Staying alive

By Jack Loo | Thursday, January 21 2010

Things might not look very upbeat for 2010, but there are emerging technologies that can help.

The past year has been one where CIOs have had to dig deep to keep things running in the middle of a global recession. Many had to deal with reduced budgets. In fact, the only tougher time for budgets was the dotcom crash during the early 2000s, estimates Martin Gilliland, vice president for IT research Asia Pacific, Frost & Sullivan.

And, according to analyst firm Gartner, worldwide IT spending is expected to have declined by a further six per cent this year. The firm said IT spending could total US$3.2 trillion in 2009, a six per cent fall against the US$3.4 trillion it saw in 2008.

It was a sobering start to 2009 for many Asia Pacific CIOs. “A lot of them were looking at just keeping their jobs, that’s all,” recalls Dr Patrick Chan, chief advisor, emerging technologies Asia Pacific, IDC.

Meanwhile, James Loo, CIO for logistics company YCH describes the year for CIOs as “a year of extremes where everyone had to be ready to react to the ups and downs anytime.”

Christian A. Fischer, CIO and vice president IT, of rail system specialist Knorr-Bremse Asia Pacific (Holding) says 2009 has been his most difficult and challenging year.

Meeting targets
Fischer faced pressure from the management and shareholders to meet global cost-cutting and savings targets and to further support growth with reduced budgets.

Simultaneously, the Asia Pacific region had to participate in a global IT restructuring programme leading to some of the biggest changes in IT organisation in the last decade.

This led to the formation of a shared services IT model for Knorr-Bremse’s operations in the region. And there was also a drive to achieve ISO certification for all the locations, IT processes and staff in the region.

The economic pressures of 2009 have made things worse. Conflicting priorities frequently put the CIO in the difficult position of deciding which stakeholder to please or disappoint; which priority to address or put off, says Subrato Basu, vice president Asia Pacific Japan, The Research Board. “In times of uncertainty, the entire enterprise can lose confidence in its ability to make the best decisions. Hence, not taking difficult decisions can place the CIO at risk of damaging enterprise performance.”

John Brand, research director, Hydrasight, observes that CIOs often spend too much time trying to provide information to the business. “Rather than talking about how good a job IT is doing, or how a new technology strategy will deliver long-term benefits, CIOs should concentrate on providing systems and capabilities that enable business sponsors the ability to source and analyse their own information, and to convince themselves that IT is providing valuable and irreplaceable services. Empowering business users is the most powerful strategy for influencing them,” he says.

With the pressing need to cut costs, CIOs have also been resorting to trimming the IT workforce. IDC’s Dr Chan warns that could be the biggest mistake CIOs can make. “It is cutting down on business and not steering towards the IT infrastructure optimisation as a cost shaver.”

Doing the best
However, CIOs have managed to brave the adversity and may have come out stronger as the year progresses.
Things have been getting better for the IT department. Dr Chan observes that many CIOs have garnered support from the management. “Some of these budgets allocated are for multi-year roll-outs,” he says. Indeed, a survey conducted by Gartner indicated that CIOs in Asia expect their budgets to actually grow by 5.32 per cent in 2009.
Many CIOs have successfully managed to reduce the cost of their IT operations by several per cent while also increasing the resilience, reliability, flexibility and agility of their technology infrastructure, notes Hydrasight’s Brand. “This has been achieved using a variety of methods; virtualisation, vendor management and sourcing strategies have been the most common themes,” he adds.

New ways
Basu acknowledges many CIOs looked at harnessing IT in new ways to reduce costs. Some have used business intelligence to raise visibility and enhance workforce effectiveness. There are cases where modernising infrastructure offers lower costs, uses less energy, performs better and adds capacity, all to ensure that enterprises stay competitive.

“Meeting the challenges of 2009 and leading their organisation and enterprise through decisions that have no simple answers has been something the CIOs have done very well,” says Basu.

Another reason why CIOs were able to handle the downturn was that they had faced similar situations before during the dotcom crash, suggests Gilliland. “This time, most of the IT departments had the experience from five to 10 years ago and were therefore able to manage it a little easier,” he adds.

For YCH’s Loo, he coped with 2009 by operating with three business plans; one for the worst case scenario with further economic fallout, one for the best-case situation that captures any opportunities in a business upturn and one that serves as the “as-it-is” plan.

“The ability to keep scanning the environment, aligning our execution to match business volume and to be agile whenever opportunities are presented to us is very important for the group to move even further ahead of competitors,” says Loo.

Then there are some CIOs who took the path of cutting back on their spending and reducing services, but staying in touch with the needs of the business. “This has worked well for the last 18 months but if the tough times last much longer, then ageing IT infrastructure will start to show its age,” notes Gilliland.

Effective IT
The top management priorities for CIOs this year are primarily driven by the economic downturn.

The main focus, according to The Research Board’s Basu, has been the drive to raise the effectiveness of IT. CIOs have tried to improve IT management by focusing on enterprise alignment, IT governance and business relationship management. They have looked at improving IT performance by reducing costs, improving IT processes and quality of service.

CIOs also looked at increasing the variability of IT costs by moving to a services focus, improving management and adding flexibility to workforce models. The projects from all five winners of CIO Asia magazine’s CIO Awards 2009 also centred on improving IT efficiency. Coca-Cola Bottling Indonesia came up with a sales automation application able to run the company’s sales functions on mobile phones.

Singapore-based ComfortDelgro’s communications system is built on a J2EE enterprise architecture that communicates between wireless terminals in the organisation’s 15,000 taxis and the backend system using a GPRS-GSM network. Created to ensure a hassle-free experience for visitors to Singapore, government agency Immigration & Checkpoints Authority’s e-Visitor programme allows foreigners to apply online for immigration facilities including extensions of stay and
visa applications.

Through the adoption of geographic information system (GIS) technologies, Singapore’s Land Transport Authority implemented an enterprise-wide information structure for decision-making and information dissemination across the authority and other government agencies. Singapore’s shipping bellwether National Orient Lines implemented REMODEL (replacement and modernisation of legacy systems), integrating six processing platforms across different operating systems and more than 250 applications worldwide. The rapid maturing of software-as-a-service (SaaS) and cloud-based services, notes Brand, have given CIOs something to think about in terms of staffing requirements as they need less management infrastructure to support.

“Staffing and skills remains a hot topic and this is now blurring with technology sourcing strategies as organisations begin to see even greater opportunities in global sourcing arrangements,” says Brand.

The right people
YCH’s Loo faced a slightly different staffing issue where skills need to be upgraded and training done to match the organisation’s adoption of technologies. “It is getting more and more difficult to find the right talent and skills for the required job even with the downturn. It is almost like industry domain/experience and advance technical skills are mutually exclusive,” he explains.

Finding suitable managers are just as tricky for Loo. “It is extremely difficult to find good managers with initiative and leadership skills to really lead in anticipating and solving issues. We need more than an average manager who simply monitors jobs or tasks assigned to subordinates.”

For Knorr-Bremse’s Fischer, his priorities were centred on the implementation of new business processes or the optimisation of processes to support the ramp-up of business, stabilisation and increased productivity as well as speeding up localisation. There were also efforts to reduce overhead costs and savings to improve cash and profits, as well as work done to improve IT security processes, controls, documentation and staff skills. The main focus of technology this year has also been influenced by the drive to make IT more effective. Virtualisation has been important because it promises to simplify the infrastructure and increases efficiency, according to both Brand and Gilliland. “Because it helps reduce costs and increase efficiency when done well,” says Gilliland.

Business intelligence has also been popular among CIOs. These applications raise enterprise visibility and transparency, particularly around sales and operational performance, notes Basu. “These investments have paid extra dividends by responding to new regulatory and financial reporting requirements,” he adds. One interesting area is that banks are able use business intelligence for cross selling, notes Dr Chan.

“For example, if you spend a big sum on their VISA cards, these banks could SMS you and say ‘why don’t you just split them into an instalment, and would you like this additional buy?’,” he explains.

For YCH’s Loo, 2009 saw him executing his three-year roadmap for his company.

The plan focuses on ‘intelligence’, which incorporates business intelligence, middleware tools for real-time integration technologies, and open-source technologies for driving service-based applications.

Business intelligence was high on the priority list for Knorr-Bremse’s Fischer as well. His efforts were in “financial planning and reporting applications as well as operational process KPIs in order to optimise ‘span of control’ and process control in all areas,” he explains.

As Knorr-Bremse has been expanding in the Asia Pacific, Fischer spent time setting up a regional PBX Architecture, standardising phone systems enabled with VoIP via WAN, in a effort to reduce administrative efforts and expenses while increasing functionality.

2010 could be the year when cloud computing gains full traction. The signs are there —IDC’s recognition awards to top IT projects by Asian enterprises earlier in the year had three out of the top ten winning companies utilising cloud technologies.

YCH’s Loo has stated that his organisation will be evaluating various SaaS and cloud computing models that can help reduce cost and improve agility for deployment.

Sourcing capabilities
Hydrasight’s Brand describes the sourcing and management of IT as a model for organisations wanting to source the most suitable technology capabilities from wherever they currently exist, configuring it for their environment and managing its performance.

The sourcing might come from their own internal own IT department, or it might be from a local technology supplier, or it could be from a global supplier on the other side of the world where no-one from either company has ever met. “It’s now entirely possible to source compute, storage and networking resources from almost anywhere in the world,” says Brand.

The technology is then configured to suit their environment, rather than traditional integration, then performance and suitability is delivered to the business. If the solution is no longer meeting business needs, another solution is sourced, configured and managed.

Social and mobile technologies will continue to infiltrate and permeate the majority of organisations, says Brand. A study by Gartner on the top emerging technologies for the next five years finds that the ability for users to be mavericks and bypass IT systems via social networks, application development with mashups, and conduct business on their mobile devices, is rapidly increasing.

Their popularity could even compel organisations that have resisted, so far, to review their IT strategy and to incorporate social aspects into their technology environment, adds Brand. The Gartner report also notes that companies are beginning to realise users are going to find ways of getting around bans on these social applications. The study recommends establishing rules around the use of these tools, monitoring, participating, and bringing a “social dimension” to external Web sites.

Management priorities
In terms of management priorities, 2010 could see CIOs looking to further refine their efficiency focus from 2009.
Expectations about the value that technology can deliver will drive higher performing CIOs to institutionalise technology-dependent innovation as a business capability, rather than an IT department capability, observes Brand. CIO Asia
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