InformationWeek
Defining The Business Value Of Technology
January 4, 1999
InfrastructureIT Frameworks Are Key For Hot Technologies
Companies plan big investments for infrastructures to support the newest business strategies
By Mary Hayes with Tom Davey, Martin J. Garvey, Monua Janah, Stuart J. Johnston, and Mary E. Thyfault
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ompanies rushing to embrace hot technologies such as electronic business, data warehousing, and enterprise resource planning are now giving equal consideration to the infrastructures needed to support them. In 1999, many will invest heavily in their IT frameworks to handle the loads generated by new business strategies.More IT managers rank PCs as the leading technology or product on their companies' project lists for 1999, if not their most strategic investment. Of 300 IT managers responding to a recent InformationWeek Research survey, 92% planned PC implementations, beating out Web development tools, network security, and year 2000 conversion. IT managers also rated application servers, networked storage, and transaction servers as the three most important products for their organizations during the next year.
Lithonia Lighting, a $1.2 billion industrial lighting manufacturer and distributor in Atlanta, exemplifies one aspect of this trend. The company will invest heavily in network storage solutions--removable storage that attaches to existing network protocols--to support a new business strategy. Lithonia is moving its transactions into a decision- support system for data modeling.
"We have a data-driven IT strategy," says Lithonia VP and CIO Jeff Kernan. "We will have a requirement for lots of information, for market forecasting and analyzing the business. There are lots of surprisingly complicated SKUs, which will require a lot of storage." That's why it was important to find a cost-effective solution; his three new Dell PowerVault systems will cost a total of just $150,000.
Storage area networks (SANs), on the other hand, will still be going through some growing pains in 1999, as vendors try to resolve interoperability issues among the pools of diverse storage systems and servers, and the hubs and switches, in these Fibre Channel-based frameworks. The ultimate goal is to allow any-to-any data sharing. But capacity and data sharing needs are so great at Polk Co., a consumer data resource firm in Southfield, Mich., that VP of IT Dave Zaccagnini isn't waiting for SAN interoperability issues to be resolved.
Zaccagnini is looking to EMC Corp. to help him build enterprise storage networks, the vendor's proprietary, centralized version of a SAN, to replace point-to-point connections. "All Polk has is data. [With EMC], I can share data across platforms, so I'm no longer duplicating storage," he says. That lets him cut storage costs in half; even with these savings, though, the company's storage spending will be between $4 million and $7 million in 1999, up slightly from 1998.
Analysts confirm that storage is one area businesses can't put on hold--even in the face of other concerns. "Y2K won't slow down storage purchases next year, because people will need capacity no matter what," predicts senior analyst Anders Lofgren of Giga Information Group.
Capacity needs and new business applications are also driving investments in servers in 1999. Enron Capital Trade Resources, a trader of electricity and natural gas in Houston, will do its first rollout of SAP applications next year for materials management and finances. The company plans to purchase up to 35 Compaq ProLiant servers to add to its 135 servers that run database and workgroup apps. Improvements in the lower-cost Wintel architecture, which the company has standardized on, have played a big role in letting it automate these processes, says John Tollefsen, director of infrastructure.
MSNBC, which runs its news Web site on Windows NT servers, is negotiating with Hewlett-Packard for up to 40 new servers to add to its current base of 80 front-end Web servers. Wesley Cronick, manager of distribution systems, says MSNBC is scrambling to keep up with the growing number of Internet news devotees. "Every time we build to exceed capacity, we exceed it within a couple of breaking news events," says Cronick.It's important for MSNBC to keep up with the load, because growth comes from its ability to serve the traffic on a consistent basis. "Our model is bringing people to our site, for advertisers," says Cronick. "It's critical that we stay up."
Mainframes
Support on the back end is equally crucial, and many organizations will continue to invest heavily in mainframes. The state of Georgia is working on storing criminal histories on two Unisys mainframes to provide its law-enforcement officers with information about suspects; the state will eventually link its data to the FBI's National Crime Information Center 2000 system, due this June. "In 1999, the mainframe continues to be of prime importance," says George Gray, systems programming supervisor for the Georgia Department of Administrative Services. Only a mainframe offers enough capacity for Gray to maintain large image files as part of criminals' history data.
IT managers are also encouraged by expected price drops of as much as 35% for mainframe Mips. Steve Matheys, VP of IT for support services at trucking company Schneider National Inc. in Green Bay, Wis., will spend more than $1 million for a 30% increase in capacity this year. But he figures he'll pay 36% less per instruction as pricing drops to $3,000 or less per million instructions.
On the desktop front, the quest for lower total cost of ownership, achieved by standardization and simpler desktop administration, is fueling investments in both PCs and thin clients. In fact, even though network computers are just a few years old, 38% of respondents surveyed say NCs are on their IT organization's planned projects list for 1999.
AmeriServe Food Distribution Inc. in Dallas will launch a thin-client pilot project early next year with 50 JavaStations from Sun Microsystems. If all goes well, AmeriServe will make NCs available to the 37,000 fast-food and chain restaurants it supplies. Standard- izing on one client can eliminate administrative headaches, says Dennis Rees, VP of marketing information technology. He says AmeriServe can convince buyers that simplifying software distribution and client support will also improve the supply chain by letting the distributor respond more quickly to customers' competitive strategies, such as promotional toys.
Mobil Corp. has earmarked about $25 million for new PCs and application servers from Dell--an investment that's expected to eventually pay for itself by lowering total cost of ownership through standardization. (The planned merger between Mobil and Exxon hasn't affected the agreement, says a Dell spokesman.) Mobil's decision to work with just one PC vendor will help it to acquire and manage desktops more easily, says Ardash Muradian, Mobil's sourcing lead for vendor management. "The key to TCO reduction is to reduce the complexity of the asset base," he says.
Notebook investments will increase next year at companies that rely on road warriors to bring in business. J.D. Edwards, which makes ERP software, will buy about 3,000 notebooks in 1999 for about $11 million. That's up from about 2,100 purchased in 1998. Much of the increase is because Edwards has rapidly been hiring mobile salespeople and consultants, who use the machines for call reporting and demos. "We're spending more on laptops for our sales force, which is growing faster than the rest of the company," says PC service manager Greg Houston. Overall, the Denver company's hardware budget will increase from $15 million to $18 million.
Additionally, spending on network infrastructures will grow at some companies that are future-proofing their networks. One example is Lesco Inc., a Rocky River, Ohio, maker of products for golf courses. Wayne Murawski, VP and CIO, says IT spending on the network in 1999 will increase "considerably" from 1998's level. Lesco will buy software to enhance network security and performance, and upgrade to the latest release of Novell NetWare. NetWare 5 has a faster kernel to speed performance, and memory protection to allow applications to run more effectively. To provide additional bandwidth so that Lesco can safely add users, and more bandwidth-intensive apps, the company will upgrade its LAN backbone to high-speed Ethernet switches. And Murawski will outsource network engineering and long-range management to Whitman Hart, so that the internal staff can concentrate on daily operations.
New Networks
In 1999, some users will also build voice, video, and data networks. Health-care organization Kaiser Permanente is investing $40 million as part of a project to build a nationwide broadband asynchronous transfer mode network, a 50% increase over its usual capital budget.
The new network will let Kaiser put its national clinical information system, with all patient medical records, online to more than 600 offices. Kaiser health professionals around the country will have access to this integrated medical database with best-practices information; it's hoped this will result in fewer repeat visits by patients, making them cheaper to serve. The company is also looking to interconnect its call centers next year, allowing a nurse in one location to transfer a call--and the patient record--to a specialist in another location. Doug Crawford, director of network and telephony technical planning for Kaiser, calls it a "very network-centric project."
In the coming year, though, some companies will reduce infrastructure expenditures, mainly because large portions of IT budgets will go to year 2000 conversion.
Even companies that plan significant infrastructure investments could change their tune in 1999, says Rob Enderle, an analyst with Giga Information Group. Giga estimates that desktop licenses sold for all versions of Windows will remain flat at about 90 million units in 1999, because many companies will find they just don't have the time for PC deployments. "People think they're covered in terms of Y2K, but most haven't completed their full assessments," says Enderle.
Sprint says it will use most of its IT funding in 1999 for year 2000 conversion, a new integrated voice-and-data network service for customers, and a new corporate campus. The telecom company invested in system deployments in 1998 to avoid a big infrastructure investment this year. "Nineteen ninety-nine is, for us, a pause on the IT infrastructure," says Lorin Olsen, manager for enterprise network services. Sprint probably won't begin to replace its new Xeon servers until the Intel IA-64 platform hits the market in two years.
Year 2000 issues will also negatively affect the arrival of converged network services for some organizations. These networks cost too much to build for users who need to allocate resources to Y2K, says Ken McGee, an analyst with Gartner Group Inc. McGee predicts that 1999 spending on network services and equipment in general will be flat, at up to 10% of IT budgets. Spending on network equipment will decline at companies that have already invested in major upgrades in those areas.
Take Domino's Pizza Inc., in Ann Arbor, Mich., whose networking dollars are a smaller percentage of its IT budget in 1999 than in 1998, says Matt Maguire, director of IT. Expenditures are decreasing, he says, because "we're starting to see the benefits from our existing deployment of technology. And network management, monitoring, and remote control have improved," helping to cut costs.
Investments in software also appear to be low on the list. Many organizations will just install service packs and updates with patches for minor year 2000 problems. For example, the city of San Carlos, Calif., has few software plans, but may roll out Windows NT 4.0 Service Pack 4, which has fixes for some date problems. "Our year 2000 efforts haven't gone as quickly as we'd hoped," says assistant city manager Brian Moura, who's responsible for the city's IT functions. The city is looking at rolling out Microsoft SQL Server 6.5 or 7.0, but he's not sure city agencies will agree to it. Says Moura, "It's going to be harder selling software to them next year."
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Staffing: Talent Hunt Gets Hotter
| Outlook '99 | |||
| Introduction | Y2K | Web Commerce | Services |
| Enterprise Apps | Infrastructure | Staffing | Predictions |
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