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Cost reduction tops list of CIO priorities

What will CIOs be working to address this year? According to a few recent surveys, cost reduction heads the list. Here's a closer look.


What tops your agenda for 2003? Security? CRM? If you're like most CIOs surveyed by several large IT analyst firms in recent months, the answer is cost reduction.

After conducting interviews with 15 CIOs, Ovum, a UK-based IT analyst firm, found that the most important item on CIOs’ agendas was cost reduction. In a recent Ovum Comments column, Ovum analyst Julian Hewett, who is compiling an analysis of the research, said that two CIOs in the survey, who each had $1.5 billion budgets, were cutting more than 10 percent each.

Hewett’s column also touches the CIOs’ views on rationalization. The research suggested that in many companies, the pendulum is again swinging away from decentralized IT to centralized IT. Hewett suggests that CIOs found themselves with an "IT soup" of varying architectures, infrastructures, applications, business processes, and suppliers and that "This mess is now being sorted out as a priority."

Another of Ovum’s findings is a trend toward reducing application customization. The consultancy’s survey found that companies are now "much more likely to change their business processes to fit a packaged solution." (This does not bode well for the large IT consulting firms whose lifeblood is customizing packaged software offerings from the likes of SAP and Siebel.)

Speaking of SAP and other large application suppliers, the Ovum survey found that there is a “flight to blue-chip suppliers.” Ovum expressed surprise at the number of firms that mentioned that they plan to standardize on SAP for their applications.

And what of the application development and rollouts planned for 2003? Ovum found that the key areas being worked on were "CRM, portals (both internal and external), supply chain management, and data warehousing/business intelligence." Of particular concern to the long-term health of the IT industry, Ovum found "no indication as to what comes next. There really are no signs whatsoever of the next wave of new projects."

Read more of Ovum's views on CIO agendas.

Similar views from CIO Insights
CIO Insights also shed some light on CIOs’ priorities for 2003 and some of the budgetary pressures facing CIOs. According to CIO Insights, almost 50 percent of the CIOs it surveyed from large companies reported "reduced operating costs" as the "primary motivator of their IT projects in 2003." The large-company CIOs also reported a .5 percent decline in budgeted spending in 2003; small companies expect to increase spending by 5 percent.

How are the CIOs in large companies going to deal with a reduction in their spending? The areas that they report will be hardest hit are:
  • Infrastructure
  • Emerging technologies
  • Collaboration
  • Distance learning
  • Marketing automation

In this tough market, it shouldn't be a surprise that CIOs are spending their budgets on projects that show a fast and measurable ROI. CIO Insights found that CEOs, feeling they were burned during the big-spending days of the dot-com boom, are "asking CIOs to generate more benefits from previous investments and focus on projects that can produce an immediate payback—preferably through cost reduction." Information security and maintaining "mission-critical systems" rounded out the list of top priorities.

Read more of CIO Insight's views on CIO agendas.

Trends from Giga Information Group
Giga Information Group also provided a list of 10 key trends that it believes CIOs should consider as they set their agendas for 2003:
  • Do not expect a dramatic economic recovery in 2003.
  • Technology purchasers have become economic fundamentalists.
  • The work force will become increasingly mobile.
  • There will be a demand for improved security.
  • Expect a reduction in demand and associated cost for IT staff but continued high demand in key skill areas.
  • Expect more "drama" from leading vendors: mergers, acquisitions, and maybe a failure or two.
  • Look beyond transactions to the "so what" and "why" of transactions.
  • Platform and integration strategies will be key.
  • There will be an increased focus on user self-service.
  • As financial difficulties continue, focus on finances.

Read more of Giga Information Group's views on trends for CIOs.

Insight from META Group
One final look at the top issues facing CIOs comes from META Group, which recently provided an excellent audio briefing that summarized the results of its survey of more than 700 CIOs. Although there were slight variations by geography, the top issues globally were:
  1. Business IT alignment
  2. Value management
  3. Leadership
  4. Operations excellence
  5. Human capital management
  6. Process management

Some of the other top contenders by geography were CRM (U.S.), adaptive infrastructure (UK), and legacy systems upgrades (Australia).

Listen to the METAView Audio Briefing.

Analyst view
What does all this mean for CIOs in 2003? Pending any unexpected upturn in the economy, expect to continue to focus on cost reduction. If you've already made the big cuts, look for ways to work smarter. And if your CEO is not already pounding on you to wring more benefits from your existing IT investments, start looking for ways to do more with what you've already purchased.

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