IT Spending: Steady in the Clouds

Let’s get the most important stuff out of the way first. 

Tiger tees off in the first round of this year’s Masters at 10:42, grouped with Australia’s Marc Leishman and England’s Tommy Fleetwood.

You can feel the Augusta Tiger buzz all over the world (okay, the golf world, anyway).

But enough golf, let’s talk IT spending.

Today’s Wall Street Journal “Morning Download” email had this headline: “IT Spending Outlook is Steady Despite Volatile Days in Tech.”

Volatile? Amazon has lost more than $50 billion of market value in the last week, Facebook somewhere north of that.

But despite that, the talk of trade tariffs and regulation, the Journal reports that “the outlook for spending on information technology appears steady.”

The estimate was based on a survey of 75 U.S. and 25 European CIOs at companies in a range of industries conducted by Morgan Stanley (and most of the firms with more than $1 billion in annual revenue.)

What’s driving the increase? First, the cloud.

The report “found that IT budgets at these firms are set to increase 5.4%, slightly up from 5.2% last year, and that “budget gains are being driven by ongoing growth in cloud computing.” It suggested that 25% of total application workloads will be running in the cloud by the end of the year (up from 20% today).

Cloud was one priority spending area, and security software was cited as another.

Fifty-nine percent indicated they “do not expect changes in tax rates, appreciated depreciation, and cash repatriation” to impact their 2018 IT spending plans, and 29% indicated the tax changes would likely put upward pressure on spending.

A Gartner forecast from earlier this year had projected estimates of IT spend to reach $3.7 trillion in 2018, a YOY increase of 4.5%.

Millennial IT Buyers

Snapshots from today’s Wall Street Journal article about milllennial IT buyer preferences and characteristics:

• At the end of 2016, the number of millennials in the U.S. workforce overtook Generation X workers, by a margin of 58.1 million to 52.9 million
• At the executive level, CIOs make up the youngest group in the C-suite with an average age of 51
• Younger IT buyers are more likely to shop for new products or services online, via search engines and social media sites, compared to their older counterparts (who prefer to respond directly to tech marketers, especially when contacted by phone or email.
• “Millennials are more comfortable with a broader variety of sources, while older buyers are more selective, but are more comfortable picking up a phone.”
• Younger buyers say they responded to sales pitches that included detailed pricing information, recognizable brands and a personalized message.

You can read the full story here.

Cloudy With A Chance Of Taxes

The Wall Street Journal’s “CIO Journal” reported on a recent CompTIA survey about the growing concerns over tax, trade and other federal policies by U.S. IT firms.

On its 100 point IT Industry Business Confidence Index, CompTia’s score came in at 64.2, down from the first quarter but up from the same time period a year ago.

CompTIA’s press release on the new index numbers was more bull than bear:

“For the 14th consecutive quarter the aggregate rating came in above the 60-point threshold,” said Tim Herbert, senior vice president, research and market intelligence, for CompTIA. “The confidence level of industry executives reflects the continued strength of the IT sector, as well as a steadily improving economy.”
– via www.comptia.org

Herbert also noted that “A strong majority of executives — 83 percent — said their companies are on target or ahead of revenue goals for the year.”

Most of the headwinds seemed to center around uncertainty about tax and trade policy in the U.S.

Six Keys To Effective Reputational And IT Risk Management

In September of last year, I blogged about the IBM 2012 Global Reputational Risk and IT Study, which I explained was an “investigation of how organizations around the world are managing their reputations in today’s digital era, where IT is an integral part of their operations and where IT failures can result in reputational damage.”

I also wrote “corporate reputations are especially difficult to manage in an era when anyone with a smartphone and Internet connection can file their complaint with a single touch.”

That continues to be the case, but what’s new is that IBM has recently issued another report on further implications of this study and its findings, and more importantly, what organizations can do to get on offense when it comes to better managing their corporate reputation.

The Connection Between Reputational Risk And IT

When the corporate world first began paying attention to the concept of reputational risk in 2005, organizations’ focus tended to be on business issues like compliance and financial misdoings.

Today, the focus has shifted to include the reputational impact of IT risks. Virtually every company is now reliant on technology for its critical business processes and interactions. While it may take 10 minutes or 10 hours to recover from an IT failure, the reputational impact can be felt for months or even years.

Reputational damage caused by IT failures such as data breaches, systems failures and data loss now has a price tag. According to analyses performed by the Ponemon Institute, the economic value of a company’s reputation declines an average of 21 percent as a result of an IT breach of customer data — or the equivalent of an average of US $332 million.

The question now is not whether IT risks affect your corporate reputation, but what you can do to effectively prevent and mitigate these risks.

Six Keys To Effective Reputational And IT Risk Management

An analysis of responses to the IBM study revealed distinct correlations between the initiatives that organizations are undertaking to protect their reputations from the ramifications of IT failures and the overall effectiveness of their reputational and IT risk management efforts.

Based on this analysis, and the pattern it revealed among organizations that are most confident in their ability to prevent and mitigate IT-related reputational risk, there are six key initiatives that IBM recommends as part of every company’s efforts:

1. Put someone in charge. Ultimate responsibility for reputational risk, including IT-related items, should rest with one person.
2. Make the compliance and reputation connection. Measuring reputational and IT risk management strategies against compliance requirements is essential.
3. Reevaluate the impact of social media. In addition to recognizing its potential for negative reputational impact, social media should be leveraged for its positive attributes.
4. Keep an eye on your supply chain. Organizations must require and verify adherence of third-party suppliers to corporate standards.
5. Avoid complacency. Organizations should continually evaluate reputational and IT risk management against strategy to find and eliminate potential gaps.
6. Fund remediation; invest in prevention. For optimal reputational risk mitigation, companies need to fund critical IT systems as part of their core business

How IBM Can Help

When planned and implemented effectively, your organization’s reputational and IT risk strategy can become a vital competitive advantage. When you protect against and mitigate reputational risks successfully, you can enhance brand value in the eyes of customers, partners and analysts. Further, your organization can better attract new customers, retain existing customers and generate greater revenue.

IBM can help you protect your reputation with a robust portfolio of IT security, business continuity and resiliency, and technical support solutions. You can start with an IT security risk assessment, or penetration testing performed by IBM experts.

For business continuity and resiliency, you can begin with a Continuous Operations Risk Evaluation (CORE) Workshop and move on to cloud-based resiliency services. Our technical support solutions range from basic software support to custom technical support.

What makes IBM solutions work is global reach with a local touch. This includes:

• Over 160 business resiliency centers in 70 countries; more than 50 years of experience
• More than 9,000 disaster recovery clients, with IBM providing 100 percent recovery for clients who have declared a disaster
• A global network of 33 security operations, research and solution development centers; 133 monitored countries
• 15,000 researchers, developers and subject matter experts working security initiatives worldwide.

To learn more about the IBM Global Reputational Risk and IT Study go here.

IBM ImpactTV 2012 Instant Replay: IBM’s Steve Mills On Big Data Analytics, PureSystems, And The Continued Importance Of Transaction Processing

At last week’s IBM Impact 2012 event at the Venetian in Las Vegas, my collaborator and fellow blogger Scott Laningham and I spent much of our week interviewing thought leaders from IBM, our Business Partners, our clients, and even our keynoters, and to help spread the word, we’ll be incorporating some of those interviews in our respective blogs over the next days and weeks.

First up, the big man himself, IBM senior vice president and group executive, Software and Systems, Steve Mills.

If you’ve been in or around the software or IT industry for any length of time, it’s very likely you’ve heard from Steve.  And, as you well know, Steve always delivers — to customers, and to audiences.

This time around, Steve reminded us about the importance of transaction processing, explained the economic drivers that led to the development of IBM’s new PureSystems line of technology, and debriefed us on two recent IBM Software acquisitions in the big data analytics realm.

Live At Impact 2011: Crossing The Consumer IT Chasm

Impact is having its intended Impact.  And then some.

I don’t know about the rest of you who may have attended, but that was some Impact networking party here at the Venetian last night.  And how about that band??

I just hope they burned the videotape…you know, the ones they were taking of me dancing.

But the dawn soon came, and now we’re back for more from Day 3 at Impact. Katie Linendoll kicked things off today with a Kinetic-like audience participation video game.

IBM VP of WebSphere Product Management and Development Support, Beth Smith, then followed Katie with some opening remarks and a recapping of the past couple of days.

And then the chasm opened, and out walked Geoffrey Moore, business innovation thought leader and author, and also chairman of TCG advisers.

The title of his talk? “The Future of Enterprise IT, 2010-2020: From Systems of Record to Systems of Engagement.”

Sounds complicated, right? But it was quite simple. How can enterprises catch up with consumerized IT to develop “systems of engagement” for the enterprise.

His pitch posed a key question that should be considered by enterprises everywhere: How can it be I am so powerful as a consumer and so lame as an employee?”

There’s a big disconnect there.  Though systems of record (think traditional enterprise IT systems) are largely complete, we’re seeing a redefinition of IT for consumers. Moore explained we’re basically using it to digitize human culture.

Access, with low barriers to entry and exit; ubiquitous broadband; and mobile technologies combined to open the world to globalization and outsourcing.  This, in turn, opened the door to consumerized IT, but also put back office pressure on large organizations to move into a Darwinian cycle, where commoditization requires differentiation, which in turn requires specialization, which requires outsourcing…you can see the cycle.

It impacts both B2B and B2C, and has also started to upend business structures.  The old, hierarchically organized, integrated enterprise is quickly being challenged by business networks of specialized enterprises.

These new networks require more demand for communication, collaboration, coordination, and the challenge to IT is to enable us all to engage with peers globally to solve problems.  But the answers aren’t in systems of record: They’re often in peoples’ heads!

So, Moore believes, we need to invest in IT for the middle tiers of organizations — not front line workers engaged in transactional workflows, and not top execs engaged in strategic issues.

Rather, we need them for “in the moment” empowerment through systems of engagement, where those workers have broad and easy access to systems of records on demand.

Moore suggests we also need B2C systems of experience, where we have core online experiences that are compelling and utilitarian (amen!), but which will be increasingly driven to facilitate work in real time.

The answers are out there, in all those computers and databases, but they are tiny needles in massive haystacks.  There’s no time left for people, or disk drives, to be in the loop.

We must move into the era of Big Data, where those systems can help we humans find the answers or provide those value-added services that humans can provide, and fast (Think Watson, but in more of a call-center like environment, where Watson’s helping people find the answers for the human).

Systems of record create efficiency, claimed Moore, and it’s impossible to do global commerce without them.  But, his thesis suggests, they won’t be enough to meet the demands of a consumerized IT culture.

It will be the systems of engagement that create effectiveness, that will address the complexities of global business relationships, and to help create those compelling online experiences.

Every strategy, Moore concluded, is made or broken during a handful of moments of engagement?

Which ones would have the most impact for your organization, and more importantly, how quickly can you put them in place?

Office In The Sun

Happy New Year!

That seems to be especially the case for Facebook, which according to Dealbook, has raised $500M in additional funding from Goldman Sachs and Russian investor Digital Sky Technologies, a sum which would now value Facebook at $50 billion.

Of course, if it’s true that Facebook is about to move into Sun Microsystems’ old 150,000 square foot office space in Palo Alto, Zuckerberg’s going to need as much new scratch as he can get to remodel the place and bring back that new IPO smell once so prevalent in Silicon Valley, but which has been eroded these past eight years with the taxing shadow of Sarbanes-Oxley.

What Zuckerberg won’t need is any overhauling of the privacy mantra still haunting the hallways of the old Sun.

Remember, it was former Sun CEO Scott McNealy who informed us “You have zero privacy. Get over it.”

It seems, perhaps, he was right.

And prescient, considering he said that way back in the Jurassic age of the Dot Com boom.  I wonder if his soothsaying also envisioned a 26 year-old kid taking over his campus someday??

Nahh, probably not.

While the Facebookers have been busy raising their valuation, Bloomberg is reporting that tech takeovers could pick up bigtime this year as firms like Intel, HP, and yes, even Big Blue, set off in a race to “harness surging demand for cloud computing and security services.”

That same said story has Gartner estimating global IT spend this year at around $3.4 trillion, a 3.5 increase from last year.

Me, I’m just hoping to catch a glimpse of some of the cool stuff being released at the Consumer Electronics Show this week.

Though my New Year’s resolution is still in the process of being resolved, one thing I did promise this year was not to go out and buy every new new thing the first week it’s available.

That, instead, I would demonstrate some resolve…and wait at least until the second week.

Students To IBM: Think Local, Act Global

On the topic of globalization…last week, IBM released results of a first-of-a-kind survey that I’ve been wanting to blog about and share (but am just now getting the bandwidth to get around to).

The survey was part of the IBM 2010 Global CEO Study, but this particular component I want to tell you about was getting into the heads of university students around the globe. 

Think about some of the key current topics: BP oil spill, increased focus and investment in green energy, challenges of a global workforce, physical infrastructure challenges in a time of increased budget deficits, and so on.

Then think about the university students’ reactions and results from the study: They are extremely concerned with issues around globalization and sustainability.

However, only four out of 10 believe that their education had prepared them to address these issues.

Ouch.

Creativity Is Key

It also revealed that both students and CEOs believe that creativity is the most important emerging competency of future leaders.  It also revealed clear confidence about the ability of information technologies to address looming issues in business or society.

I’m certainly seeing that here while in Bangalore, the IT hub of India. 

The study also revealed a decidedly optimistic new ethos, one based on an integrated view of globalization, sustainability, and belief in technology as a path towards solutions for both emerging and existing problems.

Almost 50 percent of students indicated that organizations should optimize their operations by globalizing, rather than localizing, to meet their strategic objectives.

Generation Gap, Data Driven

However, they also described a gap in this generation’s training to cope with issues that will arise in an increasingly interconnected and complex world – which is where their strong belief in IT as a gap bridger came into play.

Students surveyed indicated that they will lean more heavily on data analysis — over gut instinct or existing "best practices" — to reach their strategic and operational goals as business leaders in their own right.

And as fact-based decisions begin to prevail, they may need to pioneer an entirely new management style — one that continually enriches personal experience and education with new sources of insight based on a new ability deal with the explosion of real-time information. 

The study also revealed broad-based confidence that increased access to information, analysis, and the resulting insight can reduce uncertainty about the future.

Clearly, the students’ experience regarding globalization is different. 

Growing up more connected globally, students see the shocks and threats, but are more prone to view globalization as an opportunity to solve increasingly global problems.

They are strongly committed to a global view of shared responsibility for both environmental issues and societal prosperity.

Students, for the most part, shared their views, and even agreed on very specific courses of action: embodying creative leadership, reinventing customer relationships and building more dexterous operating models.

Nevertheless, for all the areas of agreement between students and CEOs, twice as many students selected globalization and environmental issues as one of the top three factors to impact organizations and expected major consequences to business and society from a scarcity of resources.

Bold positions like these came about because students clearly saw that globalization provides an opportunity for organizations to create new value.

Compared to all other regions, the views of students and CEOs on sustainability diverged most sharply in North America.

Students there were almost three times as likely as CEOs to expect scarcity of natural resources to have a significant impact. They were more than twice as likely to select environmental issues as a top external force.

And 60 percent more students than CEOs in this region anticipated that customer expectations for social responsibility will increase significantly. 

The Digital Deluge

Given that today’s students grew up in a digital age, intuitively understanding that economies, societies, governments and organizations are made up of interconnecting networks, it may not be surprising that seven in 10 students experienced the new economic environment as significantly more complex today, compared to six in 10 CEOs. 

But they saw far less volatility and uncertainty, in part because they were confident that access to more information could be put to better use, analyzed for patterns and predictive insights to solve the hardest problems in business or society.

Students who saw significantly more complexity, or interconnectedness in the environment, were 50 percent more likely to expect significant impact from the information explosion and 22 percent more likely to believe that a focus on analyzing information for insight would be key to organizations’ success in the future.

Views about the impact of the information explosion were fairly uniform across regions, except in China where students were 67 percent more likely to see a large impact than CEOs in China. Students in China were also far more likely to approach decision-making analytically, relying on facts more than instinct, or even experience.

Global Thinking, Local Views

Students’ attitudes toward globalization were reflected in their expectations of leadership as well.

Like CEOs, students selected creativity as the top emerging leadership quality for the successful enterprise of the future. But among the nine leadership traits CEOs and students were asked to select, students placed a higher emphasis on only two qualities -– global thinking and a focus on sustainability.

In China, 76 percent of students value global thinking as a top leadership quality, more than students anywhere else. Yet, only 38 percent of students in China believe their education has prepared them for global citizenship, which is lower than students in any other region.

Only 17 percent of students in Japan, less than any other region, believe their education has prepared them well to benefit from the growth of emerging markets.

Understanding these and other sharp differences emerging by geography is increasingly important as economies and societies become more closely linked.

Students will confront these differences as they increasingly become the future leaders of business and organizations.

It’s a set of results both heartening and yet eye-opening. 

If you’d like to read the full results and learn more, visit the IBM Future Leaders site.

IBM Global CIO Study: Analyze This

IBM just released its new global study of more than 2,500 Chief Information Officers (CIOs).

This year’s headline: Leveraging analytics to gain competitive advantage and improve business decision-making is now the top priority for CIOs.

More than four out of five (83 percent) survey respondents identified business intelligence and analytics — the ability to see patterns in vast amounts of data and extract actionable insights — as the way they will enhance their organizations’ competitiveness.

The Global CIO Study 2009 is the largest face-to-face survey of CIOs ever conducted.

This year’s study, titled “The New Voice of the CIO,” represents the insights and visions of CIOs from 78 countries, 19 industries, and organizations of every size, and it reinforces the increasingly strategic role that CIOs are playing as visionary leaders and drives of innovation and financial growth.

With an increased focus on data analytics, the survey also revealed that data reliability and security have emerged as increasingly urgent concerns, with 71 percent of CIOs planning to make additional investments in risk management and compliance.

Other key findings of the survey:

• CIOs are continuing on the path to dramatically lower energy costs, with 78 percent undergoing or planning virtualization projects
• 76 percent of CIOs anticipate building a strongly centralized infrastructure in the next five years.
• Even as they build these standardized low-cost infrastructures, CIOs are able to focus 55 percent of their time on activities that drive innovation and growth, whereas traditional IT tasks like infrastructure and operations management now consume only 45 percent of their time

Said IBM CIO Pat Toole of the study results, “In this challenging economy, CIOs understand that analytics can be key to new growth markets, whether it’s new ways to manage a utility grid or smarter healthcare systems.  Managing and leveraging new intelligence through analytics is something that today’s CIO is pursuing to gain competitive advantage in these new markets.”

Published by the IBM Institute for Business Value, this year’s CIO Study included more than 2,500 face-to-face interviews, conducted over four months from January to April 2009. In addition to the detailed personal feedback, IBM also incorporated financial metrics and detailed statistical analysis into the findings.

The report also highlights a number of recommendations from strategic business actions and use of key technologies that IBM has identified that CIOs can implement, based on CIO feedback from the study.

The full 2009 CIO Study and interviews about the study are available at www.ibm.com/ciostudy.

Studying the Life Sciences Supply Chain

IBM has been conducting a number of studies across numerous industries in order to better understand the lay of the land for our smarter planet initiative.

Most recently, we examined the pharmaceutical industry, where we found (and with little surprise) that reducing the risk of countereit drugs and contaminated medications amidst the complexity of global manufacturing are among the top concerns of the pharma and life sciences industries.

The study surveyed executives at pharmaceutical, biotechnology, medical device and consumer health care industry companies who are responsible for planning, logistics, procurement and coordination throughout the life of a drug or medical device.

Some of the other key findings:

• More than 50 percent of executives polled say their companies fail to respond quickly enough to pandemics and other emergencies because of lapses in their supply chain.
• 64 percent reported rising customer demands such as requests for designer drugs or specialized packaging as a major challenge
• Monitoring risk to prevent counterfeiting, drug and device recalls, or even the loss of intellectual property, is a priority for 75 percent of executives, as margins become slimmer and supply chain complexity rises. Three-quarters have risk and performance initiatives such as surveillance programs, anti-tamper devices and specialized labeling, but with mixed results.
• 46 percent consider vendor-managed inventory for their customers extremely effective but only 4 percent use it to ensure they are precisely meeting customer demands for products
• 65 percent collaborate with suppliers on demand planning but only 31 percent do so with customers, often resulting in an overstock of supplies or missed sales targets

The study revealed that companies must work to improve their ability to keep wholesalers, hospitals and pharmacies stocked with the products they need to meet patient demand.

Tracking every step of how drugs are manufactured and distributed are key priorities for more than 70 percent of companies.

And while the industry is far ahead of most others when it comes to supply chain planning with suppliers, the study indicates the industry falls far behind on collaborating with customers on demand planning, forecasting and replenishment. These are all critical steps to rapidly responding with new vaccines in the event of pandemics, and to ensure that demand does not outstrip supply.

Compared to 18 other key industries, the life sciences business is one of the most highly globalized, particularly in the area of Research and Development. From a supply chain perspective, the industry is not as advanced.

In general, global sourcing brings with it challenges including daunting capacity, quality, lead times and delivery issues. For the life sciences industry, seventy-six percent of respondents suffer quality issues linked to global sourcing while nearly fifty percent reported increased sales from their globalization efforts due to the growing population of consumers in rapidly developing markets.

More pharmaceutical companies are selling drugs, devices, therapies and services supplied by different partners. They are also serving smaller patient segments, rather than relying on major new drug discoveries that drive revenue over many years.

The IBM study underscores the fact that drug manufacturer supply chains need to be more interconnected and intelligent, equipped with sensors and smart devices that share data so they can rapidly change their business models to address new market opportunities.

Counterfeiting is one of the biggest risks facing the pharmaceutical industry today. According to the World Health Organization, approximately 10 percent of the worldwide drug supply is counterfeit.

To combat such risks, sophisticated simulations and data models help companies calculate risk, and building intelligence into products and packaging such as barcodes, RFID tags and other smart devices, supply chain executives can prevent theft.

This type of new intelligence along with e-pedigree and track-and-trace capabilities also enables the entire supply chain to respond quickly in the event of a recall.

Using smarter, more intelligent supply chain systems that connect suppliers, manufacturers, distribution and customers can more effectively allocate inventory around the world, making real-time adjustments in production and distribution and avoiding costly stockpiles.

And with the help of sensors and other smart devices to communicate and share information, new efficiencies can be attained.

By way of example, smart pallets of flu medication can sense what and how much medication they are carrying, monitor proper levels of refrigeration and storage, and automatically send a signal when the pallet needs to be replenished.

A smarter supply chain helps drug companies capitalize on revenue opportunities in emerging markets while more advanced customer insight allows firms to tailor their products and create new drugs, devices and even diagnostic tools to expand their business.

The study — “The Smarter Supply Chain of the Future: Life Sciences Edition” — was developed by IBM Global Business Services’ Supply Chain Management Practice, in conjunction with the IBM Institute for Business Value, which develops fact-based strategic insights for senior business executives.

IBM will host a webinar featuring AMR Research — “Smarter Medicine: The Smarter Supply Chain of the Future” — on September 10 that will provide insight about how Smarter Supply Chain Management can drive innovation into the health care and life sciences industries.