particularly business process management. She also sees an uptake in customer relationship management (CRM), content management and even human resource management systems. And this is an indicator that budgets are loosening somewhat, she said.

“We’re also seeing a real push to do things faster,” she said. “Can we find ways of building things faster, getting the build cycle smaller?” On the buy side, that’s driving activity in software as a service, since it’s a faster deployment method, as well as Web services, service-oriented architecture and component-driven development.

But close to 80 per cent of IT budgets are not spent on what people would consider strategic investments. “What we’re seeing happen is that those CIOs who recognize that 80 per cent of their budget goes to keeping the shop running are thinking strategically on that tactical stuff, so that in fact they’re in a better place to have a discussion about the other 20 per cent of that budget,” she said.

CIOs in some of the larger publicly traded companies are going through their second and possibly third year of Sarbanes-Oxley compliance. “This is going to allow their internal auditors to return to the core process and control audit functions, so we’re seeing a big uptake in automated reporting and automated suites that will drive some of that reporting for them,” said Darin Stahl, lead research analyst with Info-Tech Research.

Down in the engine room of these IT shops, CIOs are concerned about making their data centres more energy efficient. Electricity accounts for about 19 per cent of the total cost of ownership in a standard data centre. “So you get a lot of data centres out there due for refresh and redesign,” said Stahl.

As a result, CIOs are looking toward technologies that add more density, such as a modular power infrastructure. Blade servers are set for more widespread adoption, as is virtualization, since both technologies provide that density.

Companies are still cautious when it comes to outsourcing, and many CIOs engaged in outsourcing feel the vendor has them over a barrel, said Stahl. As a result, we’re seeing a trend where CIOs are trying to break up that larger engagement into smaller commodity engagements in order to drive savings and get the right processes into the hands of the right outsourcers. “So the trade-off there is now you’re managing multiple vendors,” he said, “but some [CIOs] are willing to do that to chase the savings.”

Comment: info@itbusiness.ca

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