Saxel --
Good to see you again at Google Answers!
It's late in the 4th quarter and budgets are set for 2003, so analysts
are starting to look towards the new year. It's clear that companies
are still feeling the post 9/11 shock and are tentative about
spending. Though level of spending isn't a "strategic" issue, it's a
good place to start, because the Sept. 11 incident sent shocks through
the IT community still being felt.
I. SPENDING
-------------
This year was the first time in 20 years that IT spending declined, so
it's worth looking at the event that triggered it. Ten weeks after
the 9/11 terrorist attacks, half the companies surveyed by Meta Group
had adjusted their budgets downward for 2002 and the other half were
still in a "wait and see" mode. Spending also shifted from growing
and transforming the business to more conservative investments for
on-going business. Plans to invest in customer-relations management
was up, while spending on supply chain management was down.
For an excellent (and detailed) synopsis of planned spending by
industry for 2002; the impact of 9/11 attacks; and a ranking of key
issues for IT managers, see this joint presentation by Meta Group and
First Albany:
First Albany Companies
"Technology Economics: User Spending Intentions 2002" (November, 2001)
http://www.fac.com/img/pdf_files/technology_economics.pdf
Morgan Stanley has just released its prediction for 2003 spending.
Its survey of 225 technology executives and predicts that IT spending
will be 2-3% higher in 2003. Though industry executives had predicted
an increase in spending of 5%, so many left open the possibility of
lowering budgets during the year that the investment firm lowered its
own forecast.
Top software concerns for 2003 are security. The top areas for
hardware spending were in storage and PCs. Yet 44% of the managers
called 2003 "a year of IT cost containment," according to the Morgan
Stanley report.
C/Net News.com
"Tech Exec Rallying Cry is Cautious" (Dec. 9, 2002)
http://news.com.com/2100-1001-976529.html?part=dht&tag=ntop
And a certain portion of the security requirements are unknown, as the
U.S. government has only recently released a draft "National Strategy
to Secure Cyberspace." Past experience tells me that nothing will
change priorities faster than a mandate from federal agencies on
Infosec. Here's a report from the Information Technology Association
of America on the status of this initiative, which is being directed
from the White House:
ITAA
"National Strategy to Secure Cyberspace" (2002)
http://www.itaa.org/news/newslet/updateall.cfm?Issue=Volume%208,%20Issue%209
II. STRATEGIC ISSUES
----------------------
Beyond lowering budgets, the current business environment is making IT
spending more tentative and responsive to short-term changes in the
business. "We've been turning in some good quarters that astound even
us, but the truth is, these are tough times," said Tim Stanley, vice
president of technology at Harrah's Entertainment Inc., Las Vegas. "I
don't need a report to tell me we need to be prudent about where we
spend our money."
eWeek
(Sept. 23, 2002)
http://www.eweek.com/article2/0,3959,547580,00.asp
A. COST CONTROL = OUTSOURCING
To keep headcount down and manage budgets, outsourcing is being used
to get projects or programs in the hands of companies with more
resources and more expertise. According to Computerworld, close to a
third (32%) of executives surveyed plan to increase spending here, up
17% in the past month.
Computerworld
"Security and e-business will dominate 2003 IT spending" (dec. 2,
2002)
http://www.computerworld.com/managementtopics/ebusiness/story/0,10801,76378,00.html
An excellent way to get a feel for outsourcing is to listen to this
CIO Radio interview with Dan McNicholl, CIO of GM North America. He
talks about the company's management strategy in having 800 employees
direct some 9,000 outside IT specialists in spending $2 billion per
year on routine projects such as desktop deployments, call centers,
operation and maintenance of networks. If GM's results are as
dramatic as McNicholl contends, increasingly attention will be placed
on outsourcing.
"You have to make sure that management knows you're not sacrificing
future capabilities for short-term gains. The biggest gain directly
in the IT organization is that it has frees up leaders and time to
determine what CAN be done for the business and drive it to
completion," McNicholl says in the interview.
"But instead of managing projects like computing centers and desktop
deployments and computing centers, we're working on what enables the
business. We have been able to reduce the amount of time that it
takes to develop a new vehicle from over 48 months to about 18 months
and a part of that is because of IT, with high math-based tools."
McNicholls also discusses how IT spending is increasingly going
outside North America.
CIO Radio
"All Interviews -- Dan McNicholl" (Dec. 11, 2002)
http://www2.cio.com/radio/
B. SECURITY ISSUES NOW CRITICAL
Early 2001 surveys by Meta Group showed that 18% companies were
spending more than 5% of their budget on security software. Less than
12 months later in the post-9/11 period, the number of companies had
risen to 33%. And spending patterns have been changing: right after
Sept. 11 backup and recovery had priority. Now, work is shifting to
intrusion detection and protecting the network.
"META Paints (Relatively) Rosy Security Spending Picture" (Oct. 31,
2002)
http://www.internetnews.com/stats/article.php/1492001
Security is an area in which investment has clearly risen, but two
problems have remained:
First, what are the real losses? What did the hacking of a server at
a major NY financial services firm cost? "All told $50,000. But when
asked how he came up with that number, he said he honestly couldn't
say. Because he really wasn't sure," notes CSO Magazine
CSO Magazine
"It's Not Easy Being Breached" (December, 2002)
http://www.csoonline.com/read/120902/cost.html
The second issue that appears continually with CIOs is how to measure
return on investment (ROI) for the risk. After a major catastrophe,
measures can be made, but all IT staffs are dealing with how to
measure ROI for security. "This elusive packaging of the ROI formula
to validate our existence is one that may take us down an endless
path," says Tina LaCroix, chief of information security at Aon Corp.
CSOonline.com
"Calculated Risk" (December, 2002)
http://www.csoonline.com/read/120902/calculate.html
CIO Magazine has a detailed security report that is an excellent
overview of how corporations are handling elevating and managing these
issues:
"Security Spending: How much is enough?" (Sept. 12, 2002)
http://www.csoonline.com/csoresearch/report6.html
C. SOME SEGMENTS ARE HOT, SOME ARE NOT
Geographic and industry segments of the industry show high variances.
Many expect 2003 to be a flat year for business-to-business (B2B) in
the U.S., with a shakeout occurring among websites and suppliers.
However, the story in Europe is the opposite, with dramatic growth
expected everywhere:
Jupiter Research CyberAtlas
"EU B2B Expected to Explode" (Aug. 28, 2002)
http://cyberatlas.internet.com/markets/b2b/article/0,,10091_1453831,00.html
Despite earlier hype, investment in spending on wireless services is
occurring slower than predicted says CIO Magazine.
Also, Instant Messaging has been hotly debated as a corporate
application but an unnamed IT manager seems to summarize the issue
well: " We… could not establish any valid business reason for enabling
instant messaging - our internal business clients did not seem to
care. "
NetworldFusion
"The Case Against IM" (Dec. 4, 2002)
http://www.nwfusion.com/newsletters/gwm/2002/01652867.html
D. GENERAL BUSINESS ISSUES FOR A CIO
Non-technology issues concern CIOs as well. CIO Magazine's annual
survey of high-level IT managers shows that they generally report to
the CEO, giving them excellent visibility within corporate management.
However, their major worries have less to do with technology and more
to do with typical management concerns. Lack of key staff/skill
sets/retention, inadequate budget, lack of time for strategic
thinking/planning are major issues. "Communication and business savvy
are personal skills that are most pivotal for the CIO's success," says
the annual report.
CIO Magazine: Survey of 500 IT execs
"The Changing Role of the Chief Information Officer 2002-2003"
http://www.theciostore.com/images/CIORESEARCH_STATE_SUM.pdf
There is some level of concern with the amount of time being spent on
the Internet and potential issues with pornography in the worksite,
but companies seem to be using policy rather than money to management
these problems.
Websense/Financial Times
"Prevention better than litigation" (Oct. 2, 2002 )
http://www.websense.com/company/news/companynews/02/emea/021002-uk.cfm
III. VENDORS VIEWPOINTS
-------------------------
When a company is as big as Microsoft, it's both a supplier and a
consumer of IT. Sometimes there's a difference in what's being
developed and what's being implemented. A good example would be web
services, where companies are still trying to figure out what's
useable, despite major investments by companies like Microsoft in its
.Net intiative:
C/Net News.com
"Web services: Ready, set, wait" (June 18, 2002)
http://news.com.com/2100-1001-936941.html
A pair of interviews on ZDNet with Jeff Raikes, Microsoft Group VP for
Productivity and Business Services, says his company's priorities are
on Trustworthy Computing and TCO (or total cost of ownership). The
secure computing initiative has been one major change in the past 3
years for a company historically known for pushing Bill Gates' "ease
of use" agenda:
ZDNet
"Raikes Unplugged: Failure is Not an Option" (Dec. 9, 2002)
http://techupdate.zdnet.com/techupdate/stories/main/0,14179,2901263,00.html
"Raikes Unplugged Part II: Doubling Productivity" (Dec. 9, 2002)
http://techupdate.zdnet.com/techupdate/stories/main/0,14179,2901276,00.html
Larry Ellison's recent comments at OracleWorld were more oriented to
managing the corporate software environment than on what's being
developed by his company. The prime challenges for IT organizations
are data fragmentation, complex software integration, and incomplete
automation, the Oracle chairman said.
Oracle
"Ellison at OracleWorld" (Nov. 14, 2002)
http://www.oracle.com/features/ow02/index.html?1114_ow_lje.html
The greatest challenge facing IT suppliers AND their customers is "how
can you work more closely together to help to take the risk out of the
business," says Charles Andrews, director of technology for Sun
Microsystems UK. Because business has typically been based on
competitive pricing, Andrews notes that it's riskier.
Video Interview (2002)
http://www.infraforum.net/infraforum/resources/econ_pressures.html
IV. FURTHER SURVEY RESEARCH
-----------------------------
Virtually every research company has worked some way to incorporate
Internet-based research into their work. It's faster, more-detailed
and less expensive – though it requires a good database of users. Top
suggestions would be:
Meta Group's Metricnet, which surveys some 30,000 IT managers annually
http://www.metricnet.com/
Forrester Research is a very similar research company and runs a
Technographics service to track what IT users are doing:
http://www.forrester.com/Research/CoverageIndex/0,5909,,FF.html#techno
It would also probably be worthwhile contacting CIO Magazine, as
they're constantly involved in talking with IT managers. Their
research will be driven by the editorial calendar that is planned for
2003 but they may make some excellent research suggestions. (Contact
information for CIO is in the 'Other Resources' section below.)
---
This Google search strategy involved two components: looking at what's
generally available on the Internet and surveying the web pages of
about 20 computer & Internet market research companies that I keep.
The Internet searches included:
"IT spending" + industry
"Fortune 500" + "IT issues" + 2003
"IT spending" + "strategic issues"
CIO + "strategic issues"
"IT spending" + "market research"
OTHER RESOURCES
Realizing that there are many issues important to IT managers – and
that they vary highly among industry segments – I've tried to provide
the richest links for you to do more detailed research. Some issues
are hard to address because viewpoints vary so widely: is support for
Open Source code becoming significant? Is Linux significant?
One of the richest resources for you is CIO.com, the online site for
CIO Magazine, one of the IDG Publications. It focus on issues and
people important to you. Additionally, with CIO Radio interviews give
you a better feel for issues than print reports.
While doing this research I was surprised to see how much content they
have online about a topic, company or industry. Try using their
search engine at http://www.cio.com/ in searches such as:
Ford
aerospace
ERP
One of the better forward-looking presentations on 2003 is Gartner
Group and Soundview Technology's "IT Demand and Spending Survey" from
October, 2002. It is similar the post-9/11 report linked above from
Meta Group but in many places has more details (such as vendors being
considered):
http://www4.gartner.com/1_researchanalysis/execsummary_gartner.pdf
If any portion of this is unclear, please let me know before rating
this answer. It was fun working on this answer!
Best regards,
Omnivorous-GA |
