The Big Five

Now and again CIOs like to take stock of their situation — particularly in the first quarter of a new year,

when more rather than less seems possible — and Don Parker of Shoppers Drug Mart is no different from the rest. “”This is the worst job for managing your time,”” says Parker, who has been

in the technology hot seat at Shoppers since September 2002.

Being the person responsible for technology is also perhaps the most thankless job on the executive floor. If you successfully meet your targets, at best you might get a pat on the back from your CEO.

If you do not, everyone blames you for holding up the company’s business plan.

Knowing what services and technologies to invest in will certainly help you be a winning CIO. But knowing when to invest is just as important. Given the time-sensitive nature of IT spending, both CEOs and CIOs want to know two things about 2004: What are the hot new applications and technologies they should pay attention to? And what are the trends to watch?

First, however, will 2004 really be any different from 2003?

“”The biggest challenge for CEOs and CIOs will continue to be the integration of IT into their business,”” says Parker, a veteran CIO responsible for turning around the IT shops of some of this country’s biggest companies, including Manulife Financial and Magna International Inc.

CIOs will also continue to struggle with a hangover from the dot-com party that ended a few years ago.

“”Many IT departments bought and paid for technology that is just sitting on the shelf,”” says Parker. “”They have too much technology or overlapping technology. At Shoppers, for example, we only need one database system, but

I inherited three.””

What’s new about 2004? Analysts and pundits don’t agree on much, but there is a general consensus that the three big technologies to watch are Linux, radio frequency identification (RFID) and IP telephony, also known as voice over Internet protocol or voice over IP.

LINUX

For years Linux, an open source operating system, has been running Web and e-business applications, largely because it is less expensive and more reliable than its arch rival, Microsoft’s Windows.

“”Linux has proven itself on the edges of the IT world, and now it’s moving to higher-level functions in the data centre,”” says Merv Adrian, a senior executive at Cambridge, Mass.-based Forrester Research Inc., a technology research company.

Vito Mabrucco, group vice-president with Toronto-based IDC Canada Ltd., says Linux has a bright future in both data centres and on desktops, but he expects a slow adoption curve.

“”Large enterprises don’t want to introduce more complexity,”” says Mabrucco.

“”They don’t want Windows and an open source desktop competing with each other.””

But smaller companies are more focused on their bottom lines, and technology giants such as IBM, Sun and Oracle, who compete with Microsoft, may be more willing to take the Linux plunge early. In an internal IBM memo leaked to the press late last year, CIO Robert Greenberg challenged IBM to move to a Linux-based desktop before the end of 2005.

RFID

RFID, a smarter alternative to the ubiquitous bar code, was lost in the wilderness until Wal-Mart announced last year it will require 100 of its top suppliers — including Kraft Foods, Procter & Gamble and Pfizer Pharmaceuticals — to use RFID tags on the products they ship starting in January 2005.

When Wal-Mart issues an edict, the world listens. And Forrester Research predicts RFID will begin to appear on IT shopping lists in 2004, particularly in the consumer packaged goods industry. Earlier this year, for example, SAP AG launched a software product that enables companies to integrate radio-frequency tracking with their SAP supply-chain and ERP systems. And Sun has announced plans to open an RFID testing facility in Dallas to help companies become Wal-Mart-compliant.

But not everyone is convinced.

“”It will be years before RFID technology crosses the chasm and becomes the way of doing things,”” says Mabrucco. “”At present, there is a huge mismatch between vendor promotion of RFID and enterprise spending.””

VOICE OVER IP

Not so with IP telephony. Most analysts agree it will make a fairly big splash in 2004. A number of North American telcos already offer telephone services over the Web, and the trend is expected to accelerate this year.

Will the big telcos see their long-distance revenues plunge off a cliff as a result of IP telephony?

Most analysts say no, citing an opportunity to offer advanced functionality, including wireless access, as a potential cash cow.

“”IP telephony has emerged as one of the most important new technologies,”” says Steve Parker, managing director of Toronto-based Evans Research Corp.

“”It will allow the deployment of an exciting new generation of applications that will increase the efficiency of organizations.””

There is some overlap between the technology and technology trends to watch in 2004, but not as much as you might think. The consensus among analysts and CIOs is that the key trends to watch are offshore outsourcing and thawing IT budgets.

OFFSHORE OUTSOURCING

Offshore IT outsourcing has become an economic bogeyman, particularly for Americans, who fear that Asia will

suck up high-paying IT jobs just as it has sucked up manufacturing jobs. Consider that late last year IBM announced plans to move the work of as many as 4,730 programmers to India, China and elsewhere. Any way you look at that, it’s bad news for

North American IT professionals. Forrester Research predicts more companies than ever will turn to offshore outsourcing in 2004.

“”Offshore outsourcing has not been very successful when it comes to contact centres and help desks,”” says Adrian.

“”But it has proven itself in areas such as programming and business processing.””

Forrester predicts the IT services market in India, an English-speaking country, will grow 30 per cent this year, and that Global 1000 companies will commit even more resources to English-language proficiency and accent neutralization in that country, with an eye to migrating contact centres and help desks as soon as possible.

But CIOs who have first-hand experience with offshore outsourcing are not as keen to export their IT resources.

“”Offshore outsourcing is not as low-cost as people believe,”” says Eugene Roman, CIO of Bell Canada, who helped Nortel outsource part of its IT infrastructure to India during his tenure at the company.

“”It’s alright to outsource the maintenance of old systems offshore,”” says Roman, perhaps the country’s most powerful CIO with an IT budget north of $1 billion.

“”But high-value work should be kept in Canada. We need innovation and new ideas, not just cheap code.””

THAWING IT BUDGETS

As for thawing IT budgets, Adrian expects CIOs will return to their capital spending lists with a new set of priorities. “”The next thing on the old list may not get funded,”” says Adrian.””In a thawing economy the risk profile changes, and CIOs become more willing to invest in projects with a longer-term payoff.””

Says Shoppers’ CIO Parker, “”The budget freeze was good because it helped drive out waste. Now that the dollars are flowing back, CIOs are more prudent, which augurs well for the profession’s credibility.””

The year 2004 is shaping up to be a hump year — the first year CIOs get a chance to really prove themselves since the dot-com bomb.

As always, winners and losers will be decided by who makes the right calls, and when.

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