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Things are looking up in IT Forrester Research just raised its U.S. IT spending forecast for 2010 from 6.6% growth to 8.4%, predicting particularly strong spending on PCs, peripherals, storage, operating systems, and business applications. U.S. companies added 26,000 IT jobs in the first quarter, according to the Bureau of Labor Statistics, the first time in close to two years that those numbers are up for two straight quarters. Most IT vendor executives have a positive outlook about their business for the next six months, according to the latest CompTIA survey.
So goes the cyclical roller coaster that is the IT industry and economy. But as we emerge from the worst recession in 30 years, are business technology organizations making any structural changes? Or are they simply preparing to catch up--devote their time and resources to most of the same old strategies and stuff now that money is a tad looser than it was a year ago?
For an idea of where business technology organizations should be putting their emphasis, consider my colleague Bob Evans' top 10 CIO issues for 2010. No. 2 on Bob's list--and perhaps the overarching priority--is to start reversing the 80/20 rule by which typical organizations spend about 80% of their IT budgets on maintaining systems and only 20% on new applications. Once CIOs commit to attacking that spending mix, they'll get moving on most of the other urgent post-recession priorities:
• Evaluating alternative IT models with an eye toward improving service delivery and tapping new sources of expertise. In a recent interview with my colleague Chris Murphy, David Foote of advisory firm Foote Partners said employers are more focused on the skills they need and not so much on the jobs they need to fill, so they're looking at models that blend contractors, cloud-based software and infrastructure, and new hires. "Resistance to this level of org change is natural," Foote says. "The recession has been successful in breaking down a certain amount of this resistance, and this volatility we're seeing is being driven by employers taking advantage of the window of opportunity to think through it and move things along to new models."
• Focusing more on growing revenue and engaging customers and less on cutting costs. The CIO who comes into the CEO's office to thump his chest about the $10 million he extracted from the IT budget won't get a warm reception. The CEO will view that $10 million as money that should have been extracted--and put to better use--last year. IT's true value is in what it produces. Hewlett-Packard CIO Randy Mott, a cost-cutter in his own right, is savvy enough to quantify all big IT initiatives in terms of the "revenue of IT," the result of an annual planning process where HP business unit, finance, and IT teams agree on the benefits each project is supposed to deliver. As organizations move in this direction, CIOs are looking to negotiate "outcome-based" contracts with key suppliers tied to revenue gains and other business goals.
• Applying analytics to your vast content stores to divine new insights about customers, partners, and employees. So what if your company manages 100 TB of data: How is it going to act on that data to move the business needle?
• Getting rid of those apps that have ceased to provide value but continue to hog capacity and money or, as former Chase CIO Denis O'Leary once put it, "have now become the equivalent of corporate cholesterol."
• Paying more attention to what makes your organization special--people. One of the findings of our U.S. IT Salary Survey is that as the economy improves, the stars will start looking elsewhere if they're undervalued. A freeze in spending for specialized IT skills has "thawed," Foote says. Do you have a talent-retention plan as the warming trend continues?
This inaugural episode of Business Matters explores the subject of leadership with former Air Force Brigadier General John Michel, the Chief Strategy & Innovation Officer and President of MV International.