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In November of this year the staff at CIO Update conducted its annual fourth quarter survey of IT executives in an attempt to get some sense of the coming year’s economic activity. This year the survey included executives in 139 companies in the US and Canada. From the results it appears that the doldrums of 2009 may be replaced with cautious optimism for 2010 (VERY cautious optimism). The survey asked questions such as whether the surveyed companies had made any changes to their in IT Budgets during the last quarter, increases, decreases, or no change. Another question put a slightly different spin to the IT budget inquiry and asked were there any anticipated changes in the coming years IT Budgets. The article posted December 17, 2009 by the CIO Update staff entitled The IT Spending Recession is Over presents the answers to these survey questions in print and in pie chart form as well so the reader can try to put the responses into perspective. While 19% had increased their IT Budget spend for the last quarter as compared to only 11% last year, 29% answered that they continued to reduce their expenditures as compared to 35% from last year’s survey.

Two interesting observations by the CIO Update staff center around their section entitled “Signs of Hope” and also the breadth of the recovery. The CIO Update research has 20 years of data to lean upon, particularly in the response to “Expectations for Change in the IT Operational Budget” category. The results shows 52% of the IT executives expect an increase in their 2010 budgets. Historically, the CIO Update data indicates a recession when that expectation number drops below 50%. So it appears that the trend may indicate that we’ve turned the corner. However, the anticipated amount of those budget increases is not large and hovers around 2%.

A rosy economic picture for the 2010, I think not. However, it is not bleak either. From an amateur economist at best, your humble blogger’s opinion is that the capitalist business model is cyclical and that an economic recovery is inevitable. I think some intangibles would be the uncertainty of the current administration’s spending plans and the affect they will have on any recovery. And there always is the looming Federal Reserve and whether their policies will allow for further growth as the inflationary effects of their 2008 – 2009 monetary policy have as yet to be manifested. The issues not discussed in this CIO Update posting may be addressed in its complete version Outlook for IT Spending and Staffing in 2010. This full version of the report “provides 2010 forecasts for IT operational spending, IT capital spending, and IT hiring, both for the composite sample and by organization size”.

Is the worst behind us? That remains to be seen.

 

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Well folks, I’m out of breath. I was minding my own business just cruising the net for interesting stories and then all of a sudden I stumbled upon a treasure trove of fundamental information. It all began when I came across an article by Michelle Megna entitled What’s Behind the iPhone Success Story? and read in the first sentence that Apple sold 3.8 million iPhones in the last quarter (that’s three months for the non-accountants) for a $1.5 billion boost to sales revenue during the worst recession we’ve had in approximately 70 years. I was interested to read Megna’s reporting of the reasons behind this success story – 1) the too numerous to list apps, 2) the interconnectivity with the Mac for ease of data transfer, 3) the consumer preference of the iPhone to the Netbook. You’ll have to read further down into the article before you come across the astounding sales numbers for RIM’s Blackberry devices for the comparable time period. And so the story ends – or so I thought.

So I’m in this smartphone / mobility state of mind when I come across Andrew Dod’s article entitled Strategic Considerations for “Going Mobile”. Dod’s article takes this topic into the stratosphere with countless references to vital information. He begins by calling our attention to the old days and another revolution, 1994 that is and modems firing at 14.4 bps. Companies quickly realized that the paradigm had shifted and they needed to be a part of the internet and figure out how to compete and make money.   With over 4 billion mobile devices in existence today the same questions asked in 1994 are being asked again:

·         How do we get our business on mobile?

·         How can we easily create and distribute content on mobile?

·         How do we integrate mobile into our business operations?

·         How do we ensure effective adoption of our mobile applications?

·         How do we extend and grow our business on mobile?

 

Dod cautions us that mobile is not just for marketing but can help the enterprise achieve its core business objectives. With the excess of mobile devices out there Dod declares that content should be upper most in the mind of the business strategist to address the“significant variations in operating systems, screen sizes, display resolution, processing speed, memory, and performance.” Dod lays out the three major types of content, each with its own unique character and requirements to fit into the business strategy:

·         Text messaging SMS (short message service) delivers simple content but is limited in how much it can deliver - only 160 characters.

 

·         Mobile Web (WAP): This is where your smartphone uses WAP (wireless application protocol) to access Web sites. The WAP browser is simplified for your handheld device but is fully interactive. Use of the WAP browser is different from a PC browser. Web sites usually display clumsily on the smaller mobile screens. It is better to deliver tailored offerings with a limited portion of the content and functionality available at the full Web site.

 

·         Mobile Applications: Since mobile devices support numerous platforms, rich media applications have become available enabling a much more vibrant user experience with video and audio. This allows for content developed specifically for the mobile device. Dod suggests that the smart business treats the mobile medium as its own medium, rather than an off-shoot of online.

Dod’s emphasis throughout his article is the importance of content when delivering it to a mobile device. He has devised a list of what he calls the ten C’s of mobile strategies. It is really quite ingenious. I could not do it justice in this blog posting and so I highly recommend his article to all my readers.

Continuing on with this treasure trove of information, many of my readers may remember my Blog posting last August 4, 2008 entitled Mobile Computing: A Unified Platform Is Essential As Technologies Converge regarding Jim Hemmer’s “Mobile Bang Theory”. Just to refresh your recollection Hemmer’s theory simply states that one action from a mobile device can be the catalyst for many other internal, as well as external, business reactions yielding significant ROI. Well Hemmer is back with a follow up to his Mobile Bang Theory entitled The Mobile Bang Theory – Part II: Let the ROI Sparks Fly. He sees the global economic meltdown as an aid in bringing cost containment more into focus for the enterprise and thus putting mobility projects on the top of the “to do” list for IT managers.

Hemmer’s take on the current mobile revolution is quite fascinating. He really sees a BIG PICTURE when he describes the inherent benefits of mobility. His vision combines multiple systems and devices and networks and processes and people and the end result is faster ROI. He emphasizes this faster ROI by explaining that the global recession provides opportunities in the sales cycle to impress your customers. He takes this lesson from the former president of Scandinavian Airlines, Jan Carlzon, who turned the company around during a deep recession. As Carlzon explained each customer interaction was a “moment of truth” for the company to impress the customer. Hemmer takes the moment of truth approach and refines it to fit today’s economic environment. These moments of truth become “Trigger Points” where the sale can be won or lost based on the timely and relevant use of data that can be brought to bear via mobile devices.

To be sure, mobility is not solely for the sales cycle. Hemmer’s article is full of other real examples of the use and benefits to the enterprise deploying the latest mobility devices and applications. He presents examples of mobility’s use for field service operations and also the productivity gains for IT Management itself as data can be retrieved real time to provide visibility into the operations. Jim Hemmer’s article is a nice companion piece to Andrew Dod’s article. And as Andrew Dod stated in his article:

“Mobile is here, now, and only going to dwarf the first Internet wave due to its ubiquity, essentialness, convenience, and proximity to nearly all we do.”

 

 

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Nobby Akiha reports in SandHill.com on Gartner’s Top Ten “HOT” technologies for 2009. Included in this top 10 list is Business Intelligence (“BI”). Akiha lists the 10 predictions for BI and how BI will surge in 2009 and they include the usual suspects, “The Recession” and “Going Green”; however, the list also gives us some insight into the other salient issues that will cause the use of BI to swell in 2009. For the complete story read Nobby Akiha’s article 10 Predictions For Business Intelligence. Here is a short-hand version of the list:

1.       More Open Source Collaboration: Blogs, online communities, and social networking will help spur the development and use of BI tools.

2.       Rich Internet Applications (“RIA”) for consumers influence the Enterprise:  Workers start to demand the same web applications used at home for the workplace.

3.       The Cycle Goes from Applications – to – Users – to - Better Applications:  It becomes a self-fulfilling prophecy.

4.       A Recession Fighter: BI provides the competitive advantage to analyze costs, margins, and channels to better gauge profitability.

5.       Green: BI assists in the allocation of resources. “Plus, ‘going green’ fits with consumer sentiment and conserving resources conserves cash.”

6.       Regulations are coming: In light of the financial melt-down on Wall Street, it is a foregone conclusion that the Feds will be writing more regulations and these regs will most assuredly require companies to retain and disclose data. BI will help with the data management.

7.       Globalization Increases Competition: BI makes it possible for business decisions to be more informed and in real time.

8.       Wider Access to the Analysis: Decision makers are enterprise wide and as BI gains wider adoption these decisions makers will have access to the informed analysis.

9.       Flexible Reporting: Siloed data isn’t much help to the enterprise at large. BI makes it possible for data to be scalable and viewable in various formats.

10.   More Open Source Deployments: These solutions will be customizable for business decisions.

 

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• There has been a plethora of news stories regarding the future of outsourcing and IT jobs. In my research I came across a Blog that is maintained by the Staff at the Ubikwiti website. The Blog entitled Stemming the Outsourcing of IT Jobs cites freelance writer Rachael King for BusinessWeek.com. King reports that speaking to Ohio workers President Barak Obama stated, “We’re not looking to create just any kind of jobs here; we’re looking to create good jobs that pay well and can’t be shipped overseas.” The Blog posting on the Ubikwiti website goes on to make some interesting claims, such as:
• 140,000 more jobs will be moved offshore by 2010 (Hackett Group December 2008 report).
• 25% of all IT jobs at the largest global corporations will be outsourced by 2010.
• The posting then touts some of the spending items in the current stimulus package:
• $20 Billion for health information technology and the building of its infrastructure.
• $6 Billion to improve broadband internet access.
• $11 Billion for modernizing the power grid.

The above statement by Barak Obama and the planned spending as stated above, with the intended purpose of creating jobs here at home that cannot be “shipped overseas”, does not comport very well with his newest appointment to his National Economic Council. David Sirota reports in his Blog Article, More to Promote Outsourcing Than Anyone Else In America, on an Op-Ed piece by Ron Hira, a professor at Rochester Institute of Technology and a progressive.  President Obama has appointed Diana Farrell of McKinsey & Co. to his inner circle of economic advisors. As Hira states, “Farrell's firm made millions of dollars consulting with companies, advising them to accelerate their offshoring.  And she publicly made the rounds to convince policymakers and the public that offshoring was good for them and the country.” She is also the co-author of a study entitled Offshoring: Is it a Win-Win Game?, which Hira claims did more to mislead the American public on the impact of offshoring than any other debate.

The inconsistency of the above has to give one pause. On one hand Obama states he does not want to ship jobs overseas and on the other hand he appoints, arguably, one of the most pro-outsourcing executives in this country to a top economic post. Now we throw into the mix an article in Financial 24 entitled Outsourcing Gets Crimped by Recession and its report of the troubles in India and the outsourcing field is wide open. Financial 24 reports on the convergence of several factors that may bust the Indian market for outsourcing. These factors converging at once are:

·         The global recession – no more needs to be said on this one

·         The Mumbai Terror Attacks of November 2008. This caused great concern regarding India’s ability to provide adequate security, especially for US Companies.

·         The financial scandal of India's fourth-largest outsourcing provider, Satyam. There are many questions whether there is enough regulatory oversight of India-based outsourcing providers.

In light of the serious situation facing the Indian outsourcing market, here is a list of the next emerging outsourcing destinations:

1. Cebu City, Philippines
2. Shanghai, China
3. Beijing, China
4. Ho Chi Minh City, Vietnam
5. Krakow, Poland
6. Kolkata, India
7. Cairo, Egypt
8. Sao Paulo, Brazil,
9. Buenos Aires, Argentina
10. Shenzen, China
11. Hanoi, Vietnam
12. Chandigarh, India
13. Curituba, Brazil
14. Prague, Czech Republic
15. Pasig City, Philippines
16. Dalian, China
17. Coimbatore, India
18. Santiago, Chile
19. Colombo, Sri Lanka
20. Johannesburg, South Africa

"20 emerging outsourcing destinations" by Sriram Vadlamani.

 

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The business environment for 2009 looks bleak.  Financing came to a screeching halt in the late summer of 2008 and capital markets are still reticent on extending credit.  What is an enterprise to do?  As Bryan Stolle, partner with Mohr Davidow, points out in his article How to Survive - and Thrive, the key is first to survive by assessing the environment, creating a plan, and executing.  Once the economic recovery begins, your company must have differentiated itself from the other companies in its market-space.   

Stolle presents a list of 10 tips for the tech CEO of today.  As he states, some are obvious.  I will try to summarize his action plan below, but for the full impact I strongly suggest you read his article:

1.       Question every expenditure:  If it does not fit into the “Must Have” category, then it should be cut.  Does the spend positively affect the bottom line?  Examine R&D with an emphasis on return on investment and its ability to differentiate your products from your competitors.

 

2.       Everyone is a salesman:  All employees must focus on acquiring new customers and maintaining the current customer base.  All top executives, CEO included, need to be in the field or on the phones.

 

3.       Mirror your customer’s mantra – cut costs:  Your sales pitch must state how much your solution will “CUT COSTS”.  Your customers won’t be listening to anything else.

 

4.       Increase your marketing efforts:  The more spent in this area will help your customers to focus their spend prioritizing on your application, the sales process is enhanced, and competitors will be forced to compete or leave the market.

 

5.       Refocus your distribution strategy:  The search for new channel partners and resellers is a drain on cash.  Funnel your cash into the proven channels and leave the marginal producers for later.

 

6.       Cut headcount – but do it fairly:  In my career I have seen enough of the “Trim the Fat” executives as it relates to personnel and I know the devastating affects it has on the individual, on his/her family, and on company morale.  Stolle also recognizes the need to maintain and “nurture the esprit de corps - not kill it” and advises to give full consideration to the corporate culture.

 

7.       A good time to hire:  As a counter-balance to point 6 above, this may be the time to upgrade your team.  Top-performers in other companies may be getting a bit nervous with their current position in light of the current economic climate.  If offered the right package, these top performers would be happy to join your team.

 

8.       Reexamine the operation and consider a new approach:  Take this opportunity to rethink how the company works.  Perhaps an outside observer can suggest a new approach and re-energize the operation.

 

9.       We are a global economy: Since the internet and global supply chains and global service providers allow us to sell our products and services anywhere in the world, then take advantage of this fact.  Stolle suggest that you find a market that is healthier than the US and Europe and determine if you can sell at or below our current market costs.  If so, then do so.

 

10.   Reject the urge to merge:  In the current economy, the chances are both companies will fail.  Two struggling companies seldom create one strong enterprise.

Stolle’s concluding remarks are right on point and I couldn’t say them better.  He concludes by saying:

“Whether all, or just some, of the above apply to you, to make it through these “interesting times”, you must a) be very sober and realistic about valuations if you must raise capital, b) treat every dollar as if it’s your last to avoid having to raise more capital, and c) lead, lead, lead!

Lead with a vision of how your company will be a winner despite the tough times; lead with a plan that will deliver on that vision and is credible and inspires trust and confidence; lead with execution from the front (as in constantly in front of customers and employees), hammering the vision, the plan for success, and the results.”

 

 

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Richard Adhikari reports for Internetnews.com on a recent Forrester Research report addressing the strategies of CRM Vendors entitled Social Networks Among Trends in CRM for 2009.  The Forrester report discusses the difficulty in these tough economic times of obtaining funding for new CRM projects.  New customers are harder to come by and so one approach for 2009 will be to create customer loyalty in an effort to avert attrition and thereby at the very least maintain revenue for 2009.  CRM Vendors will direct their efforts on adding value to existing applications.  One way to do this is targeted offerings that will incorporate CRM into existing ERP and SCM systems.  These new solutions will utilize the existing systems to provide enhanced customer facing applications.  Forrester also sees the Salesforce.com model of incorporating Social Networking capabilities into its CRM offerings as yet another approach.

On the flip side of this equation, the enterprises will be looking for specific enhancements in their CRM applications in order to justify future projects.  As discussed in Forrester’s report, Customer Data Management seems to be the biggest area for improvement.  The enterprises will also be exploring SOA and SaaS licensing models as alternative means of obtaining value and keeping costs down.

 

 

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Software vendors can increase their revenues during this prolonged recession.  How do these vendors make lemonade out of this lemon of a global economy?  They must look to their installed customer base.  Mike Smerklo, President & CEO of ServiceSource, has written an OpEd piece for SandHill entitled Delivering Predictable Revenue Streams.  ServiceSource is in the Service Performance Management business which aims to increase their clients’ service revenues by increasing the number of customers on maintenance and increasing the dollars spent on maintenance.

In economic downturns, such as we are now experiencing, customers defer new product purchases.  Although this is not a positive for software sales, it does increase the value that can be placed on enhanced maintenance and support services.  Software companies must continue to invest for the next generation of products, but enhanced maintenance today can drive revenue and provide the reliability that customers need.

Smerklo cites a Gartner study that the potential market for maintenance and support is over $180 billion annually and that only $150 billion is spent on maintenance every year.  It is easy to see that there is another $30 billion in potential maintenance and support not being tapped.  He increases our lexicon from the more familiar term “market share” to a new term he labels “service share”.  This is the total maintenance revenues available from the installed base.  And he lays out for us a complete 4 part service management strategy as follows:

1.     Technology Platform:  The vendor’s CRM must measure transaction data on the maintenance side down to the granular level.

2.     Business intelligence:  The analytical capabilities of the vendor must be able to show what the customers are buying and why some are saying no.

3.     Customer contact:  Must have the ability to help the customer extract the most out of their solutions.  This will enhance the relationship and could pay dividends down the road on renewals and purchases of new product.

4.     Benchmark against the competition:  Need to know your specific service metrics in comparison to the industry overall.

The Service Performance Management alternatives are as follows:

1.     Do Nothing:  All focus on product revenue and market share can come back to bite you especially on renewals.

2.     Build your own service management platform:  This could be costly.

3.     Partner with a Service Management Performance provider:  They have the expertise and the capabilities to manage on a global basis.

 

 

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IDC is a global provider of market intelligence and advisory services to the High-Tech marketplace and assists CIO’s and others to make informed decisions on technology purchases and business strategy. You can learn more about IDC by visiting their homepage. IDC held their annual Direction’s conference this week in San Jose, California and their main topic for discussion was the affect the economic slowdown, real or perceived, will have on this year’s IT budgets.


The conference compared this year’s downturn to the last major downturn faced by the industry in 2001 – 2002 and found significant differences. Where the last major economic mess was mainly a business-led crisis due to the over valuation of many dot.com start-ups exacerbated by the terrorist attacks of 9-11, this new economic down turned is basically due to overzealous consumers saddling themselves with mortgages they couldn't afford and affects one sector, the financial services industry.


The collapse of the housing market spread over several geographical areas should not have a direct impact on global enterprises decisions to proceed with their planned purchases of IT. With this in mind, the growth in IT spending for the US and Western Europe will probably be reigned in to 4% growth, half of the 8% growth in IT budgets for 2007, while the BRIC countries should continue in their IT spending unabated with a 10% to 20% growth rate over last year.


Andy Patrizio reports from the conference in his article Which IT Sectors Will Weather a Financial Storm? He includes in his article the following observation:


The hardware most likely to be affected by a reduction in spending, not surprisingly, is PCs, followed by mobile devices -- smart phones in particular. Storage is least likely to be cut, followed by networking hardware.


Software reductions are also anticipated, but at a much slower rate than hardware. Office and operating systems are most likely to get the chop (bad news for Microsoft), while security and compliance software is least likely to be cut.

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