Software Licensing & Master Service Agreements : Chicago Software Licensing Lawyer & Attorney : Sam Conforti Law Firm : Master Service Agreements, Negotiations, Outsourcing : Cook County, Illinois

Global stock markets are falling.  The price of a barrel of oil broke the $70/barrel mark on its way to $60 and maybe $50.  The $700 billion bailout (or rescue) package of Wall Street hasn’t seemed to take hold.  The Fed has opened up its discount window to all sorts of entities.  And yet amid all the financial tumult, Gartner sees IT spending for the coming year as slowing, but not stopping.

Richard Adhikari reports for Internet.News.com from the Gartner Symposium/ITxpo in Orlando, Florida in his article entitled Gartner: IT Spending Will Grow, Just Slowly.  He quotes Gartner’s global head of research, Peter Sondergaard:

"In a worst-case scenario, our research indicates an IT spending increase of 2.3 percent in 2009, down from our earlier projection of 5.8 percent"

What makes Sondergaard so sure the growth, albeit slowed, will continue into 2009?  He cites three factors:

·         There is usually a 2 quarter lag in decreases in IT spending vis-à-vis the economy.

·         The shift to a multi-year approach to IT projects makes a cut implausible.

·         Top management’s realization that IT can help transform their business.

Sondergaard sees developing countries worst hit, with Europe posting negative growth, and the US and Japan as flat for 2009.

It seems that the need for IT will be a stabilizing factor in these turbulent times.  AFCOM is an association which is related to the datacenter industry.  Their study supports Gartner’s conclusion that IT spending will hold and might even increase in 2009.  Why?  Well, if the data center goes down, the whole business might go as well.  Read the whole story Datacenter Dollars Seen as Steady Spend.  The salient points in the datacenter industry to keep in mind for 2009 are these:

·         The downturn in the economy will spur a major growth in greening efforts because they have a payoff in savings.

·         The impact of datacenter budget cuts will reduce overall efficiency of operations in the entire company. When budgets are cut, new technologies don't come into play. Firms need to expand or adopt new technologies and won't be able to.

·         The downturn may spur increases in purchases when companies realize increases in their datacenter's effectiveness affects their company's survival.

·         A company's ability to survive in this economy is more than ever before dependent on the datacenter's performance.

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I recommend an Economist Intelligence Report entitled IT Excellence: Achieving Optimised Business Outcomes.  This whitepaper begins with the premise that “IT departments are increasingly being called upon to define and pursue excellence”.  The consensus seems to be that IT’s role has evolved to one of a business partner that must align itself with the company’s overall business objectives.  The editorial board of the Economist Intelligence Report put together this report based on in-depth interviews conducted with Dow Corning CIO, Abbe Mulders, and Applied Materials CIO, Ron Kifer.  It is interesting to see how both individuals recognize the pervasive nature of IT in their organizations and their commitment to realizing the most from their departments.  Each has an interesting approach.  I’ll briefly summarize below:

Dow Corning:

Mulders has embraced the Six Sigma (defined) statistical approach with its continuous improvement toward defined goals.  Business units within the company collaborate and produce a future strategic plan which includes IT as a full partner.  The senior executives of the functional business units along with senior IT executives hold quarterly meetings to review and adjust priorities.  This collaborative approach allows the participants a view into the infrastructure, allowing for more effective decision-making, investment and execution of their 5 year strategic business plan.  The Six Sigma approach requires some kind of return.  Mulders’ teams focus not only on the progress but also on the quality of those returns and reports an 80% achievment of targets 12 months after an implementation.

Applied Materials:

Applied Materials is a leader in nanomanufacturing technology and produces semiconductor chips, flat panels, solar arrays, and energy-efficient glass.  Ron Kifer’s approach to IT excellence starts with the premise that IT not only enables business strategies, but must take a leadership role in such business processes.  Kifer maintains that in order to compete in the global market each business functional area must be able to support all others.  This is what he calls “cross-functional support”.  He believes the pursuit of IT excellence optimizes the other business functions.  He looks at core competencies to get the most effective results.  He believes he has accomplished this through the outsourcing of major components of his IT infrastructure.  In order to make the most out of this approach Kifer explained that vendor management became a priority for the company and they needed to “reorganise and develop skills in negotiation and management of vendor relations”.

This whitepaper report also includes a Q&A with each CIO.  It’s interesting reading.

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Yes, the rumors are true.  I have left the world of “cool” and entered the world of “White Papers”.  It really isn’t that bad.  In fact in my research I have found a very interesting White Paper by Cindy Jutras, Vice President and Service Director, Manufacturing Research, for the Aberdeen Group, Inc.  Jutras’ paper is entitled Best Practices in Extending ERP: A Buyer’s Guide to ERP versus Best Of Breed Decisions.  Admittedly her report was published in November 2006, but it is a factual view of where the ERP industry was at that point in time and a prescient summary of where it was about to go.  It is a must read for those involved in the ERP industry and I highly recommend it to my readers.

The gist of the report is the emerging approach of today’s Enterprise’s desire to derive more for their dollar from their ERP implementation and deciding whether to stay with the core functionality of the ERP solution or augment this functionality with “pure play” or “Best of Breed” software vendors.  This decision is becoming more complicated due to the acquisitions of these smaller Best of Breed vendors by the larger ERP giants.  This 2006 report foresaw the consolidation in the market and what affects it would have on the companies caught in the middle.  See also What’s Next for ERP in 2008; and, The 7 Trends for ERP in 2008; and, What Customers Want from their Software Vendors; and also, SAP’s Business Objects Partnership with Oco.

Jutras identifies the three “Key Business Value Findings” for the enterprise deciding whether to go solely ERP or Best of Breed.  These three factors are:

• Functionality
• Integration
• Ease of upgrading to new releases

Her report includes very descriptive and easy to understand tables and figures such as:

• Levels of integration
• ERP module adoption rates
• Adoption rates of ERP extensions

At the top of each of her four chapters is a “Key Takeaway” section in bullet points.  This is extremely helpful to the reader.  It helps direct your attention to the salient points and provides a fast and easy way to return to a chapter and refresh one’s recollection.

For all those involved in the industry this is a report you should keep handy.  It definitely helps bring the whole recent picture into clear view.

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