It’s always darkest before it gets darker. At its annual symposium in San Francisco this week, Gartner is drawing a bleak picture of the future of the traditional corporate IT function. The research house predicted that, for the fourth year running, IT budgets will grow less than 3 percent this year. As if on cue, giant tech vendor Hewlett-Packard announced today that it would chop an estimated $1 billion off its own internal IT budget by consolidating its IT operations and assets and closing down 79 data centers around the world.
Gartner notes that “many technology segments are already commoditized today. PCs, storage and bandwidth are essentially commodities, where buyers can get essentially the same ‘product’ irrespective of who they choose [to supply it]. Gartner analysts see this trend continuing to encompass elements of software and services as well.” In an interview with Silicon.com (thanks, Charles), Gartner’s Ken McGee elaborates:
“We think there is a slowdown taking place. Businesses don’t see the value [in technology] any longer. They find no compelling reasons for vigorous investment. It’s a non-growth industry … This represents a very dangerous period ahead. It will only accelerate the number of organizations who conclude ‘this is a commodity and I don’t need you to do it.'”
None of this will come as much of a surprise to anyone who’s been watching the recent behavior of top IT executives. IT has become an albatross around the necks of many CIOs. More and more of them are trying hard to distance themselves from “the technology” in order to escape the dead end of the data center. The CIO role is being repositioned in various ways: It’s not about IT anymore; it’s about “innovation” or “change management” or “process design” or “collaboration” or … well, anything but IT. A few days ago, I met a well-respected CIO at an event, and the first thing she told me when we started talking about IT was, “I don’t really see myself as being an IT person.”
Speaking at a UK conference of public-sector IT executives last week, another CIO put his finger on his profession’s identity crisis:
“As IT becomes more plug and play, the traditional technology roles are bound to diminish. We no longer do much system development – we buy it in – and as we get the standards developed we won’t need to do systems integration to the same extent. The networks are pretty much plug and play, so what are we going to do as a profession?”
But it was what another IT director said that really summed up what’s going on: “One of the first tests of a CIO is stick them in front of a broken PC and see if they can fix it. If they can they aren’t a CIO … We aren’t about running tin anymore.”
You have to wonder: If IT mattered, why would CIOs be trying so hard to disassociate themselves from it?
Got an invitation the other day to a seminar on “aligning IT with the business” (from Hammmer & Co, I think.)
Isn’t it a bit strange that there is still a need for this kind of thing? There have been IT organizations in American business for fifty years now. No one sends out seminar invitations for “aligning manufacturing with the business” or “aligning sales with the business” or “aligning logistics with the business.” Clearly, there are a lot of businesspeople who believe that IT marches to a drummer other than the best overall interests of the corporation.
It’s very unclear to me why anyone would think that a CIO would be particularly well-suited as a director of “innovation” or “change management”..speaking in generalities, of course; there will always be individual exceptions.
T does not matter until it is not there. Much like the manufacturing side of a business does not matter until it stops running. IT is not a competitive advantage per-se – it is Business as usual (BAU). As such, it has to run well, it has to run with ever shrinking budgets.
Those companies who are successful are able to make their “normal” internal functions work well. Look at advanced production methods, or stock control methods. All of these types of efficiencies need to be applied to IT as well.
As for “anyone” doing the setup and admin – I think that is a wildly simplistic statement. This is written by people who could not fixc their own PC if something was wrong. When a new manufacturing plant is built – the experts come in to design and setup. Likewise in IT. Things are not nearly as “commodity” and “simple” as many of the analysts think. We are not so advanced yet as we would like to be.
I have seemn many an organisation go down the “commodity” road and realise that all offerings are NOT necessarily alike.
Much of this reminds me of the past trend to outsource IT all together (as it is not “core business”). Then came the trend back to at least having the architecture function in-house as organisations lost total control over their IT direction.
It’s about time. CIOs should not be IT persons. Many CIOs have unfortunately acted more as CTOs, focusing more on technology than on information.
In my experiences CIOs have so far not really been very interested in information, except for information as “data” residing in their SAP installations.
More unstructured information — content — have rarely engaged a CIO, which has left it to other departments.
Information is valuable and the industry stands to benefit greatly if CIOs realized this and started understanding “information”.
Cheers, Janus
Hi, Everybody!
Well, I have one opinion about this, and, I have the same ideia that Nicholas Carr, but I believe that it’s possible to evolve from CIO to CSIO(Chief System Information Officer), like “Marketing”, or whatever!
In that way, it’s possible to change our perceptions from CIO, nowdays, to a business view, market, competitors and organization properly.
Bye!
Nick, you are drawing wrong conclusions from static budgets. If anything, it should be slighly declining each year given all the improvements in PC, broadband, global labor economics, blades, third party s/w maintenance, open source. The stubbornest costs to bring down have been software and multi-year outsourced services. And guess what they are geting much more focus.
To the question what is IT going to do as a profession. Harness in to business processes newer echnologies telemetry, web services, mobility, analytics etc.
You are going to see a new CIO emerge – crunching older utility spend, and delighting business users with enw innovations.
My friend, it is not the end of corporate computing. It is the beginning of new IT computing.
Vinnie,
I’ve been arguing for a while now that big companies should be reducing their IT budgets by capitalizing on commoditization and utility services. Sometimes, you have to spend to save, but in general IT costs should be going down.
I think the word “delight” should be banned from all business writing.
Nick
i can be as cynical as you – sometimes even more so, and feel it essential to balance things out by using words at the other end of the praise/pee spectrum…I know of several CIOs who are delivering what their CEOs would call delightful results.
Simon & everyone…I don’t think it is true at all that manufacturing is never a source of strategic advantage. Consider Toyota’s development of the Toyota Production System, which is arguably the primary source of the company’s success. Or, more recently, Dell’s approach to custom PC assembly.
I don’t think Toyota and Dell had access to any special technology. The robots and milling machines at Toyota could probably be bought by anybody. Nor was the key factor in these cases “being first.” Rather, the key factor was thinking out the production process intelligently in the light of organizational culture and business opportunities.
There is a parallel with IT. I think that in principle, IT *does* matter, but far too many IT people keep it from mattering by focusing on the cool technology of the moment rather than what that technology can do for the business.
When the only tool you have is a hammer, everything looks like a nail.
I think Mr. Carr’s argument is still a strawman. I take what’s he’s really saying to be: IT matters less (maybe very little) on the deployment side. It still matters very much on the innovation side. The folks who develop the newest e-commerce gadget at Corporation A matter more than the folks who implement it for Corporation X. But, you can’t tell me that the CIOs who identify the proper solution from myriad options, figure out how to deploy it properly, and integrate it with all the other deployments don’t have a significant value add. An investment broker uses all the same commodity financial tools and tricks that are openly available to any ambitious accountant. However, he should be capable of combining more of them in better ways than the average accountant. Based on Mr. Carr’s argument Berkshire Hathaway should replace Warren Buffett with an run-of-the-mill accountant. CIOs aren’t fleeing IT. They’re fleeing their executives’ misguided opinions of IT–thanks in part to Mr. Carr–by camouflaging themselves verbally. A CIO shouldn’t be able to fix a PC anymore than a investment broker should be able to rattle off the minutae of generally accepted accounting principles. Leave it to the accountants.
I think IT is under-going a traumatic change as we speak. So much time and effort is still spent on integrating the data center with apps and automating business processes. To me, this is the equivalent of keeping the trains running – nothing sexy there. The rub though is that business users no longer value this solution, unless it fails. What they do value immensely is information. The IT of tomorrow must begin focusing now on giving business users un-fettered, un-constrained access to corporate information and let them do with it what they will. It is becoming less about Technology and more about Information, which is all the business users ever wanted in the first place. Technology-oriented applications are dead. The CIO that figures this out first and implements information-oriented applications will be a star.
Chris is right. It’s a strawman. Sure, there’s little value in just building large data centers for their own sake. Corporations care little about whether it’s a SAN, NAS or direct-attached storage that is used for their email system. Spending on hardware and large software packages is decreasing or stagnant as a percentage of organization’s budgets.
But people use IT solutions and services more than ever. They care that those solutions work. They care when they go down. They need more storage space for their files and emails. They need web services to communicate and interface with others (inside and outside the organization).
In fact, I’d say IT matters more than ever, and smart CIOs are re-positioning IT not as the “electric company” but as core parts of the business integrated with the functional units they serve.
For example, no one hires 100s of temps to route POs in the purchasing or AP systems to people every day. Instead they writing business rules in PeopleSoft/SAP that automate the routing of POs for approval. They use Crystal Reports to get summary expense reports. They buy document management systems, or using web-based forms to store the data in a database.
Just like at the dawn of the industrial revolution, when the spending focus changed from hiring massive numbers of people to spending money on the new machines didn’t shrink the number of jobs for people in those industries, the consolidation and commoditization of IT won’t shrink the number of IT jobs in the near future.
Commoditized solutions do not create business advantage, they allow an organization to keep pace. This is a trend of IT wanting to be seen as creating value. The past focus of IT has been on operational efficiencty, reducing non-value adding functions. IT is now seeing deminishing returns in this area, and must focus on value creation to survive. Unfortunatly creating value is much more difficult then improving efficiency. I don’t see IT jobs shrinking because of this, a renewed push for IT to create value will provide more opportunity for customized solutions. One major hurdle is that technology is easily replicated, and any technology created advantage can quickly be erased.
As for the poster who mentioned the topic of aligning IT with business, this is about flexibity. Being able to adpat IT solutions to business strategy quickly. This is the whole service oriented architecture/workflow push. Having a business user quickly modify system processes to better serve business strategy. Its not that IT never cared about business goals, it was slow to react.
CIO’s may be fleeing IT in the same way CEO’s might be fleeing business. One doesn’t expect the CEO to prepare an invoice or calculate price of an item for the day or negotiate with the supplier unless otherwise it is a mom-and-pop shop. These are the same functions that constitue the business as “fixing compueters” that constitue IT. Ultimately the CEO is responsible for all these but the CEO cannot be a charted accountant, or seller or procurement speacialist, all rolled into one. In the same way that the CEO expands the business, the CIO should accomodate to the changing needs, both from outside and inside. Technology unlike the 80’s is complex – innvoations and proliferation of technology in the last 2 decades demand robust management approaches, which is a quite common scenario in IT. Further technologies also become commodities. Thus, today the role of the CIO is to manage both the types. Then there are compliance regulations imposed by governments, which require management of IT a much more stringent. Thus today’s CIO needs to be a very good manager. As managers go, they are gererally disassociated with technologies. All the “techie” functions are with the Chief Architect or the Solution Development teams, as the case may be.
I think everyone forgets what the role of CIO is. Clue it’s in the title – chief INFORMATION officer. Not to be confused with chief TECHNOLOGY officer, as that would be CTO.
The CIO should be the first point of call in the organisation for getting information. If the billing department needs information from accounts or sales then the CIO should be the one to say I can make that happen. If the organisation needs to share information with its customers securely then again the CIO should take ownership of this. Porter and Millar have said that it is information that can lead to competitive advantage and not technology. Hence another role for the CIO is to understand how information can be used to reconfigure the organisation’s value chain.
It is good that technology and software is becoming commoditised. This means that the CIO has more time to think about what to do with the technology than how it should be run. That is where the CIO can add value.
Aha! (As Jack Welch would say!)
When I took the IT Management course this last semester as a requirement for my MBA in IM, the course was less about traditional IT management and more about strategy and alignment. We only spent about two hours on pure technology matters. Most of the course was managing change, process management, aligning IT with organizational strategy, dealing with disruptions (bottom-up and top-down), outsourcing, and creating/managing IT strategy.