IT Must Create Products, Not Just Cut Costs - InformationWeek
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IT Must Create Products, Not Just Cut Costs

Our Global CIO Survey reveals IT at the core of new products, business models, and innovation strategies. How does your organization stack up?

This Doesn't Apply To Me

It's tempting to dismiss this idea of IT-driven products as not a fit for your business: "Of course, Hilton needs to do this, but we don't have guests like a hotel does."

But then consider what BMW is up to, starting a $100 million venture capital fund to invest in mobile application services that aren't necessarily tied to its cars in any way. In late February, for instance, BMW invested in MyCityWay, a startup that provides consumers with information on public transportation, parking availability, and traffic, and gives them location-based entertainment options in more than 40 U.S. cities; it plans to expand internationally. BMW is tying this mobile effort to its new sub-brand BMWi, for its electric and hybrid vehicles.

Remember, this is BMW, maker of "ultimate driving machines" and famous for skimping on cupholders and other amenities because they don't enhance the pure driving experience. BMW has always been about the car. Now it's also about the apps.

Death of 'Alignment'

Remember business-IT alignment--CIOs fretting about making sure their IT teams understand business needs and are working on relevant projects? A surprisingly high percentage of IT leaders think they have that problem licked.

Asked if they're worried about relationships with business units, a majority (53%) rank it a 1 or 2 on a 5-point scale, where 1 is not a concern and 5 is a major concern. (The average rating across eight categories in our survey is 2.9). Likewise, when asked if they have a system to prioritize projects, IT leaders aren't very concerned (see chart, p. 28).

IT leaders are slightly more worried about having the right resources--the skills and infrastructure to execute--but the rank for that still averages less than a 3 on our 5-point scale.

Instead, the No. 1 worry among the leaders we surveyed is that IT isn't implementing fast enough to meet business goals. More than one out of five respondents (22%) cite it as a major concern. That tops not having enough IT budget (20%) and not having enough staff (17%). Those three factors were the only ones to register as serious concerns--averaging more than 3 on our 5-point scale, with speed's 3.6 the highest.

In short, IT leaders aren't worried about knowing what to do; they're worried about being able to execute.

The IT team at CME Group, which owns the world's largest commodity trading exchanges, including the Chicago Mercantile Exchange, doesn't worry about aligning with business goals. CME's IT and business are one and the same, as electronic transactions constitute nearly all the exchanges' trading volume. Most everything CME needs to do--from supporting more international trading to adding new commodities to trade to acquiring other exchanges--leads directly to the need for more and faster computing capacity. That's why it opened a 428,000-square-foot data center in suburban Chicago this winter. The building left plenty of room to expand for future growth, and CME even bought the vacant lot next door, just in case. Says Joe Panfil, CME's managing director for enterprise technology: "It's capacity, but it's about overall business growth."

CME's IT team is looking to drive new revenue by renting space for investment companies to colocate their servers in the new data center. The thinking is that some high-frequency traders will want to be as physically close to the exchange's trading engine as possible, in order to eliminate the roughly 10-millisecond trip--less than half the time it takes to blink--that it takes for an order to get from downtown Chicago, where many trading firms are located, to the suburban data center.

CME IT teams often meet with the company's customers, as the hyper-competitive commodity traders want every assurance their systems won't hiccup during a split-second trade. That kind of IT interaction with external customers is still pretty rare: Just 20% of our survey respondents say it's one of the primary areas on which they spend their time, though that's up from 14% a year ago.

That IT-customer bond has served CME well as it expands into selling colocation services. For example, it knew that traders wouldn't stand for a rival being even a few feet closer to its trading engine, so CME technologists made it so that every colocated server has exactly the same length cable, even if it means sending the cable around a few loops before it gets to the trading engine.

Without that direct interaction, it might have been tempting for CME IT pros to dismiss the time difference inside the data center as overblown--really, in a fiber-optic cable, could a message traveling an extra 10 feet at the speed of light be a disadvantage? Yet "that has come up in pretty much every customer meeting I've had," says Craig Mohan, who runs CME's colocation business.

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