IT FOCUS - After the millennium party, the hard choices.

With Spring the traditional time for cleaning and reorganising, a number of companies are expected to introduce sweeping changes of their own to their IT systems – arguably as a direct result of the increased awareness given to systems following Y2K. Although the new millennium celebrations may be becoming an ever-blurring memory, the effects of Y2K will be felt for a considerable time. With the bulk of the world’s businesses focussed on IT issues in the run-up to 31 December, many companies were forced to take a look at their systems and introduce change. As well as hunting the elusive millennium bug, these IT reviews gave companies the chance to move faster towards e-commerce and internet initiatives, a trend confirmed by the number of leading software providers which have put these two areas at the sharp end of their strategies. Despite a slow January, experts predict IT spend in general is likely to increase as the year wears on. And it appears that anything e-related will be increasingly embraced as businesses look to lever corporate knowledge and standardise on a global basis. I spoke to four senior figures who have seen the changes at first hand. Martin Butler is chief executive of research consultancy the Butler Group, Rob Wirszycz was marketing director of IT consulting giant EDS and is now chief executive of online IT information resource ITNetwork. Robin Bloor is chief executive of IT consultancy Bloor Research and Simon Gifford is finance director of Tate & Lyle. 1. To what extent were non-Y2K IT projects forced on to the back-burner by Y2K activities? Butler: To total exclusion in many instances. Wirszycz: We didn’t find a large number of projects that would have been done in 1999 postponed; a lot of people were waiting for post-2000 to do their e-commerce-related activities. There is lower risk e-commerce activity now, and there would have been anyway, since I don’t think those projects would have taken place before 2000. Bloor: Clearly, this varied from company to company, but there is no doubt that many companies simply did not deploy any new applications, for reasons of caution, in the final six months of 1999, and this naturally meant that a number of projects were not started. However, I also saw evidence that some companies just steamed ahead with web projects because they concluded that they could not afford to wait. Gifford: Y2K forced us to accelerate a number of initiatives to ensure we met Y2K deadlines, but in some areas we had to invest in some tactical package solutions where legacy applications could not be renovated in time and strategic systems could not be implemented within our Y2K timetable. It is fair to say that some areas – data warehousing, knowledge management and e-commerce initiatives – have started more slowly because of Y2K. 2. Aside from preventing the disruption of systems at the start of 2000, what other benefits did companies accrue from Y2K spending? Butler: A review of their IT assets, and replacement of some old systems. Wirszycz: They know what they’ve got. We have a number of clients right now who are looking to upgrade or replace their infrastructure or hang new applications off their networks, and because they know what they’ve got they can move an awful lot faster. Bloor: Very little in comparison to the cost. However, most companies ended up going through a kind of spring cleaning process on their software inventory. Some had lost source code, and those problems were solved because they had to be. And some companies will also have stored up problems for the future, especially those that took a windowing approach to solving the problem. Gifford: Virtually a complete IT infrastructure refresh and standardisation, bringing PCs, local area network and wide area network components (voice and data) up to date and fully integrating them. In addition, standardisation of business and office applications. 3. In general, and in your experience, will corporate IT budgets grow, shrink or remain constant this year? Why? Butler: Corporate budgets will grow to embrace e-business. Wirszycz: They will grow. It’s been a slow January, a lot of people in the industry would agree with that. But we believe from Q2 onwards, there will be more spend, but it will be different from before the year 2000. It will go on e-related activities rather than infrastructure-related. Much of that spend will also be embedded in business initiatives rather than being discreet ‘IT budget’. Bloor: Nowadays we need to distinguish between the IT budget and the spending on IT, because they are different. Most departments in any organisation are spending on IT, but it does not register as IT budget in many companies, because IT budget is what the IT department spends. The spending on IT will grow as it has been doing for years because IT simply does more and more for a company. For example, the cost of web access can now be added to corporate spending on IT for most companies. IT budgets will, in general, probably grow anyway, because this is the year that companies try to drive a web strategy. Gifford: The business has some discretion in how it will invest in IT this year, but we expect a small increase in IT investment as we look to further exploit information technology-led business improvements and make operational efficiency improvement through closer integration of our global businesses and investing in our e-business opportunities. 4. Spending on e-commerce and the internet in general is widely thought to be a priority for companies this year. Where should (or will) companies best focus their IT budgets for the most benefit? Butler: Most businesses will focus on supply-side issues such as procurement and supply chain, but the greatest benefits will come from demand side spending. Wirszycz: There are three areas: first is getting a web foundation – do you have the infrastructure to build all this stuff? Second, they must look at a strategy which moves all of their applications to be usable through a web browser – they need to integrate everything, including their voice and data. Third, they need to look at what’s going on in their marketplace – who they can link up with, who can they create new business models with. Bloor: A good place to invest will be in out-hosting activity to ISPs and ASPs, but this depends on what useful services are available and that is contextual. Beyond that, getting benefit will mostly involve business decisions on where and when to take advantage of web-based services. Also, there’s the question of ‘what is the company’s web strategy?’. When that is determined, it will drive a good deal of the IT budget. Gifford: Depends on sector, but business-to-business e commerce will be a priority and the simplest and most obvious areas where benefits can be realised quickly are in e-procurement. If you have not already built an e-business-enabled application and technology infrastructure that will be a priority. 5. What are the other (non-Internet) IT spending priorities for 2000? Butler: Outsourcing and CRM. Wirszycz: Application maintenance continues to be a priority; there are some applications you just can’t do without, and to have them operating in these new infrastructures you’ll have to change the way they work. Bloor: It is very difficult to separate internet and non-internet as they are so closely related. For example, there should continue to be spending on intranets and there may be a good deal of investment in voice-over-IP. Is that internet or not? We should begin to stop thinking in these terms. When the telephone was invented we didn’t talk in terms of ‘t-businesses’, so why do we talk of e-businesses now? Having said that, in Europe, if not in the UK, there will be a heavy investment in amending systems for the euro and I guess that is a non-internet thing. Gifford: The trend towards increased globalisation of business and looking for opportunities to leverage corporate knowledge creates the need to build collaborative systems infrastructures and integrate and standardise systems on a global basis. This can only come from having a common language and common definitions of data. Integration can be achieved through use of data warehouse technologies and accessibility and sharing through corporate intranets. 6. Will the IT industry offer any significant breakthroughs for corporate users this year? If so, what? Butler: Mobile commerce technologies, and integration of these with core systems. Wirszycz: Mobile commerce is going to boom. The concept of having the internet literally everywhere and having a personal device like a mobile phone through which to access corporate data (and having such a system fully secure) will be the major innovation in Q4 this year. Bloor: Well yes, of course it will. It does this every year. For example, this year we shall see Windows 2000, which I expect to be a boon for committed users of Microsoft’s Windows NT. We shall see the proliferation of fast in-memory databases which will offer faster data query and data mining. We will see internet devices around which many companies may be able to build new channel strategies. Voice technology will move forward. There are too many things to list. One could almost write a book. Gifford: Greater interconnectivity and standardisation and browser-based computing have improved reliability and accessibility of corporate information. The breakthrough may be improved user IT awareness and competence in exploiting information. Greater mobility through increased take-up of wireless communications and better integration between different devices, PCs, telephone and cell phones and web/WAP phones will continue. 7. What one piece of advice would you give to finance directors as they consider their IT spending through 2000 and beyond? Butler: Enhance your spending justification models. Simple ROI calculations won’t provide a foundation for the new breed of demand side e-business systems to get off the ground. Wirszycz: Don’t try to do it all yourself. Services companies have the capabilities and the bandwidth to do a lot of this – although I would say that! But anyone who tries to do all of this new stuff on their own could well be headed for failure. Bloor: I’d ask them to think in three categories: a) Cost saving through IT; b) Business benefits through IT; c) Infrastructure investment. And please do not ignore the third as this only stores up problems for the future. Of course, some things will span these categories. Gifford: In the net age, the pace of change is ever increasing. There is no longer the concept of stability in IT terms. Continued investment in IT to keep it current (in order to meet the requirements of trading partners) and refreshing IT skills are essential. So invest wisely, but do not underinvest. Richard Young is Deputy Editor of Financial Director magazine www.financialdirector.co.uk. ?: