Amidst The Gloom, How CIOs Are Driving IT Infrastructure Innovation - InformationWeek

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Amidst The Gloom, How CIOs Are Driving IT Infrastructure Innovation

With growth projects on hold, now is the time to clean up IT operations and drive hard bargains with vendors.

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Infrastructure Innovation illustration Washington Mutual's failure last September marked a precipitous moment of this recession. But for JPMorgan Chase, it was an opportunity. And for Guy Chiarello, JPMorgan Chase's CIO, it was the right time to invest in the company's IT infrastructure, including millions of dollars in new mainframe computers.

By acquiring a big chunk of WaMu's business for $1.9 billion, including its prized West Coast branches and its pile of bad home loans, JPMorgan Chase already has boosted its revenue in retail banking and consumer lending. It upgraded to IBM's Z10 systems shortly after the acquisition, creating a mainframe infrastructure that can handle current volume and create capacity on demand so that the company could more quickly absorb WaMu's portfolio and customer data and have more efficient capacity for when business picks up.

While some CIOs have put the brakes on IT infrastructure initiatives, Chiarello's team has been busy investing time and money in hardware, refreshing and in some cases virtualizing desktops and servers throughout the company. Upper-hand negotiations with vendors are providing what he estimates are 25% savings over what he would've paid for new hardware during better times, setting price points that will be hard for vendors to ratchet back up when the economy turns around.

Bad times? For Chiarello, these are good times to get work done, even with the "tremendous pressure" on his IT budget. Chiarello doesn't know how long the vendor price competition of this economy will last, but the company's positioned "to make it last forever, because I won't pay a dollar more [than I paid] for the last thing I bought."

Call it IT infrastructure innovation, and it's surging along at many companies. Yes, these are undeniably tough times, with revenue shortfalls slamming IT budgets and forcing layoffs that have IT unemployment back to 2004 levels, above 5%. Gartner predicts global spending on IT hardware will decline 16% this year, then be flat next year. It predicts IT services spending will decline 5.6% for the year, reflecting the lack of new projects in the pipeline.

But to sum this up as "not much happening in IT" is a superficial view. Underneath the gloom there's a flurry of activity, new thinking, and even selective investments, as some CIOs seize the opportunity to both modernize and cut costs from their infrastructures before the upturn, when growth projects will again dominate the business technology agenda.

Some of the most clever and innovative thinking in IT today has nothing to do with, say, software that helps grow the customer base or improve collaboration with partners. Because infrastructure innovations are all about making IT work better and more cheaply, they can gain support from business leaders in this economic climate. At the same time, some of a company's top IT stars, previously focused on growth-oriented applications, have become available to help find ways to optimize the most expensive systems and software.

"When business is flourishing and demands are increasing, infrastructure has to serve the business in a progressive way," leaving less time in the portfolio to focus on infrastructure improvements, Chiarello says. "If you're in the CIO seat, the most exciting times for infrastructure are in down environments, and the most exciting times for application development are in the up times."

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Among the infrastructure innovations gaining momentum: server and, to a lesser extent, desktop virtualization; cloud computing, at least in pockets; open source software alternatives; new and more energy-efficient data centers; lower-cost voice networks, including unified communications; expanded IT automation; and new processes and software for tracking IT system costs and usage.

In an April report, Gartner cites IT cost reduction as the No. 2 strategy for CIOs in 2009, a leap from No. 12 in 2007. Delivering projects that enable business growth dropped from the No. 1 strategy in 2007 to No. 3 this year. No. 1 is linking business and IT strategies and plans, up from No. 2 in 2007.

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