CIO HANDBOOK 2004

With the domestic industry spend ing Rs 26,952 crore ($5.5 B) in 2002-03, it
grew by 9%. How ever pale this may be, in comparison with the exports of IT
services by India, the demand for technology in the domestic market is buoyant
and waiting to be served. Across all verticals including government and defense,
India is gaining maturity in technology adoption. Vendors are already after the
"bottom-of-the-pyramid" market segment (call it SMB- small and medium
business) and the segment is about to explode.

As in every market, we have some segments like banking, financial services,
telecom, services, and large manufacturing companies leading the curve with
demonstrable maturity in choosing and deploying IT and managing it for
competitive advantage. Through the past several months, we have been interacting
with many CIOs to understand some of the things that work in managing technology
within an enterprise. We have show-cased a few of these cases where the CIO
takes us through the technology story within their enterprises.

Aligning IT with business goals is the oft-quoted objective. Simple as it may
seem, it is difficult to achieve it all the more. In our survey of around 68
senior CIOs of large and medium organizations in the country, we found that many
a CIO is still struggling to do it right and even those who claim to have
brought in business benefits are not able to prove it always.

n  CIOs of nearly 68 medium and large enterprises participated in the Enterprise Technology Directions Survey, aimed at understanding the broad direction of technology spends for 2004, the technology priorities for 2004 and the pressure points that the CIOs face in managing the technology function. n The sample had a representation from almost every segment barring the defense and government. n Companies from all over India participated and the survey was administered face-to- face.

We have brought in some global cases of excellence in managing technology.
Take the case of Cisco Systems Inc and its successful e-business story. Ninety
percent of Cisco’s business is done online. The company has been ale to save
$2.1 bn in 2003 by leveraging the Internet and its technology spend has remained
almost constant for the past three years at around $1 bn. Reason : Cisco has
been able to pin down the right direction and choice of technology. It has been
able to drive standardization of commodity IT components and unwaveringly
execute the projects with business goals in mind. Moreover it institutionalized
the practice of measuring the impact of IT.

In the case of General Motors, one of the largest IT spenders worldwide, the
unification of its fragmented IT fabric has brought in most of the advantages.
GM removed over 3500 information systems while investing $1.7 bn in Internet
applications that connected the company to its supply chain as well as
consumers. A matrixed organization manages IT consistently around the world. The
organization includes CIOs who are responsible for improving operations within
their respective business units. There are also process information officers,
called PIOs, who drive common technologies and standards across business
processes, such as manufacturing, product development, or sales and marketing.
Says Ralph Szygenda, group VP & CIO, General Motors, "This structure
creates an intended tension designed to drive immediate results in each business
unit while operating through cross-company standards that drive consistency and
structural cost reductions."

It is important for the Indian CIO to understand that they are no longer the
custodian of the IT function. This is the root of the disconnect between IT and
business. Veteran CIO, Phillip Windley puts it well: "I have always
believed that the CIO’s job is to support the business and that’s a
strategic function. Unless you’ve got a seat at the table, and are
meeting with the business leaders of the organization, you can’t hope to
understand what the business needs. Business leaders want business
intelligence and business process automation, what we give them is desktops and
networks. That gap is where CIOs fall short."

And delivering good IT is often not about technology- cutting edge or
commodity. It is about operational excellence combined with strategic
management. This is what is borne out of our interactions with some of the
brightest minds in managing enterprise IT.

In a manner of speaking, the career of the Indian CIO is at crossroads- they
can either make it big or be relegated to the management backyard. We are highly
motivated to make the former happen.

Apart from the global wisdom, we have attempted to provide an insight into
what CIOs have planned for the year 2004, their technology priorities, so to say
. Beyond that, we have put together a ring-side view and analysis of some of the
major verticals, forecast on technology trends, insightful interviews with CIOs,
a debate on the CIO being the change-agent in the organization, a round-up on
what some of the enterprises on planning, and a listing of some leading
enterprise products available in the country. It is the voice of the Indian
enterprise and CIOs who manage IT.

Find all this in Enterprise 2004-The CIO Handbook.

Where are CIOs planning to invest

• Nearly 56% of the organizations surveyed, indicated that they would take
  up application integration projects in one form or the other during the
  year. The trend continues in the next year too. These projects may not be
  full-fledged integration projects and are likely to be undertaken in-house,
  as pointed out by nearly 50% of the organizations. Only telecom and some
  BFSI companies would do EAI in an elaborate manner.
• ERP here largely denotes expansion of modules and other enhancements.
  About 38% organizations would expand their ERP in the next two years
• Along with EAI, organizations are also planning web-enabling existing
  applications this year itself. This points towards the trend of using XML
  and other emerging Web-services standards. The trend has been chiefly cited
  by telecom, BFSI, and service organizations. Building new e-business
  applications ground up is not in favor. This points to the increased
  reliance on packaged application software and middleware.
• With nearly 50% organizations indicating data warehousing initiatives for
  the year, increased use of business intelligence tools is expected.
• Surprisingly, despite the presence of 38% manufacturing organizations in
  the sample, supply chain management is still not a priority area. Within
  that, supply chain planning is considered to be a very difficult area. This
  points to the overall lack of maturity of manufacturing sector in the
  country, leaving aside certain pockets of excellence.
• Notably, on the overall, 2004 seems to be the year where a lot of action
  is expected on the applications front.
  

Top Priorities in Internal IT Management

• Organizations still rely on a lot of in-house expertise for application
  development and maintenance. Nearly 50% of the organizations would continue
  to do some in-house development activity. These are expected to be in the
  area of application integration, customization, and in the web enabling of
  applications using Java and .NET, and Oracle technologies
• User training is a high priority area for over 60% of the organizations- a
  direct consequence of new and emerging applications being deployed within
  organizations. User training is also a part of readying the organization for
  enterprise-wide usage of technology. The trend is evident across verticals
  including banking and telecom where business users are trained in
  application areas.
• IT outsourcing is a trend but restricted largely to facilities management,
  infrastructure outsourcing, and outsourcing of very specialized application
  development. Larger organizations have been outsourcing chunks of IT
  activities to third-party companies.
• Internal IT departments would continue to hire and staff people with
  nearly 56% of the organizations looking at hiring new staff.

Priorities in Data Protection

• Even if it is a lip service, Indian organizations have been sensitized to
  the issue of security. An overwhelming 70% of organizations have indicated
  that they would be implementing data security and privacy measures. For one,
  with the increasing amount of virus and denial of service (DoS) attacks and
  reports on hacking, organizations have been ramping up security measures by
  implementing anti-virus, firewalls, and intrusion detection systems. But
  only few organizations have been looking at security in a holistic manner;
  most are securing the organization from the perspective of its dependency on
  networks and the Internet.
• That security is still a matter of having the appropriate software (rather
  than the security policy aspect) is evident from 70% of the organizations
  opting to go in for security software.
• Along with security is the issue of data protection and protection of
  information assets from disaster recovery. Nearly 50% of the organizations
  voted for having disaster recovery measures, primarily BFSI, telecom, and
  service organizations with a sprinkling of manufacturing organizations. DR
  comes in all shapes and sizes and effective DR measures range from having
  strict back-up policies in place, redundant network paths, mirroring of
  applications, data replication, remote site DR centers, and hosted DR sites.

Investment Plans

• Nearly two-thirds of the organizations seem to be averse to shifts in
  architecture and platforms. One of the reasons is that many of the
  organizations surveyed are nearly running in a centralized architecture with
  an ERP and a central transactions database. In light if this, the number of
  organizations opting to shift from distributed architecture may be construed
  to be a significant trend.
• We found lack of clarity amongst the organizations polled in the context
  of thin-client/ server-based computing. The trend that 34% of the
  organizations have indicated this shift may be ignored.
• Even at 20%, the organizations that are considering a shift to open-source
  and Linux can be considered to be significant. For one, these are
  progressive organizations and many of them currently have some deployments
  of Linux. Having learnt from their experience and with the high decibel
  popularization of Linux, these organizations could consider deploying Linux
  in mission-critical areas. Others are looking at using open-source software
  in areas like messaging, web serving, etc.

Infrastructure
Management

• While building IT infrastructure is a very high priority area,
  infrastructure management (through software) does not seem to be a hot area,
  except in banks, BPO, and telecom companies.
• Again, while storage hardware found a favorable take amongst
  organizations, storage software is not considered hot in bulk of the
  organizations except for BFSI and telecom.
• Few organizations reported that they would consider outsourcing
  infrastructure management.
• The concept of automated helpdesk for delivering IT service to users is
  still to catch on. It could also be a function of the size of the
  organizations and the overall infrastructure set-up.

Building IT Infrastructure

• Overall, the organizations surveyed are in the mode of infrastructure
  build-up and expansion. This trend could be true for most organizations in
  India across all segments, something characteristic of where we are on the
  IT maturity curve.
• The uppermost trends are in the area of network expansion and new server
  acquisition reported by 70% and 62% of the organizations respectively
• Even desktops upgrades have been reported by a good number of
  organizations
• With multiplicity of applications, most organizations had multiple servers
  based on functional requirements–web serving, messaging and mail serving,
  applications, and the like. Managing multiple servers is a nightmare.
  Organizations have begun to realize this and have started considering the
  move to consolidate multiple servers. Some organizations are even
  considering moving into a data-center kind of a concept. Nearly 51% of the
  organizations indicated server consolidation for the year. This could happen
  in tandem with new server acquisition and server upgrades- both of which
  have been indicated as strong possibilities by nearly 60% of the
  organizations.
• Close on the heels is a sizeable move towards adding storage capacity by
  way of storage hardware and storage consolidation reported by nearly 45% of
  organizations.

IT and Business

• This is where CIOs get stuck. When it comes to proving the value of IT,
  CIOs find it difficult (see also CIO ‘Pressure Points’, later in this
  analysis). Most organizations surveyed have been in the phase of building
  infrastructure and populating it with business applications. In many cases,
  proving the ROI continues to be a contentious issue. On the other hand,
  there are technologies that help in lowering operational costs and which may
  or may not be tied to a specific business application- for example: IP
  telephony or corporate instant messaging. Nearly 70% of the organizations
  surveyed indicate that they would choose technologies that help in lowering
  costs.
• A direct corollary is the relationship between the business strategy
  organization and the IT organization. While CIOs jockey for more power and
  say in the strategy of the organization, in most organizations IT is
  relegated to be a business support function. More than two-thirds of the
  organizations vow to align IT with business goals. The success of this would
  largely depend on the company culture and structure.

• There is a cautious move towards adopting emerging technologies and
  applications- for one, it is difficult to get fresh budgets and then CIOs
  are yet to find compelling business needs to support the need. Most want to
  perfect the use of existing technologies. However, the understanding of
  these emerging technologies, amongst all CIOs surveyed has been beyond
  expectation with most of them fully aware of the cost implications and the
  organization-readiness required. One frequently response was that they could
  try out pilot projects.
• More receptive were the private sector banks, insurance companies, telecom
  companies and some of the multinational manufacturing companies.
• Wireless networks and sales force automation found the most takers. To be
  specific, supplementing the existing networks with wireless in the former
  case and trying out sales force automation projects using hand-helds in a
  limited manner in metros.
• CIOs don’t seem very enchanted about the enterprise portal concept- for
  one, many believe that it is but a feature in any good application package
  and in any case the applications scenario is not complex as to warrant a
  separate effort in building a portal.

CIO Pressure Points

In a similar vein, there is some extent of disconnect with peers in the
organization and being able to communicate the value of IT to business users.
All this points to the fact that CIOs need to develop some soft skills and
relate to the entire organization and be articulate about the value that IT
brings to the table. Nearly a fifth of the CIOs said that they are mired in
routine operational activities leaving them with little time for strategic
thinking.

Resource Related

An overwhelming 75% of CIOs find themselves resource-starved. This is highest
pressure point for CIOs–the biggest crunch is being able to find and recruit
key staff and skill-sets and being able to retain them. Blame it on the vibrant
IT services industry and the offshore development centers of both Indian and MNC
software companies. Inadequate budget allocation is almost a non-issue. This may
be due to the realization of the top management that IT is inescapable if the
organization has to have a competitive edge.

Behavioral Issues

Interestingly there are some behavioral issues that pose a pressure point for
nearly 55% of CIOs. The key issue amongst this is the difficulty in proving the
value of IT– basically demonstrating the hard and concrete evidence as to how
has IT helped. This could be a direct consequence of the fact that most
organizations in India do not have the practice of having IT metrics in place
and have strategic measurement of IT’s impact as a responsibility of the IT
department. In most cases, CIOs themselves do not speak the business language
and find it difficult to articulate the value of IT.

External Factors

External factors like volatile market conditions and the rapid pace of
technology change also pose as pressure points for the CIOs, who aver that these
factors place a constraint on budgets and proper planning. Changes in prices,
licensing fees, demand-supply variations, and rapid obsolescence of technology
have the combined effect of keeping the CIO and his team on their toes every
working day. Vendors would be happy to note that they have been favorably voted
for by nearly 90% of the CIOs in terms of product and service quality.

Figures denote number of CIOs who responded

All base =68; Source: Dataquest

Easwaradas Satyan in Mumbai With inputs from Mohit Chabbra in New Delhi

Easwaradas Satyan is the Associate Editor covering enterprise computing for
Dataquest.