Showing posts with label CIO. Show all posts
Showing posts with label CIO. Show all posts

Friday, May 11, 2012

Investing Well in IT With Emphasis on KPIs Separates Business Leaders from Business Laggards, Survey Results Show

Transcript of a sponsored BriefingsDirect podcast on the results of a survey that show that innovation focusing on information and KPIs drives substantial positive business results.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: HP.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Today we present a sponsored podcast discussion on some fascinating new findings from a recent survey on chief information officer (CIO)-level priorities. We'll uncover what distinguishes leaders from laggards among businesses, and identify which IT approaches and solutions are driving the most powerful business results these days.

To help dig into the survey, explain what it means, and learn how these results can lead to establishing winning new IT strategies we're joined by Joel Dobbs, President and CEO of Compass Talent Management Group. He's also an Executive in Residence at the School of Business at the University of Alabama at Birmingham (UAB), and a lead blogger and member of the Enterprise CIO Forum.

What’s more, Joel is a retired CIO himself, coming from such organizations as GlaxoWellcome, Schering-Plough, and Eisai. Welcome to our discussion, Joel.

Joel Dobbs: Thank you very much.

Gardner: We're also here with Daniel Dorr, a Worldwide Solutions Manager for HP Enterprise Marketing. Welcome to you, Daniel. [Disclosure: HP is a sponsor of BriefingsDirect podcasts].

Daniel Dorr: Thank you, Dana.

Gardner: Let’s start with just an overview of what we wanted to accomplish. Daniel, what was the idea behind doing this survey at this time?

Dorr: Dana, a lot of companies talk about how important technology is, and we all represent our technology as the right answer to the problem. But if our job is to help our CIO clients better use technology to solve business results -- and if our job is to help our CIOs work more effectively with their executive committees and CEOs -- the best way for us to help them is to determine which technologies actually change or correlate with in-market results.

In other words, if we look at revenue leaders in-market, which technology seems to be most closely associated with those who lead in-market performance? It's not technology for technology’s sake, or because it’s exciting or new -- but technology that actually seems to represent business results.

So our goal here was to help our clients do a better job of assessing which technologies lead to in-market business results and which technologies might not.

Gardner: Well, this has been a hot topic for decades, trying to establish the link between technology practices and business results.

Joel, you've been in the trenches as a CIO. You're now involved with the academic view of this at UAB and doing some IT talent work. When you reviewed these results, was there anything that jumped out, that was perhaps something new or interesting?

Not much separation


Dobbs: There were a couple of things that surprised me, one of which is how close statistically the leaders and laggards were in some areas. There was not as much separation in some of the areas that were looked at as I would have expected.

The other thing that surprised me is one of the areas that gets an awful lot of play in the press now -- this whole idea of bring-your-own-device (BYOD) policies for employees. For the most part, this seemed to have been a non-issue for most of these folks. This suggests that either this has not taken hold as much as we would be led to believe, or that companies have just basically decided they're not going to tackle this battle now and will save that for another day.

Gardner: Tell us a little bit, Daniel, about this survey. When did it happen? Who was targeted? HP was involved. Maybe you can tell us how, and then who conducted it?

Dorr: We wanted to understand the difference between market leaders, from a revenue perspective, and market laggards or followers, and see what their IT environments looked like. We surveyed 688 organizations. We spoke to IT decision makers, so we would call that "CIO minus one." We didn’t speak to the CIO directly. We spoke to the people that reported to him or her.

Everyone that we spoke to had to have significant knowledge about applications, information, data center operation, security, and cloud. The survey was conducted over nine different geographies: the US, Brazil, Mexico, UK, Germany, France, Japan, China, Australia, and covered a number of different industry groups.

This was not a public survey. In other words, the people responding didn't know the survey was coming from HP. It was a blind survey. We asked over 55 different questions around areas of application, security, information, cloud, etc. to understand which attributes were most strongly correlated with in-market or revenue performance, and those that weren't.

The questions we were trying to answer were what do market leaders do versus followers? How do industry leaders differ from followers? Is there a difference depending on the region or the market or the industry? And where do IT decision makers focus on a day-to-day level, versus the more CIO strategic forward two-year thinking level?

Gardner: Just to be clear, the surveys were delivered and answered in the last few months of 2011. Is that right?

Dorr: Exactly right. The results came into us in December 2011. So this is pretty accurate and up-to-date data.

Gardner: How about some of the top findings? Were there some nuts and bolts issues here around workload, automation, server capacity, things like that, that we could look to and just get a sense of who these organizations are and where they are on their journey toward a better IT outcome?

In search of priorities

Dorr: We asked more than 50 questions to understand from organizations where their priorities were and what they were doing today and then we compared that to their in-market performance. And I would say the answers fell into three buckets: They were around infrastructure issues, information and information management, and people and processes.

On the infrastructure side of the equation, we asked a number of questions, but the ones that rose to the top in terms of driving in-market or correlation between revenue performance were probably three or four. A lot of it had to do with application modernization and security, when it came to the infrastructure side of the equation.

For example, market leaders tended to have fewer custom applications and fewer legacy applications. They tended to use their server capacity more efficiently than their peers. Those were some of the big ones around the infrastructure side of equation.

With security, the market leaders tended to build security, not only into the boundary, but also into the applications themselves, versus the market followers who tended to focus on an us-versus-them mentality, or just boundary security.

… Companies that manage risk more effectively and more automated definitely outperformed their peers. As a technology company, we're always looking at the infrastructure. We're always talking about how infrastructure can lead to competitive advantage, and we saw that. But a lot of times we forget the people and process side of the equation.

Companies that manage risk more effectively and more automated definitely outperformed their peers.



One of the other areas that jumped out at me was the need for clarity and agreement of key performance indicators (KPIs). Market-leading companies who outperform in revenue over their peers had more clarity within IT about which KPIs were important and had agreement on those KPIs. Everyone is marching and working toward the same goals. That had a huge impact on me as well.

It’s not just about infrastructure. It’s not just about managing risk. It’s also the people/process side of the equation that is critical in market-leading companies.

Gardner: Joel, when you hear that those who are doing well seem to have fewer custom apps, fewer legacy apps, higher utilization rates on their servers, what does that tell you about these types of organizations?

Dobbs: It tells me a couple of things. We'll start with the second one, server utilization. What I think you're seeing there is the affected people who have really done a good job with virtualization. You're not having is a lot of equipment sitting around idle or used at under-capacity. So I suspect virtualization probably plays into that difference significantly for a number of people.

Custom and legacy applications was something I hadn't really thought about until I read this material. I suspect that what you're seeing is probably a result of modernization of the applications that I call commodity applications, things like human resources, some of the financial applications, a lot of things that are generic across businesses. You're probably seeing some of the leaders move to more software-as-a-service (SaaS)-type applications in order to free up their staff to work on things that are much more strategic to their business.

Unique value

So the things that they're working on are probably things that are adding unique value to their business, and they're not spending a lot of cycles doing things with generic applications that they can buy and let somebody else manage.

If you're just doing security on the boundaries, that's a cheap way to do security, if you think about it. You put a firewall in place, you configure the thing, and you do the boundary security stuff. But when you're building another layer of security into your applications, that tells me that there's a lot more focus on the realization of the value of what's in there, in terms of the data and the way that it’s used.

There's very much an intentional focus on protecting not only the perimeter of the institution, but making sure that there's added security and protection within the perimeter. I would expect that folks who are really serious about understanding the value of the information within those systems, and [understanding] the risk to their corporate reputation, should those be compromised, are being very intentional about mitigating those risks.

Gardner: So it's a strategic, comprehensive approach to security across the assets -- including the applications.

Daniel, before we move on, a question on the infrastructure. When I saw this, I said that sounds like services orientation (SOA) -- modernized apps, fewer monolithic stacks, higher utilization vis-à-vis virtualization. Was there anything else that would back up my hunch that services orientation or SOA was also prominent in the way they are doing infrastructure?

Virtualization, in and of itself, did not rise to the surface of market leaders versus followers.



Dorr: You're absolutely right, but the key component here is actually using it for the right purposes. Virtualization was one of the questions, but you'll notice virtualization, in and of itself, did not rise to the surface of market leaders versus followers.

It wasn't just that you're moving to a service-oriented view, but you're actually implementing it in a way that means something to the business. You're actually seeing a change in capacity usage. You're actually seeing a change in custom and legacy applications.

Again, not following that shiny object, but it's implementing it in a way that's strategic to the business, is what we are seeing here that leads to success. It's not just virtualization, but it's using virtualization to its full capacity.

Dobbs: I agree completely.

Gardner: So we have talked a little bit about infrastructure. What were some of the other major areas, Daniel?

Dorr: The second big area was around information. There was a huge difference around the area of audit and compliance. For example, we saw that more than half of the market leaders had automated their audit and compliance, about 52 percent. Market followers tended to be much less. Around 39 percent had automated their audit and compliance.

Information strategy

There was an information strategy in place in both market leaders and market followers. However, market leaders tended to have automated their information-management strategy, versus followers, who just had it documented.

Also, we see a big difference in the use of business intelligence (BI) to automate decision making. About 18 percent of market leaders are automating their decision making using BI tools, while only 7 percent, so less than half of them, less than half of them as leaders, are doing that.

Now, there is still a huge amount of room for growth on both leaders and followers there, but to see only 18 percent rise to the surface already tells you the importance of automating BI decision making as a clear difference for market leadership.

Gardner: Let's go back to Joel on those two items. This gets to a point that I'm really interested in, a movement in business nowadays to much more of a data-driven and analysis-driven decision process. Perhaps the older way might be summed up by the highest paid person's opinion (HPPO) being the way that ultimately decisions were made.

But Joel, how do you react to some of these findings around information management and BI?

Dobbs: There are a couple of things here. One is that there's been an interesting evolution over the last 20 years in this field. We started out in IT automating various business processes. The focus was on making those processes faster or more efficient or something of that sort. As a result of that, we were generating information that had valuable use, but really wasn't being used that much.

What you're seeing with the leaders is that they not only understand it, but they're doing it.



It was during the reengineering revolution in the early '90s that people began to look at that. Along with the uptake of Six Sigma and Lean Sigma, people began looking at harvesting that data that was collected almost as a byproduct of automation and using it for continuous improvement and various other things.

This whole field has matured. Take the example of just the retail industry and all the information that’s collected as a result of point-of-sale processing and things like that. What we've learned is that that’s a rich trove of information that can be mined and used for all kind of things.

What you're seeing with the leaders is that they not only understand it, but they're doing it. That’s a big differentiator between those who understand it and have the insight and the capabilities to take this information and look at it in different ways. I suspect some of the automating of business, the BI automation, as we were talking about, is really a way of going back and using technology to create options for decision making, based on automated looks at data.

Let's talk about the automation of, I think the term you used, Daniel, was the automation of their information strategy, versus documentation. What that tells me is one group is doing it and the other group is just writing it down, and that’s a big difference. It’s like the difference between what most people do with strategy. Most people develop a strategy and there comes nice a book that sits on a shelf somewhere, and very little gets done about it.

The ones who are really leaders are the people who develop a strategy and then part of that strategy is a strategy to implement the strategy. That’s what this automation that you saw among the leaders really reflects -- not just talking about it, but actually doing it.

Single view

Gardner: It strikes me too that this gets back to that theme that we raised earlier about being controlled and being comprehensive as an IT organization. You can’t gain that single view of the customer and you can’t gain insight across an entire business process, purchasing, supply chain, the relationship between cost and outcomes, without that ability to gather all the different bits and pieces and then manage that in some full way.

So it strikes me, again, as an indicator of maturity and comprehensive control vis-à-vis IT and makes them therefore more powerful when it comes to this level of insight. Daniel, what other areas were part of the top findings, and where can we go now to the next stage, which would perhaps a little bit better define what distinguishes leaders?

Dorr: Just to close on that information discussion, I agree completely with Joel’s points. If you think about it, there were seven key attributes that rose to the surface for market leaders, revenue leaders, and revenue followers.

Three of those were around information. Automating your audit and compliance, having an automated information strategy. In other words, as Joel said, doing it, versus just writing it down, and really using BI for decision making. Three out of seven are around information. So clearly this is a key theme for in-market performance.

One of the things we do at HP is workshops for CIOs to help align business and IT and identify the impact that IT can have on the business. This comes up every single workshop we do.

I don’t think we can understate the importance of helping the business see what’s happening and understand what’s happening through automating audit and compliance.



We did it with a retailer recently. It took them days to process in-store information, in order to know what SKUs were selling and how well marketing programs were doing. By the time they had that information, it was too late for them to do anything.

They couldn’t change the SKUs on shelf. They couldn’t update, migrate, manage, or move the marketing program into new regions or what have you. As a result, their performance in-market clearly showed the difference. They were at a 20 percent disadvantage to the revenue leader in their category.

So I don’t think we can understate the importance of helping the business see what’s happening and understand what’s happening through automating audit and compliance, through actually implementing the information management strategy and trying to automate as much as possible decision making using BI.

Dobbs: I would echo that and add one thing. Daniel pointed out that there is increasingly a competitive advantage. The competitive advantage becomes not just doing it, but doing it faster than your competitors and being able to understand the meaning and the application of the data ahead of your competitor.

The retail example is a great one, where you're lagging days behind in your ability to harvest and use the information. Increasingly, the competitive advantage becomes being able to make adjustments and move much more quickly, whether it’s deciding where to place inventory or how much inventory you need to keep on hand, and all those kind of things. Time is money, and being able to move quickly can be a huge advantage.

What about cloud?

Gardner: We haven’t talked too much about cloud computing, and this did come up as one item that distinguishes leaders over laggards. Perhaps we could address that. Daniel, what is it about cloud that popped out in this survey?

Dorr: The focus of the survey was what capabilities clients have today and how that correlates to their revenue performance. We didn’t see a lot of cloud attributes rising to the service in people’s current capabilities. We did, however, see it rising to the surface in the focus area, where we asked IT decision makers, the CIO minus one, what was important to them. We did see a pretty significant difference between what market leaders, revenue leaders, thought was important about cloud versus market followers.

In fact, almost half of revenue leaders see cloud as incredibly important to them versus their peers, almost half of that number in the market followers. So, we're seeing a lot more priority focus on cloud computing going forward.

We didn’t see it driving current revenue performance, which makes sense. Cloud is somewhat of a new technology. We haven’t seen it fully deployed in many cases in driving today’s revenue.

Gardner: For the benefit of our listeners, Daniel, maybe we could just go through the list at a prioritized basis, with descending priority, on what distinguished the leaders over the laggards. I think the top one is security as we mentioned, but let’s just go through it on a list basis, so they can get a sense of the importance.

Cloud is somewhat of a new technology. We haven’t seen it fully deployed in many cases in driving today’s revenue.



Dorr: Sure. Of the 50 attributes that we asked our CIO minus one IT decision makers and directors, what was happening within their IT environment, seven of those attributes rose to the surface, and they fell into three buckets, as we talked about briefly before. One was around the infrastructure side of the equation or the core computing environment, one was around information, and then the final one was around people and processes.

… With the survey, once we identified which specific attributes differentiated market leaders and market laggards or market followers from a revenue perspective, we then put it on a maturity score and we would score them based on those key attributes. You can see a clear difference between those with obviously a higher score, a higher maturity in their IT environment, around those key specific areas and their in-market performance.

Specific areas

S
o from the infrastructure side, it was custom applications and legacy applications. Leaders had fewer custom applications -- 38 percent versus the followers at 45 percent.

Leaders had fewer legacy applications -- 25 percent versus followers at 32 percent.

Leaders used their server capacity more efficiently. They used about 80 percent of their server capacity at peak usage, versus followers using only 71 percent.

Leaders had security built into the applications as well as at the boundary, versus only a boundary-level security, inside/outside view of the world.

In the information area, leaders automated audit and compliance at an average of about 52 percent versus followers at 39 percent.

Leaders had automated their information strategy, versus followers only documenting their information strategy.

Leaders tended to use more BI and automated decision making versus followers. So 18 percent of leaders had automated business decision making using BI, versus followers at only 7 percent.

Then there is the people and processes side -- and this is an area where CIOs can actually start working on right now without spending a cent -- which was clarity and agreement of KPIs. We saw a big difference in market leaders. There was a high degree of clarity within their organizations about what the KPIs were and agreement on those KPIs, versus only a moderate level of agreement within market followers.

That’s an area where CIOs can take action today. They don’t even have to talk to a vendor or an analyst at all. They can walk right into the CEO’s office and start working on that problem today.

Gardner: Let’s move to a separate lens to view this through. One of the things you asked was a series of questions that led to some conclusions about what distinguishes those who do best, and what leaders were focused more on. You broke it out into five different areas and you got some indicators of why it’s important, leaders versus laggards. Perhaps you could run through those as well.

Leaders had security built into the applications as well as at the boundary, versus only a boundary-level security, inside/outside view of the world.



Dorr: At the end of the survey, we asked them areas of importance, and we gave them security, information and insight, infrastructure convergence, application transformation, and cloud computing. We asked them to rank which were the most important to them. And we asked them to rank their current capabilities.

This was different from the attributes. For example, most of our IT decision makers ranked security, defined as keeping the lights on, as the number one priority. When they ranked their current capability, again, they ranked their current capabilities quite high, doing that well today. Although leaders tended to feel they were doing a better job of keeping the lights on, versus revenue followers.

Number two on the list was information and insight, in terms of driving what is important today from an IT organization. Again, the average of how important it is was not significantly different between leaders and followers. What was significantly different was how well they rated themselves.

We saw this in the individual attributes, but also when they ranked it at the end as well. Leaders tended to outperform, or believe they were doing a better job managing information and insight, than their followers by almost twice as much.

No huge difference

T
here were no huge differences on converged infrastructure or applications between leaders and followers, but the area where we saw a big difference was in cloud computing. Leaders ranked it much higher in importance and believed their current capabilities are much higher than their industry peers.

Gardner: Joel, let's go back to something you mentioned earlier. You were a little bit surprised that the difference on some of these areas between the leaders and the laggards was smaller -- there wasn’t a great deal of difference. Which of those were you referring to and what does that tell us about a baseline of IT functionality that everyone has, but it doesn’t really distinguish anyone either?

Dobbs: Some of the things really surprised me, security actually. The magnitude of that difference was somewhat surprising. Things like the infrastructure convergence were actually fairly close. I expected a little bit more of a spread there.

Around information and insight, there's a pretty good difference. It's statistically significant because of the size. In many ways I would have expected that spread to be even larger, because so many laggard companies are really just operationally focused, keeping the lights on, etc.

I was even surprised that you had that large of a percentage that rated themselves very capable. I would have expected it to be lower than that. In some ways, I would have expected more of the leaders to have considered themselves very capable. So that was a little bit lower than I would have expected.

We didn’t see a huge difference in the regions, particularly the U.S., Latin America, or Asia Pacific and Japan.



For cloud computing, the capabilities are probably not that surprising but, again, the spread was a little less than I would have expected. Because it's a new technology, one would expect that the leading companies would have been much more further out front, beginning to look at ways of exploring the capability there.

But you had only about 36 percent versus 20 percent. It's statistically significant, but was somewhat surprising to me that the gap was not even larger than that.

If you look back at how they ranked cloud computing by importance, it's the same sort of thing, I would have expected a higher percentage to have been looking, if that's something that’s potentially very important, particularly at some of the capabilities that are available today in SaaS. It's a way of getting away from having to maintain rudimentary legacy systems that really don’t add a lot of business value.

Gardner: Let's slice and dice this a different way. Daniel, what about regional differences, or similarities, but let's start with differences? What were some of the biggest differences by region that jumped out at you? Then, maybe we could ask Joel to tell us what he thinks that means in terms of the progression of these technologies and maturity models around the globe.

Dorr: We didn’t see a huge difference in the regions, particularly the U.S., Latin America, or Asia Pacific and Japan. In those regions we saw a little bit in terms of platforms -- Windows versus Linux, virtualization, and so forth -- but not huge issues. It was more kind of personal preferences.

Mainframe in Europe


The one that did jump out at us though was Europe. The biggest difference in Europe is that there is actually a growing movement around the mainframe. At the global level, we saw the mainframe was irrelevant to market leaders versus market followers.

In other words, some market leaders were moving more towards the mainframe, some market followers were moving more towards the mainframe. Some market leaders were moving off of the mainframe and some market followers were doing the same. So there was no correlation between a mainframe strategy and in-market performance anywhere, except in Europe.

In Europe, we saw that market leaders were those that were moving and growing their mainframe strategy, versus market followers who were just maintaining their current mainframe strategy.

Gardner: What does that tell you, Joel? What is it about Europe that has them so interested in mainframes or perhaps that leads them to be successful?

Dobbs: That’s a very good question. That’s actually a surprising finding. Having worked in Europe for a number of years earlier in my career, there are two things that I suspect that might be factors, and these are generalizations. So I don’t know if they're applicable in all cases.

In Europe, we saw that market leaders were those that were moving and growing their mainframe strategy.



What you see a lot of times in European companies is a much more conservative approach to a lot of things in business, and IT is certainly one of those. So change doesn't always come as rapidly in some of those cultures as one would see in cultures with a higher risk tolerance, like you may see in U.S. and other areas. That may be one thing.

The other thing I would wonder about is the extent to which the economic environment there may have an impact on this. You're seeing growth in the mainframe sector, largely because companies may be avoiding expensive investments in other technologies and simply expanding upon what they already have. There are a lot of implications, not only in terms of software and licensing and a number of other things, in being moved to another platform.

So I wonder if the economic environment there has been a factor as well. It's hard to say, but that’s interesting and somewhat perplexing finding.

Gardner: It makes sense that they are maintaining their current systems rather than growing and modernizing.

How about vertical industries, Daniel, anything that jumps out there in terms of which vertical industries that you examined and broke out in your survey seemed to be doing well, and for what reasons?

Vertical industries

Dorr: We looked at retail, communication service providers or telco, manufacturing, energy, healthcare, and banking. The results were comparable to what we saw in each of the regions with what we saw at a global level.

We saw a couple of differences in each of the industries. In retail, for example, when it came to their information strategy, a new aspect was how they managed both structured and unstructured data, versus only structured information.

This makes sense, if you think about it from a retail perspective. There is a lot of qualitative information coming in for leaders to understand, not just that the inventories are up or down or sales are up or down, but to understand why. So that was a big one that’s different from a retail perspective.

In communication service providers, no big differences there between what was happening at the global level versus the retail level.

In manufacturing, we saw a little difference in terms of external IT spend on new applications. In this case, leaders were spending less on new applications than followers.

In manufacturing, we saw a little difference in terms of external IT spend on new applications. In this case, leaders were spending less on new applications than followers.



In the energy sector, there were no significant differences there, or in healthcare. In banking, the one biggest one was cloud capabilities. We did see a lot more interest in cloud in banking than we saw in some of the other areas. Otherwise, it was very similar to what we saw at the global level.

Gardner: So we've got some interesting takeaways here about the role of modernizing, gaining visibility, measuring along the way, being comprehensive in how IT approaches these problems, being responsive to the business on the business terms rather than the technology terms, with an emphasis on culture as well and the people and the process. We've talked about this at a high level.

Daniel, for those folks who are intrigued and would like to get some of these statistics and findings themselves, do you have a place they can go to learn more to either perhaps see a slide deck, a white paper? What’s available for them?

Dorr: A couple of places. First of all, you can join us at the HP Discover 2012 event in Las Vegas in June. We'll be presenting these results there and sharing it with attendees there. In addition, they will be posted on hp.com.

Gardner: Great. Joel, what takeaways do you have from this in terms of whether people should readjust their thinking or perhaps take a pause and ask what they can be doing different when they sort of tease out some of the findings here?

Impact of investments


Dobbs: There was an interesting study published by MIT just a month or so ago that looked at a number of companies. What they found is that some of these companies that were investing heavily in IT, the IT investments actually had a greater impact on profitability than the same amount of money invested in research and development or in advertising. That’s a shocking finding.

I think what happens, when you delve underneath these companies who get such great returns on IT, you find two or three different things that are embodied in what we saw in some of the leaders here.

One of them is really good governance around decision making. The second thing is probably ownership of IT by the entire executive team. And I think the third thing is that they're probably measuring their return using business metrics on the investments that they make.

That’s what differentiates the leaders from the laggards -- they're approaching IT holistically as a core part of their business strategy, instead of seeing it as a support function or a back-office function.

That’s what differentiates the leaders from the laggards -- they're approaching IT holistically as a core part of their business strategy.



And things like this study that we've just been talking about today, as well as the MIT study, help add credence to the idea that money is well invested in IT, and I emphasize well-invested. It can have a tremendous payback, but only if you use it wisely.

Gardner: And that sort of runs counter to the perception of IT as a cost center, rather than as an enabler for growth and opportunity.

Dobbs: Precisely.

Gardner: Okay. Daniel, last word to you, are there takeaways or areas that we may not have covered that you think we should also uncover here?

Dorr: Joel said it very eloquently. There is a large body of research. Now, we have HP's own research. We have the MIT study, showing that there is a clear correlation between technology and in-market revenue results. As CIOs, we should feel confident to walk into the CEO’s office and talk to them about the strategic benefits that we can offer the organization.

The two biggest areas that we should be having conversations with our business counterparts today are clearly around information and KPIs. If we have agreement on those, we've covered more than half of the key attributes that we see between market leaders and market followers.

So there's a lot of opportunity for us in IT to start playing an even bigger leadership role in helping our companies innovate and drive in-market results. I look forward to seeing what the results look like two years from now, once we see cloud and other things deployed and driving even bigger benefits.

Gardner: As you point out, there's a lot more room for growth around those BI and analytics benefits. They're already sort of showing a great deal of worth even though we are still early into it.

You've been listening to a sponsored BriefingsDirect podcast discussion on some new findings from a recent survey on priorities for IT organizations and what distinguishes leaders and laggards in the field based on their business outcome.

I'd like to thank our guests, Joel Dobbs, President and CEO of Compass Talent Management Group, as well as Executive in Residence at the School of Business at the University of Alabama at Birmingham. He is also a lead blogger and a member of the Enterprise CIO Forum.

And we've also been joined by Daniel Dorr, Worldwide Solutions Manager for HP Enterprise Marketing. Thanks to you both.

Dobbs: Thank you.

Dorr: Thank you.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks also to you for listening, and come back next time.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: HP.

Transcript of a sponsored BriefingsDirect podcast on the results of a survey that show that innovation focusing on information and KPIs drives substantial positive business results. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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Thursday, December 17, 2009

Executive Interview: HP's Robin Purohit on How CIOs Can Contain IT Costs While Spurring Innovation Payoffs

Transcript of a BriefingsDirect podcast with HP's Robin Purohit on the challenges that CIOs face in the current economic downturn and how to prepare their businesses for recovery.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn more. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Today, we present a sponsored podcast executive interview that focuses on implementing the best methods for higher cost optimization in IT spending. [See HP news from Software Universe on cloud enablement technologies.]

To better define the challenges facing CIOs today, and to delve into what can help them properly react, we are here with Robin Purohit, Vice President and General Manager for HP Software and Solutions. Welcome back to BriefingsDirect, Robin.

Robin Purohit: Wonderful to be here again with you, Dana.

Gardner: Clearly, the cost-containment conundrum of "do more for less" -- that is, while still supporting all of your business requirements -- is going to be with us for quite some time. I wonder, Robin, how are CIOs reacting to this crisis, now that we're more than a full year into it?

Purohit: Well, just about every CIO I've talked to right now is in the middle of planning their next year’s budget. Actually, it's probably better to say preparing for the negotiation for next year’s budget. There are a couple of things.

The good news is that this budget cycle doesn’t look like last year’s. Last year’s was very tough, because the financial collapse really was a surprise to many companies, and it required people to very quickly constrain their capital spend, their OPEX spend, and just turn the taps off pretty quickly.

We saw a lot of CIOs getting surprised toward the end of year 2009 and the beginning of year 2010, and just having to stop things, even things that they knew were critical to their organization’s success, and critical to their business success.

So, the good news is that we're not in that situation anymore, but it's still going to be tough. What we hear from CIO Magazine is that about two-thirds of the companies out there plan to either have flat or down IT budgets for next year. A small amount are trying to actually increase spend.

Every CIO needs to be extremely prepared to defend their spend on what they are doing and to make sure they have a great operational cost structure that compares to the best in their industry.

They need to be able to prepare to make a few big bets, because the reality is that the smartest companies out there are using this downturn as an advantage to make some forward looking strategic bets. If you don't do that now, the chances are that, two years from now, your company could be in a pretty bad position.

Gardner: Given that we are either flat or refining still and that this might last right through 2010, it means we have to look at capital spending. I think probably a lot of costs are locked in or have been already dealt with. When it comes to this issue of capital spending, how are these budgets being managed?

Important things

Purohit: Well, with capital spend, there are a couple of pretty important things to get done. The first is to have an extremely good view of the capital you have and where it is in the capital cycle.

You need to know what can be extended in terms of its life, what can be reused and what has to be refreshed? Then, when you do refresh it, there are some great new ways of actually using capital on server storage and networking that's at a much lower cost structure, and much easier to operate, than the systems we had three or four years ago.

Quite frankly, we see a lot of organizations still struggling to know what they have, who is using it, what they are using it for, and where it is in the capital life cycle. Getting all of that information that is timely, accurate, and at your fingertips, so you can enter the planning cycle, is extraordinarily important and fundamental.

Gardner: It certainly seems that the capital spending you do decide on should be of a transformational nature. Is that fair?

Purohit: Yes, it's true. I should have said that. Capital, as we all know is not only the hardware, but software. A lot of our customers are taking a hard look at the software licenses they have to make sure they are being used in the best possible way.

"Today's innovation is tomorrow’s operating cost."



Now, the capital budget that you can secure needs to be used in very strategic ways. We usually advise customers to look in two buckets.

One, when you are going to deploy new capital, always make sure that it's going to be able to be maintained and sustained in the lowest-cost way. The way we phrase this is, "Today's innovation is tomorrow’s operating cost."

In the past, we’ve seen mistakes made, where people deployed new capital without really thinking how they were going to drive the long-term cost structure down in operating that new capital. So that's the first thing.

The second is, the company wants to see the CIO use capital to support the most important business initiatives they have, and usually they are associated with revenue growth, by expanding the sales force, and new business units, some competitive program, or eventually a new ecommerce presence.

New business agenda

It's imperative that the CIO shows as much as possible that they're applying capital to things that clearly align with driving one of those new business agendas that's going to help the company over the next three years.

They are clearly in bucket that either dramatically lowers the ongoing cost structure of new technologies, or clearly rides the capital spend with something that a line of business executive is trying to do over the next two or three years. They have the best chance of getting what they think is really necessary.

Gardner: It seems that in order to know whether your spend is transformational, you need to gain that financial transparency, have a better sense of the true cost and true inventory, and move toward the transformational benefits. But, then you also need to be able to measure them, and I think we are all very much return-on-investment (ROI) minded these days. How do we reach that ability to govern and measure once we put things into place?

Purohit: It's a great point. The reality is the CIO has been a bit of a cobbler’s child for some time. They've done a great job putting in systems and applications that support the business, so that a sales executive or a business unit executive has all of the business process automation and all of the business information at their fingertips in real-time to go, and to be competitive and be aggressive in the marketplace.

It's imperative that the CIO shows as much as possible that they're applying capital to things that clearly align with driving one of those new business agendas that's going to help the company over the next three years.



CIOs traditionally have not had that same kind of application. While they can go through a manual and pretty brutal process to collect all this information, they haven’t had that real-time financial information, not only in what they have or plan to do, but to track, on an almost weekly basis, their spend versus plan.

I guess, all the CFO cares about is whether you are on track on your financial variance, and if you aren’t on track, what are you doing to real-time optimize to the changing realities of the budget that are adjusting monthly these days for most CIOs.

This is where we really see an opportunity. They help customers put in place IT financial management solutions, which are not just planning tools -- not just understanding what you have -- but essentially a real-time financial analytic application that is timely and accurate as an enterprise resource planning (ERP) system, or a business intelligence (BI) system that's supporting the company’s business process.

Gardner: If we have a ratio in many organizations where we have 70 percent roughly for maintenance and support and 30 percent for innovation, we're going to need to take from Peter to pay Paul here.

What is it that you can do on that previously "untouchable" portion of the budget? How can we free up capacity in the data-center, rather than build a new data center, for example?

It's a cyclical thing

Purohit: The joke I like to tell about the 70:30 ratio is that, unfortunately, we've been talking about that same ratio for about 10 years. So, somebody is not doing something right. But, the realty is that it's a cyclical thing. Today’s innovation is tomorrow's maintenance.

It's important to realize that there are cycles where you want to move the needle and there are cycles where you can't. Right now, we are in a cycle where every CIO needs to be moving that 70:30 to 30:70. That's because, first of all, they'll be under cost pressure. I really believe that the leaders of tomorrow in the business world are going to be created during the downturn. That's historically what we’ve seen. McKinsey has some good write-ups about that.

It means that you need to be driving as much innovation as possible and getting to that 70 percent. Now, in terms of how you do that, it's making sure that the capital spend that you have, that everything in the data center you have, is supporting a top business priority. It's the most important thing you can do.

One thing that won't change is that demand from the business will all of a sudden strip your supply of capital and labor. What you can do is make sure that every person you have, every piece of equipment you have, every decision you are making, is in the context of something that is supporting an immediate business need or a key element of business operation.

When we work with a lot of customers, we help them do that assessment, and I'll give you one example. A utility company I worked with was able to identify up to $37 million of operational and capital cost savings in the first couple of years just by limiting stuff that wasn't critical to the business.

It also means there are more things and more new things to manage.



There are lots of opportunities to be disciplined in assessing your organization, both in how you spend capital, how you use your capital, and what your people are working on. I wouldn't call it waste, but I would call it just a better discipline and whether what you're doing truly is business critical or not.

Gardner: I suppose having that financial visibility and transparency that allows that triage to take place, and then moving towards this flip of 70:30 ratio, we have to involve people and process and not just technology, right?

Purohit: That's right. If you don't get the people and process right, then new technologies, like virtualization or blade systems, are just going to cause more headaches downstream, because those things are fantastic ways of saving capital today. Those are the latest and greatest technologies. Four or five years ago, it was Linux and Windows Server.

It also means there are more things and more new things to manage. If you don't have extremely disciplined processes that are automated, and if you don't have all of your team with one play book on what those processes are, and making sure that there is a collaborative way for them to work on those processes, and which is as automated as possible, your operating costs are just going to increase as you embrace the new technologies that lower your capital. You've got to do both at the same time.

Gardner: Now, HP Software Solutions has been describing this as operational advantage, and that certainly sounds like you're taking into consideration all the people and process, as well as the technology. Tell me a little more about what you’ve been doing in the past several months and how this will impact the market in 2010.

Best in class

Purohit: We talk about operational advantage, we talk first of all about getting close to a best-in-class benchmark of your IT costs as a percentage of your company’s revenue.

They say close to best, because you never want to race to the bottom and be the lowest-cost provider, if you want to be strategic. But, you'd better be close. Otherwise, your CFO is going to be breathing down your neck with lots of management consultants asking why you are not there.

The way you get there is through a couple of key steps that we have been recommending. First and foremost, you have to standardize and automate as much as you can.

The great news is that, right now, there is really sophisticated technology that we have. Many companies have to apply this to this problem, where you can take a lot of the stuff that you know how to do every day and that involves a lot of people, and eventually a lot of manual work that could be done incorrectly, if you are not careful.

Standardize and automate them to make sure they get done in a very efficient way, in the cheapest possible way, and in the same way every time. We've seen customers take $10 million of operating cost out in 6 to 9 months just by automating what they know to do and what they know they need to do repeatably every time.

We’ve done a ton of work to roll out and automate those best practices, and how to get the advantages of faster innovation using Agile development, without creating a bunch of risks as you move faster.



The second thing that we really work on with people is getting that financial visibility, and getting all of their financial information on labor, projects, capital, and plans in one place, with one data model, so that they have a coherent way to plan and optimize their spends.

Those two things are huge levers. The third thing that we've really started to work with people on is all of these innovation projects, which are really brand new innovative techniques, like Agile development?

How do you make that labor tool extremely effective using that new technique like Agile development? We’ve done a ton of work to roll out and automate those best practices, and how to get the advantages of faster innovation using Agile development, without creating a bunch of risks as you move faster. Those are three really fundamental elements of what we're doing right now.

Gardner: I suppose that when you are picking on something quite as complex as this, you need to have some goal and some vision and direction about what are the realistic goals for some of these cost optimization activities. You mentioned the percent of revenue for IT spend as one gauge. What sort of results do you think people can meaningfully and realistically get in terms of some of these larger metrics?

Important goal

Purohit: We've seen the best companies actually implement this swap from 30:70 to 70:30. So, getting to 30 percent of your spend on operating costs in this cycle, where you need to be investing for the future, is absolutely an achievable and important goal. The second thing is to make sure that you’re benchmarking yourself on this cost of IT versus revenue on the most important competitors in your industry.

The reason that I phrased it that way is that it's not a general benchmark and it's not just the lowest-cost provider in your geography or industry, but you want to know what your most important competitor is doing, using technology as an advantage for both cost structure and innovation.

You want to understand that, spending probably something similar to that, and then hopefully be smarter than them in how you implement that strategy. Those are two really important things.

The third thing is that, depending where your IT organizational maturity is, there are opportunities to take out as much as 5 to 10 percent of your operating cost just by being more disciplined.

Say that you're a new CIO coming to organization and you see a lack of standardization, a lack of centers of excellence, and a lot of growth through merger and acquisition, there is a ton of opportunity to take out operating cost.

We've seen customers generally take out 5 to 10 percent, when a new CIO comes on board, rationalizes everything that's being done, and introduces rigorous standardization. That's a quick win, but it's really there for companies that have been probably a little earlier in the maturity cycle of how they run IT.

The same thing is happening now that happened in 2001, when we had our last major downturn. In 2001, we saw a rise of outsourcing and off-shoring, particularly to places like India.



Gardner: Another way of reducing this percentage of total revenue, I have to imagine, from all the interest in cloud computing these days, comes from examining and leveraging, when appropriate, a variety of different new sourcing options, both, new and old. How does that relate to this cost optimization equation?

Purohit: That's a great point. The same thing is happening now that happened in 2001, when we had our last major downturn. In 2001, we saw a rise of outsourcing and offshoring, particularly to places like India.

That really helped companies to lower their cost structure of their labor dramatically and really assess whether they needed to be doing some of these things in-house. So, that clearly remains as an option. In fact, most companies have figured out how to do that already. Everybody has a global organization that moves the right labor to the right cost structure.

A couple of new things that are possible now with the outsourcing model and the cloud model -- whether you want to call it cloud or software as a service (SaaS) -- is that there's an incredibly rich marketplace of boutique service shops and boutique technology providers that can provide you either knowledge or technology services on-demand for a particular part of your IT organization.

That could be a particular application or a business process. It could be a particular pool of knowledge in running your desktop environment. There's really an incredible range of options out there.

Questions for the CIO

What every CIO needs to be doing is standing back and saying, "What do we really need to be the best at, and where is critical intellectual property that we have to own?" If you're not running at the best possible cost structure for that particular application or business process or you're not operating this infrastructure at the best possible cost structure, then why don't we give it to somebody else who can do a better job?

The cost structures associated with running infrastructure as a service (IaaS) are so dramatically lower and are very compelling, so if you can find a trusted provider for that, cloud computing allows you to move at least markets that are lower risk to experiment with those kind of new techniques.

The other nice thing we like about cloud computing is that there is at least a perception that is going to be pretty nimble, which means that you'll be able to move services in and out of your firewall, depending on where the need is, or how much demand you have.

It will give you a little bit of agility to respond to the changing needs of the business without having to go through a long capital-procurement cycle. The only thing I would say about cloud is be cautious, because it's still early, and we're seeing a lot of experimentation.

The most important thing is to pick cloud providers that you can trust, and make sure that your line of business people and people in your organization, when they do experiment, are still putting in the right governance approach to make sure that what's going out there is something that doesn’t introduce extra risk to your business.

There’s a lot of diligence that needs to be put in place, so that cloud becomes less an experiment and more a critical element of how you can address this cost-structure issue.



Trust your provider, if you are putting data out there in the cloud. Do you trust how that data is being handled? If that cloud infrastructure is part of a business critical service, how are you measuring it to make sure that it's actually supporting the performance availability security needs of what the business needs?

There’s a lot of diligence that needs to be put in place, so that cloud becomes less an experiment and more a critical element of how you can address this cost-structure issue.

Gardner: Now, when we talk about cost structure, I would think that's even more critical for these cloud providers in order for them to pass along the savings. They themselves must put into place many of the things we have talked about today.

Purohit: That's right. Cloud providers have to push the needle right to the edge in order to compete. They're using the best possible new technology around blade computing, virtualization, automating everything, new service oriented architecture (SOA) technologies, so that you can do small component applications and stitch them together super fast.

The right governance

That's the value that they're providing. Then, the challenge is that you've got to make sure that not only do they have the great innovation, and great cost structure, but you trust what they are doing and that they have the right governance around it. I think that's really going to be what separates the lowest-cost cloud providers from the ones that you want to bet your business on.

Gardner: Is there anything else you want to offer in terms of thinking about cost optimization and how to get through the next year or two, where we are flipping ratios but are also maintaining lower total cost?

Purohit: I want to go back to this innovation bucket, because, as I said, you don't want to come out of this cycle as a CIO who was associated only with lowering cost and didn't fundamentally move the needle out, making the business more competitive.

You have limited ability to make those bets. So, the best bets are ones that are very prevalent, very top of mind for the business executives who really change the dynamic in terms of competitiveness, sales productivity, or the way they engage their customers.

The most consistent project that we have seen, the kind of project we see out there that are good bets for those innovation dollars, is around a theme you call application modernization.



The most consistent project that we have seen, the kind of project we see out there that are good bets for those innovation dollars, is around a theme you call application modernization.

What's happening right now in the industry is what we believe is the biggest revolution in application technology of the enterprise in probably 10 years. That's a composite of things that you build applications with these new Agile development methods.

All of these rich Internet protocols are revolutionizing the way you visualize and interact with applications, crossing over from the consumer world into the enterprise world. A whole, new wave of application platform technology is being introduced by SAP, Oracle, and Microsoft. And, SOA is becoming very real, so that you can actually integrate these applications very quickly.

Our view is that the companies who use this opportunity to modernize their applications and have this rich interactive visual experience, where they can nimbly integrate various application components to innovate and to interact with their customers or their sales people better, are the ones that are going to emerge from this downturn as the most successful leveraging technology to win in the marketplace.

We really encourage customers to take a very hard look at application modernization, and are helping them get there with those scarce innovation dollars that they have.

Gardner: Very good. We've been discussing the need for implementing best methods and achieving higher cost optimization by looking at reverse ratios from maintenance and support to innovation and transformation. Helping us along our journey in our discussion, we've been joined by Robin Purohit, the General Manager and Vice President for HP Software Solutions. Thanks so much, Robin.

Purohit: Thanks, Dana.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You have been listening to a sponsored BriefingsDirect Podcast. Thanks for listening, and come back next time.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn more. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast with HP's Robin Purohit on the challenges that CIOs face in the current economic downturn and how to prepare their businesses for recovery. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

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Friday, September 18, 2009

Caught Between Peak and Valley -- How CIOs Can Survive Today, While Positioning for Tomorrow

Transcript of a sponsored BriefingsDirect podcast on what CIOs need to do to survive the current economic downturn, while preparing for the coming upturn.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Download the slides. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Today, we present a sponsored podcast discussion on whether CIOs are making the right decisions and adjustments in both strategy and execution, as we face a new era in IT priorities. The combination of the down economy, resetting of IT investment patterns, and the need for agile business processes, along with the arrival of some new technologies, are all combining to force CIOs to reevaluate their plans.

What should CIOs make as priorities in the short, medium, and long terms? How can they reduce total cost, while modernizing and transforming IT? What can they do to better support their business requirements? In a nutshell, how can they best prepare for the new economy?

Here to help us address new questions during a very challenging time, and yet also a time in which opportunity and differentiation for CIOs begins, is Lee Bonham, marketing director for CIO Agenda Programs in Hewlett-Packard's (HP’s) Technology and Solutions Group. Welcome to the show, Lee.

Lee Bonham: Hi. Thanks very much for having me on.

Gardner: We certainly get the sense that CIOs are shifting in their priorities and making real-time adjustments. So much has happened in just the last six months, as a result of the shifting economic landscape. How do you think, from your vantage point, that IT has to adjust, given these new economic realities?

Bonham: We all recognize that we’re in a tough time right now. In a sense, the challenge has become even more difficult over the past six months for CIOs and other decision-makers. Many people have budget challenges and are having to make tough decisions about where to spend their scarce investment dollars. The demand for technology to deliver business value is still strong, and it perhaps has even increased, but the supply of funding resources for many organizations has stayed flat or even gone down.

To cope with that, CIOs have to work smarter, not harder, and have to restructure their IT spending. Looking forward, we see, again, a change in the landscape. So, people who have worked through the past six months may need to readjust now.

Gardner: Is this what you mean by the new economy -- doing more for less -- or is there more to it than that?

Bonham: Doing more for less has been around for a little while, and will continue. As we look ahead, we see a few new questions emerging. From an economic and financial point of view, hopefully we're close now to the bottom of the downturn. The forecasters suggest that the economy will start to improve slowly, but hopefully steadily, over the next 6 to 12 months.

What that means for CIOs is they need to think about how to position themselves and how to position their organizations to be ready when that growth and new opportunity starts to kick in. At the same time, there are some new technologies that CIOs and IT organizations need to think about, position, understand, and start to exploit, if they’re to gain advantage.

Gardner: From HP’s perspective, what sort of factors are important in terms of moving to improve productivity and to gain that agility.

Need to take stock

Bonham: If we think about the priorities and the challenges, as they have been over the past six months, what we’ve been saying is that organizations need to take stock of where they are and implement three strategies:
  • One is to standardize, optimize, and automate their technology infrastructure -- to make the best use of the systems that they have installed and have available at the moment. Optimizing infrastructure can lead to some rapid financial savings and improved utilization, giving a good return on investment (ROI).
  • Secondly, they needed to prioritize -- to stop doing some of the projects and programs that they’ve had on their plate and focus their resources in areas that give the best return.
  • Thirdly, they should look at new, flexible sourcing options and new ways of financing and funding existing programs to make sure that they are not a drain on capital resources. We’ve been putting forward strategies to help in these three areas to allow our customers to remain competitive and efficient through the downturn. As I said, those needs will carry on, but there are some other challenges that will emerge in the next few months.
Gardner: So, I suppose looking backward over the past six months or so, it's been very much a

In general, we’re seeing and suggesting that now is the time for CIOs to move their foot nearer the accelerator and maybe a little bit off the brake.

cost-cutting and cost-saving mode, but you really can’t save your way out of a transformation. How do they know when to make that switch, if you will, from defense to offense?

Bonham: That’s a really good question. The answer is very dependent on the industry, the geography, and the specific environment that each organization finds itself in. In general, we’re seeing and suggesting that now is the time for CIOs to move their foot nearer the accelerator and maybe a little bit off the brake.

If CIOs are not laying the groundwork now and thinking about their plans for when the economy starts to recover, they are in danger of being too late and missing the opportunities as they emerge. There is no hard-and-fast rule, but, at the same time, people should think and take stock and maybe set some plans—or perhaps drop some plans—so that they can get ready for growth over the next few months.

Gardner: I imagine that having a strong ROI analysis associated with certain projects will allow them to get funded. How do they balance the long-term with that need for a short-term use case or cost-benefit analysis story?

Focus on the short term

Bonham: They still have to balance those two things. What we’ve been saying is that firms need to optimize their cost, focus on the short term, and make sure that they can survive in this current period, but also thrive as the economy recovers.

There are a number of different techniques and ways that customers can achieve that. Clearly, an alignment between business and the IT organization is key. CIOs need to work closely with their line-of-business managers and colleagues and make sure they understand business requirements and priorities of the rest of the organization.

There are some tools and techniques that leading CIOs have been putting in place around project prioritization and portfolio management to make sure that they are making the right choices for their investments. We’re seeing quite a difference for those organizations that are using those tools and techniques. They’re getting very significant benefits and savings.

Gardner: I suppose having that visibility, knowing exactly what you have, what works, what doesn’t work, and how to measure those become really critical, when you’re trying to make the transitions, as we said, from long-term and short-term, offense and defense, or the brake and the accelerator.

Bonham: It’s really important to understand what projects are in progress, what projects are

Our survey work shows that technologies like consolidation, virtualization, application modernization and data-center automation have really moved up the scale in terms of importance.

delivering real value, and to optimize the spend. What we’ve seen is that leading organizations are really focusing their resources on projects that are delivering fast ROI, typically, within six months or less, so that they get real benefit, savings, and real business value in the short-term.

But, there is also another set of applications and opportunities as people look to grow. Growth may come in emerging markets, in new industry segments, and so on. CIOs need to look at innovation opportunities. Matching the short-term and the long-term is a real difficult question. There needs to be a standard way of measuring the financial benefit of IT investment that helps bridge that gap.

Gardner: A little earlier, you mentioned new technologies. What is it that that organizations can put in place that maybe is not just process, not just people, but actual technologies to assist them in these crucial times.

Bonham: Well, if we look at the area of financial cost savings and efficiency improvements, there is a whole range of technologies that people are adopting. Our survey work shows that technologies like consolidation, virtualization, application modernization and data-center automation have really moved up the scale in terms of importance.

Just as an example, server and storage consolidation is being implemented by well over 50 percent of the major organizations around the world as a way of saving cost and improving efficiency. That’s not the only area that’s important. I've already outlined the topic of project prioritization, making sure that you’re spending your scarce investment dollars in the right way.

Optimizing the investment

Tools like Project and Portfolio Management (PPM) software help allocate budget and decide which programs and projects are delivering a good return and should be continued, versus those that are maybe not so important and should be delayed or canceled. Those software tools can help in making sure that organizations optimize their investment.

Gardner: I wonder if you have any examples, either use cases or companies that have moved in this direction. What sort of payoffs do they get?

Bonham: We’ve seen quite a few customers who have really taken a great approach and have been ahead of the game in terms of using consolidation and virtualization tools, standardizing their data centers and other technology components.

As an example, Joanne Cummins, chief information officer of Standard Register, a document and print management services company based in Dayton, Ohio, has really used a whole range of techniques to reduce operating cost, simplify the technical infrastructure, reduce the number of servers and server and storage administration costs, and really get the most from her technology investment.

She's delivering yearly savings of $400,000 for the organization, as well as delivering a number of other benefits, like a flexible allocation of resources and faster application development and deployment. A combination of techniques is often the best approach. We're seeing that we can help customers choose the right solution to meet their needs in many cases.

Gardner: When the CIO leadership individual needs to go back to the business leadership --

Tools like the PPM software can help define and outline those financial benefits in a way that financial analysts and CFOs can recognize.

the accountants, the bean counters, if you will -- what sort of metrics do they need to describe in order to get the investments to make these new technology improvements?

Bonham: Over the past six months, the financial community is looking for fast return -- projects that are going to deliver quick benefits. CIOs need to make sure that they represent their programs and projects in a clear financial way, much more than they have been before this period. Tools like the PPM software can help define and outline those financial benefits in a way that financial analysts and CFOs can recognize.

Gardner: I’m also curious about the advice you would give for CIOs listening here today. What’s the general advice that we can offer in terms of getting that new economy bang for the buck.

Bonham: Let’s try and think about this in terms of some metrics. There is a total IT budget metric that CIOs need to think about. Over the past few months, many have been focusing on reducing the total cost of IT and maximizing efficiency, as well as targeting effectiveness. But, there is also a metric of how much you are spending on maintenance and management of existing systems versus innovation and growth. Typically, organizations spend 60-70 percent of their budget on maintenance and management of existing systems.

What CIOs need to think about going forward is how to grow the spend on innovation and applications, so that they can drive real business value and better business outcomes for their organization and be more competitive as the economy emerges.

Gardner: So, for that large chunk of their budget, it’s going to these ongoing operations, maintenance and support. You can consolidate, call out applications that might not be delivering much value, archive and remove data, this whole notion of modernization, and then use virtualization, and I think that can significantly reduce that larger nut of the equation, right?

Transformational approach

Bonham: That’s exactly right. Those organizations that are taking a transformational approach, an end-to-end approach, choosing those technologies that are giving them efficiency are going to lead the way. They are the ones that are going to have investment dollars available to allocate to new projects, which will drive their business in the upturn and give them the growth opportunities they want.

Gardner: So, for a CIO, they want to find that golden strategy that both reduces costs over the long-term, but increases that business agility, and then frees up those funds for those innovations and additional technologies. It's a trifecta, if you will, of consolidate, modernize, and virtualize.

Bonham: Absolutely. We’re seeing many firms on that course.

Gardner: For those folks who are interested in learning more or getting started, where do they go for information, and how do they set up a process?

Bonham: HP has a whole range of services and technologies that can address the specific needs

These organizations and CIOs want to think through their next step and think through where to start and how to make sure their IT strategy is in line with their business needs.

that we’ve talked about -- virtualization requirements, the services to help firms consolidate and standardize their technology, to implement automation tools, to better manage their portfolio projects, and to speed up software development.

Through EDS, an HP company, we have outsourcing, which can take the burden away from CIOs by outsourcing those services. We have HP Financial Services that can help fund through leasing and financing new investment requirements.

These organizations and CIOs want to think through their next step and think through where to start and how to make sure their IT strategy is in line with their business needs. We also have some consulting services and workshops that we call the CIO Agenda that can help people get started and make sure they are on the right course for the next few months to optimize their investment and their business outcomes.

Gardner: We’ve been discussing whether CIOs are making right decisions and how to make adjustments moving forward, both in strategy and execution. We’ve been joined by Lee Bonham. He is the marketing director for the CIO Agenda Programs in HP’s Technology and Solutions Group. I welcome his thoughts and appreciate his input. Thank you for joining us, Lee.

Bonham: Well, thanks very much indeed. Have great day.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You’ve been listening to a sponsored BriefingsDirect podcast. Thanks for listening and come back next time.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Download the slides. Sponsor: Hewlett-Packard.

Transcript of a sponsored BriefingsDirect podcast on what CIOs need to do to survive the current economic downturn, while preparing for the coming upturn. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.