October 20th, 2008

State of the enterprise tech economy

Posted by Larry Dignan @ 5:00 am

Categories: Cisco, Cloud computing, Gartner Symposium, Gartner Symposium 2008, General, Hardware Infrastructure, IBM, IT Management, Innovation, Microsoft, Oracle, SAP, Software Infrastructure

Tags: Information Technology, Gartner Inc., Technology Executive, Strategy, Management, Larry Dignan

Almost a month has passed since technology demand fell off dramatically; the stock markets tanked and worry about the credit crisis moved from Wall Street to Main Street to your company. Despite this perfect storm it’s hard to generalize the enterprise technology economy. Simply put, it’s not all gloom and doom. And technology executives seem calm–in IT there’s no panic. But there is a general feeling that the tech sector and all the executives in the ecosystem have been here before and will manage through a downturn again.

You could get a feel for the pulse of the enterprise technology economy at the Gartner Symposium ITxpo. CIOs weren’t exactly going on the record about their plans–to be honest they didn’t know their plans since just born 2009 budgets have already been scrapped–but it’s slightly comforting that technology executives were steady hands. Yes, the budget is uncertain. Yes, technology managers will have to modernize their systems, do it on a shoestring and revamp staffs. But this industry has been through this before–just five to six years ago. In fact, technology budgets haven’t exactly been swelling since the dot-com bubble.

Gartner’s worse case is that technology budgets will fall 2.5 percent in 2009, but that isn’t so bad. Both Forrester Research and Citigroup also highlight a shaky outlook for 2009 in recent CIO surveys.

Meanwhile, Gartner is telling clients to prepare a scenario where budgets will fall 20 percent or more. Gartner’s presentations had a few common threads: Cut costs, be prepared for the worst and reload on the technology that matters. In other words, downturns can be transformational IT events. The funny part: The technology executives in the audience at these powwows were almost mocking Gartner’s guidance. These IT veterans weren’t joking because they didn’t buy into the downturn. They were saying, “we’re prepared.” Meanwhile, it’s not like information technology spending has been going through the roof anyway.

What exactly we’re preparing for is unknown. The deleveraging of the economy will hurt, but it’s unclear how much. At this point in time, here are a few emerging tech economy trends that’ll likely move to the front burner in the not too distant future.

Visibility = Nil.

Game theory and scenario planning will become crucial to technology management. Why? You have no clue what will happen to your customers, your management and your plans going forward. Intel CEO Paul Otellini summed up the state of affairs:

Q3 played out mostly as we expected it to when we began the quarter. We saw some softness in September in the corporate segment while consumer was more seasonal. As we head into Q4, we see some mixed signs. We expect the corporate segment to continue to show some softness as IT spending gets rationalized in this macro environment…It’s clear that the financial crisis may impact our business but the extent of that is difficult to quantify. As a result, we’ve made two changes for this quarter — one, our outlook has a wider range than normal, reflecting our view of the boundaries of the risks, and two, we’ve decided to provide a formal mid-quarter update scheduled for December 4th to allow us to give you additional information about the state of Q4 business trends as the business and financial conditions unfold.

In other words, stay tuned. Other technology giants are likely to say the same thing. And it makes sense. Any company that says it can nail its earnings guidance to the penny is lying. SAP saw the same slowdown at the end of September and the credit crunch will impact multiple vendors as customers are hit by a credit squeeze.

On the IT buying side of the equation the visibility is also fuzzy at best. It’s likely that 2009 budgets may be open-ended affairs that change quarterly. That doesn’t bode well for big technology projects.

Vendor-customer relationships may become strained.

This chart from a Gartner presentation sums up the current state of vendor customer relationships:

Simply put, customers are being milked. The software industry has boiled down to four huge software vendors–SAP, Oracle, IBM and Microsoft. You have no leverage in many cases. However, customers are likely to be pushing to renegotiate existing deals to save money. Vendors want to keep their profit margins. Something has to give. My hunch is you’ll see a lot more customer pushback on everything from software licensing to IT services to hardware upgrades. Gartner counts renegotiation with vendors as the second most important thing you can do in the downturn–right after implementing a hiring freeze.

Everyone is cleaning house. 

Depending on the extent of the downturn enterprises will look to “mothball” systems and decommission legacy apps that cost more to support than run. Any projects on the drawing board that don’t deliver returns quickly will be jettisoned. In other words, the projects that really matter survive. And the ones that don’t get the boot. Shouldn’t this be the way all IT is managed all the time?

This massive prioritization will create some winners and losers. Cisco CEO John Chambers noted that its collaboration software was the equivalent of an enterprise planning system without the years to implement, expense and consultants. Of course, Chambers was talking up his company’s wares, but he has a point. Perhaps a downturn ushers in new delivery models and enterprise 2.0.

Go-to technologies will still matter.

There will be pockets of strength in the technology sector. It’s not like everything will fall apart. The top four technologies in Gartner’s top 10 disruptive technologies list will save you money and are possibly cheap to implement:

• Multicore and hybrid systems
• Virtualization and fabric computing
• Social networking
• Cloud computing

In recent years, it has been almost impossible to generalize IT spending. While the overall budget growth has been low single digits each year, there has been a lot of movement under the surface. A downturn will only intensify that trend.

We’ve been here before and some people know what they are doing.

I’m not optimistic about the economy, but come away feeling pretty good about technology executives. They have been through technology’s Armageddon before–2001 to 2003–and this industry isn’t in the epicenter this time. Sure, everyone is going to take a hit, but I get the feeling that Gartner’s Symposium would have had a different vibe if it were a financial services industry powwow.

Advice is plentiful. Take it and read:

• Essential strategies for weathering the economic storm
• Cisco CTO: 10 ways for leaders to lean into the economic headwinds
• How to Manage in a Recession
• Recession Survival Strategies

October 16th, 2008

Microsoft wants you to move: To IE 8, Vista...

Posted by Larry Dignan @ 9:35 am

Categories: Gartner Symposium, Gartner Symposium 2008, General, IT Management, Linux, Microsoft, Software Infrastructure

Tags: Microsoft Windows 7, Microsoft Office, Microsoft Windows Vista, Microsoft Internet Explorer, Microsoft Corp., Microsoft Windows, Microsoft Windows Vista (Longhorn), Operating Systems, Software, Larry Dignan

A visit to the Microsoft booth at the Gartner Symposium and ITxpo is full of subliminal messages urging technology executives to move up to more modern products.

One part of the booth rides shotgun with a research note (from Gartner of course) making sure you “understand the risks of skipping Windows Vista.” Another part of the booth says “don’t wait for IE8 to move from IE6.”

See a theme here? Microsoft wants you to upgrade really bad. The problem: PCs are lasting much longer than expected and companies see no reason to get on the upgrade bandwagon. Indeed, I recently got a loaner laptop and the default settings were XP with IE6. I had forgotten what IE6 even looked like.

Also see: Ballmer: It’s ok to wait until Windows 7; Yahoo still ‘makes sense’; Google Apps ‘primitive’

Now there are some good reasons to move toward Vista–and IE 8. The security is better, these older apps won’t be supported forever and you could be on something like XP longer than you think.

Think it’ll get folks to budge? Not a chance. Microsoft’s pushing could just make execs hang on for Windows 7–and whatever browser comes with it–a little longer.

Here in Orlando the Microsoft upgrade question is a burning issue. Later today, Gartner analyst Michael Silver, who just a few months ago noted Windows would collapse under its own weight, tackles the issue. The question: Which version of Windows and Office do you use and for how long?

Silver’s presentation this go round is a little more constructive on Vista, but you can argue either way. Microsoft wants you to think about the risks of not upgrading. Customers want Microsoft to think about the savings involved with not moving up to Vista and the latest office.

Some key points:

• Through 2009 more than half the documents created will be in legacy binary formats. So much for .docx extensions in Office. The latest Office also requires training since it has a new user interface.
• Windows and Office stock keeping units re too damn complicated. Look at these flavors.

• That said Gartner reckons that vendors won’t support new applications running on XP starting in 2010. That’s the risk of not switching.

Add it up though and there are as many reasons to skip Vista as there are to upgrade to it. A coin flip is not a reason to upgrade.

Among the reasons to not skip Vista:

• Software vendors don’t support old OSes that long;
• Microsoft could delay its latest OS;
• You may not have the budget to upgrade to Windows 7.

Silver notes:

Organizations that have the need or capability to do a forklift migration could consider skipping Windows Vista and planning a forklift migration to Windows 7, but should understand the risks involved. Windows 7 is an unknown entity with unknown features and an uncertain time frame. Skipping Windows Vista will not mean that the work done to remediate applications for Windows Vista will be eliminated; we expect much of the same work would need to be done to prepare for Windows 7 as well. Organizations that plan to skip Vista should have contingency plans to be able to deploy Vista for some users and should ensure that they have a commitment for the necessary budget to move off Windows XP and onto Windows 7 in 2012.

And the reasons to skip:

• You’re an company with less than 1,000 users;
• 35 percent or more of your applications are written in-house;
• Or you replace all of your PCs at once and you have a replacement project prepped for 2012;
• You have alternatives such as Linux and Apple explored.

Overall though, every situation will be different. Microsoft’s problem is that the decision to upgrade to Vista and the latest Office still remains a coin flip for customers.

October 16th, 2008

Ballmer: It's ok to wait until Windows 7; Yahoo still 'makes sense'; Google Apps 'primitive'

Posted by Larry Dignan @ 8:53 am

Categories: Cloud computing, Gartner Symposium, Gartner Symposium 2008, General, Google, Microsoft, Software Infrastructure, Web Technology

Tags: Google Inc., Google Apps, Microsoft Windows 7, Steve Ballmer, Yahoo! Inc., Microsoft Windows Vista, Microsoft Corp., Microsoft Windows, Microsoft Windows Vista (Longhorn), Cloud Computing

Microsoft CEO Steve Ballmer on Thursday defended Vista’s honor–again–but at least gave a nod to enterprise buyers that planned to skip it and upgrade when Windows 7 launches. He also noted that a Microsoft purchase of Yahoo would still make sense, but there are no talks. And he called Google Apps primitive while he was at it.

Ballmer, speaking at the final keynote at the Gartner Symposium ITxpo in Orlando (Twitter feed), came to the stage in the middle of an economic swoon where enterprises are still debating whether to upgrade to Vista. Ballmer spoke via a Q&A with Gartner analysts Neil MacDonald and David Mitchell Smith.

First, Ballmer defended Vista’s honor as he had at last year’s Gartner’s powwow.

“The adoption rate of Vista is faster than the adoption rate was of XP two years in,” said Ballmer, who noted that there were issues with compatibility. “We had a great success with security and starting to see a ramp with adoption.”

MacDonald countered with Gartner survey data that 61 percent of respondents are thinking about skipping Vista. Ballmer said that Microsoft would be ready for that outcome too. Mentioning Windows 7–he quipped about the creative naming convention of using just “7″–he indicated that Microsoft would be ready for folks that want to skip Vista. In fact, he said Windows 7 would be compatible with Vista.

“Our next release of Windows will be compatible with Vista. The key is let’s get on with it. We’ll be ready when you want to deploy Windows 7.”

Ballmer was asked why Windows 7 is considered a major release instead of just the second rev of Vista. His reply: “It’s not minor because it’s a lot more work than a minor release. It’s a major release.”

Ballmer also noted that Windows 7 will improve the operating system shell. “Windows 7 will be Vista, but a lot better,” he said, noting cleanness of user interface. Is this fit and finish improvement? Gartner analysts kept referring to Windows 7 as a release candidate 2.

Another key question: Given the economic environment, why upgrade to Vista?

“If people want to wait they really can,” said Ballmer. “But I’d definitely deploy Vista.” He noted that most IT buyers upgrade the OS when they deploy new machines.

The other elephant in the room was the Yahoo deal. Yahoo, which used to be a takeover target of Microsoft, is getting cheaper by the minute.

In fact, Yahoo tagged yet another 52-week low on Thursday traded below the $12 mark.

Could Yahoo come into play again for Microsoft?

The answer seemed to be to never say never, but there’s nothing imminent. “We offered $33 bucks (for Yahoo) and it’s $11 today,” said Ballmer. “It’s clear Yahoo didn’t want to sell. They probably still think it’s worth more than $33 a share. I still think it makes sense for their shareholders and ours.”

Update:  Those comments put Yahoo shares on better footing almost instantly. When Ballmer speaks Yahoo shareholders listen.

Among other topics:

Google Apps: Ballmer said he didn’t consider Google Microsoft’s biggest competitor. Gartner’s questioners asked Ballmer about the Google Apps threat and he became animated. “People don’t use it. People try Google Apps, they don’t use it. You can’t even put a footnote in a document!” said Ballmer. When asked if Ballmer was dismissing Google Apps, he said that Google has “very primitive” capabilities. “We have better competition today than Google Docs and Spreadsheets. We get more competition from OpenOffice and StarOffice frankly,” said Ballmer.

Consumer: Ballmer noted that Xbox, Office 2007 and Messenger have been consumer hits. However, Ballmer pooh-poohed the idea that Microsoft was favoring consumer over enterprise.

Multicore: Optimizing applications to take advantage of multicore technology is a challenging problem. Windows’ NT code base can still improve.

Microsoft’s cloud OS: Why should people care? “We have a big announcement in two weeks at our Professional Developers Conference and we’re going to run through this stuff,” said Ballmer, looking at his 10 handlers in the crowd (right) and knowing he’d be saying too much. Regarding cloud computing he said it’s critical Microsoft has a platform in the cloud because it’s more than just hosting.

Does Microsoft worry about losing focus? “No,” said Ballmer. He said it’s silly to not think the world is going to change. He said he has no problems building everything from data centers to devices.

October 16th, 2008

Gartner rates offshore outsourcing hot spots

Posted by Larry Dignan @ 7:40 am

Categories: Gartner Symposium, General, Hardware Infrastructure, IT Management, Offshore outsourcing, Outsourcing, Software Infrastructure

Tags: Offshore Outsourcing, Gartner Inc., Outsourcing, Financial Services, It Operations, Business Operations, Outsourcing & Subcontracting, Larry Dignan

Gartner on Thursday walked IT folks through its global sourcing–also known as offshore outsourcing–methodology in a spiel that was part informative and part subtle hint that the consulting and research firm offers these services.

Much of analyst Frances Karamouzis’ talk at the Gartner Symposium ITxpo focused on the basics such as determining why you want to go offshore, what’s the business impact and the people headaches you may encounter. But amid all the holistic models and other management-speak Gartner went all Consumer Reports with its ratings. The charts that follow are worth the price of admission (and maybe even worth the Gartner subscription).

Here’s a look at Gartner’s ratings for the Americas:

And Europe, Middle East and Africa:

And Asia Pacific:

Reading between the lines I wonder how many IT execs would seriously consider half of these locales including some of the up-and-coming countries like Morocco, Latvia, Egypt and Panama.

My hunch is that Gartner’s chat is probably geared toward massive multinationals. But given Canada and India were really the only two that knocked Gartner’s scorecard out of the park it may make sense to start there. Another looming question: How would states in the U.S. stack up? Would it make sense to stay at home and play the labor arbitrage game by state?

October 15th, 2008

Does IT really need to fear multicore?

Posted by Larry Dignan @ 2:00 pm

Categories: AMD, Gartner Symposium, General, Hardware Infrastructure, IT Management, Intel

Tags: Software, Information Technology, Multi-core, Larry Dignan

While multicore chips hold great promise for applications and computing power they could wreak havoc on technology departments.

That’s the message from Gartner analyst Carl Claunch, who argued Thursday that IT types should fear–yes fear–multicore technology. Multicore chips carry multiple brains on them and companies like Intel are pushing a core arms raise. The more cores the better–even though applications providers haven’t quite caught up yet.

Why will multicore be an issue? For starters multicore technology can be a budget buster. Among Claunch’s multicore points at Gartner’s Symposium ITxpo:

• You’ll need new coding skills in house;
• You’ll need new development tools;
• There are multiple core designs that will affect your software;
• Your existing software licensing deals become more complicated;
• And the impact on applications varies immensely.

All those wild cards and it’s not even clear whether your old programs–and you know you have dozens of legacy apps lying around–won’t run faster.

Claunch explains in his presentation:

We have had the easy fix for decades to deal with existing applications whose requirements have outgrown their current system — we refreshed the technology and the application ran better. This led to relatively long life cycles for applications, allowed operations to address application performance problems easily and required little advance notice of capacity shortfalls. Now, a performance issue may require substantial recoding of the applications, shortening life cycles, increasing the cost of modernizing portfolios, and introduce the need for good long-range forecasting of such performance issues.

There’s also the staffing conundrum. Where are you going to find these programmers that can handle multithreading and parallel processing? Microsoft is just beginning to go down the multicore route, but when it does multiple applications may have to change. The majority of applications don’t exploit multicore servers with the exception of Microsoft SQL Server or an Oracle database. But when the multicore app bandwagon fills up there will be some planning hassles.

Naturally, this software revolution is going to cost you more money–most likely. Claunch explains that software vendors will charge by the socket, chip, core or thread. But various designs from the likes of Sun, Cray, Intel and others will “produce seemingly illogical price differences when the same software, handling the same workload, is put on different systems.”

In fact, Claunch reckons that Oracle’s pricing, which is based on a ratio of computing power that varies with different chip architectures, won’t last for long.

Claunch says:

The correlation between user workload and license charges will swing widely from model to model, vendor to vendor and year to year, further stressing the processor-based pricing models. As a consequence, methods such as the ratios used by Oracle will not be sustainable for long. All software vendors will be challenged to find a method that behaves logically for users, performs well for their businesses and can be explained easily.

And you thought your licensing scheme today was unbearable. It’s likely that your software costs will rise as vendors as core inflation results in price inflation even if older applications don’t improve dramatically.

Toss in the need for new programming languages, staff and software licensing schemes and multicore is going to cost you.

Luckily Claunch has some tips:

The first point–the “attempt” part–is interesting. Multicore will have you going to your software vendor in the name of fairness. Doesn’t exactly sound like you’ll have a lot of negotiating leverage in that scrum.

October 15th, 2008

JetBlue unveils high-tech terminal Oct. 22; IT as customer service tool

Posted by Larry Dignan @ 8:54 am

Categories: Gartner Symposium, Gartner Symposium 2008, General, IT Management, Innovation

Tags: Information Technology, JetBlue Airways Corp., Projects, Product Marketing, Operational Accounting, Customer Relationship Management (CRM), Marketing, Finance, Enterprise Software, Software

Joseph Eng, executive vice president of JetBlue’s systems and technology, said the company will unveil its high-tech terminal at John F. Kennedy International Airport in New York Oct. 22.

The terminal when it launches will be the culmination of one big technology project. JetBlue’s terminal at JFK, known as Terminal 5, includes:

• 40 ticket counters and 65 e-ticket kiosks;
• 20-lane security checkpoint with family lanes;
• Wi-Fi throughout the terminal and later on planes in 2009;
• And self-service options throughout the terminal.

Under the hood, however, JetBlue is looking at those terminal touch points as ways to use information to offer better customer service and drive revenue. And these touch points need to be self-service. “To be a low cost carrier it’s in the value proposition to drive down costs, but it’s also how customers want to interact with us. When you get to T-5 (Terminal 5) you’ll be able to buy more. It’s a convenience, customer service and revenue generator,” said Eng.

Eng in an interview with Gartner analysts Barbara Gomolski and Patrick Meehan at the Symposium ITxpo in Orlando, spoke a lot about business alignment, which is a big topic for JetBlue. The airline has tweaked its technology org chart repeatedly and at one point had a former CIO reporting to a marketing executive. Eng was named to his role in March and reports to Russ Chew, the airline’s president and operating chief. Duffy Mees, CIO of JetBlue, reports to Eng. The structure is designed to connect the business an IT at the hip.

Indeed, Eng said that as an IT leader you have to be tight with the CFO. “You need to play in that space to evaluate business cases,” said Eng.

The business case for JetBlue at the moment revolves around information management. Eng wants to ultimately create a market of one for each customer. He spoke about reaching customers directly in their seats and using its DirecTV screens as an information platform. Eng acknowledged that there may be a point where privacy is an issue, but JetBlue would test the idea with customers first.

Eng noted that the entertainment screens in its seats can be a customer service tool. “I know you were on a flight, what seat and can push connecting information, gate and status to you,” said Eng. But when asked if that market of one can go too far, Eng said it’s possible. “It could be a privacy issue if push information to your seatback console.”

A more likely change will come when JetBlue uses Wi-Fi on its planes and pushes information–connecting flights, gates, delays etc.–to customers on laptops and mobile devices.

Among other topics:

• Eng said he isn’t into a big development organization, but needs to retain talent and recruit IT workers that are more business oriented. “There’s a lot buy vs. build and a lot of packaged environments,” said Eng.
• JetBlue has a new RFP out for a new reservation system. Eng said he plans to buy the system instead of build one (airlines typically build these systems). The value added connections to the system will focus on the integration with revenue management analysts at JetBlue.
• Projects are measured on revenue generation for the business more than timelines. “In IT you can make a dramatic difference on the bottom line,” said Eng.

Also see: JetBlue fiasco: A database could have made a difference

October 15th, 2008

Facebook and its ilk are for the enterprise too

Posted by Larry Dignan @ 6:27 am

Categories: Enterprise 2.0, Facebook, Gartner Symposium, Gartner Symposium 2008, General, IT Management, Innovation, Social networking, Software Infrastructure, Web Technology

Tags: Facebook, Network, Chances, Social Networking, Online Communications, Marketing, Advertising & Promotion, Larry Dignan

Companies are blocking Facebook, frowning on social networking and pretending that employees don’t peruse information from Wikipedia and Delicious, but they should embrace those sites. In fact, it may make sense to bring them into the enterprise instead of buying some corporate social networking application.

Gartner analyst Jeffrey Mann, the resident social networking guru, made his case Wednesday for why the technology department should be absorbing social networking instead of pretending it doesn’t exist.

Let’s go right to the slides from the Gartner Symposium ITxpo:

And.

Well gee doesn’t that sum things up pretty well? Why exactly are we pondering enterprise social networking apps when there’s no volume and chances are this software will never be as good as Facebook?

Think about it. Mann has a point. Using “enterprise” social networking tools is a lot like having an enterprise phone. Or an enterprise Internet. Enterprises have phones, but it’s the same as the one you have at home.

Now Mann doesn’t recommend that IT departments just adopt Facebook as their own. But instead of banning social networks or pretending they don’t exist they should understand them, learn and then implement if it makes sense. In the end, you’ll probably have a blend of enterprise and consumer social networking apps at your company. Chances are you already have the latter already.

Mann’s other points:

• Social networking solves business problems like expertise location and mobilizing groups;
• You get access to many people in volume;
• You can keep track of colleagues;
• Social networking tools can be ad hoc meeting places for far flung workers.

Rest assured that software vendors will increasingly add these social networking features into their suites, but there’s a catch. You’ll have to pay for something that won’t be as good as what your friendly neighborhood users already use.

Mann’s presentation makes you go hmm. Of course, there are problems with monitoring, security and policies, but it’s not exactly rocket science.

October 14th, 2008

Gartner: Top 10 technologies to watch over the next three years

Posted by Jason Hiner @ 3:44 pm

Categories: Gartner Symposium, Gartner Symposium 2008

Tags: Business Intelligence, Social Networking, Cloud Computing, Information Technology, Gartner Inc., Technology, Mashup, Strategy, Servers, Management

On Tuesday, Gartner analysts Carl Claunch and Dave Cearley gave a crowd of IT leaders at the Gartner Symposium ITxpo 2008 a list of the top 10 technologies that will provide important strategic advantages to IT over the next three years. They encouraged the leaders to keep these technologies in mind as they formulate budgets and long-term plans.

Claunch and Cearley delivered their list in the presentation “Top 10 Strategic Technology Areas for 2009″ at the Orlando event. Here’s how they defined the “strategic technologies” that made the list:

“A strategic technology is one with the potential for significant impact on the enterprise in the next three years. Factors that denote significant impact include a high potential for disruption to IT or the business, the need for a major dollar investment, or the risk of being late to adopt. Companies should factor these technologies into their strategic planning process by asking key questions and making deliberate decisions about them during the next two years. Sometimes the decision will be to do nothing with a particular technology. In other cases it will be to continue investing in the technology at the current rate. In still other cases the decision may be to test/pilot or more aggressively adopt/deploy the technology.”

Here’s the list:

Read the rest of this entry »

October 14th, 2008

IT's challenges: The end of device charging; ROI; Super programmers

Posted by Larry Dignan @ 1:40 pm

Categories: Gartner Symposium, General, Hardware Infrastructure, IT Management, Innovation, Mobile, Software Infrastructure

Tags: Device, Information Technology, Gesture, ROI, Programmer, Programming, Wireless, Roi/Tco, Strategy, Development Tools

Gartner on Tuesday outlined its grand IT challenges from 2008 to 2033 and it includes a world where you’ll never have to charge your device.

That was one of the futurama type predictions outlined by Gartner analyst Ken McGhee at the firm’s Symposium ITxpo. These prediction presentations are always entertaining–even if you don’t quite buy it all. McGhee doesn’t spare the drama. One of his opening slides proclaims:

The successful resolution and combined influences from the grand challenges explored within this presentation will transform business and society more than any other peacetime endeavors by 2030.

With that introduction we might as well get to the highlights:

Read the rest of this entry »

October 14th, 2008

How green is your vendor?

Posted by Larry Dignan @ 12:04 pm

Categories: Dell, Gartner Symposium, Gartner Symposium 2008, General, Google, Green Tech, Hardware Infrastructure, Hewlett-Packard, IBM, IT Management, Oracle

Tags: Gartner Inc., Strategy, Management, Larry Dignan

Gartner analyst Simon Mingay on Tuesday unveiled ratings for technology vendors to highlight who’s talking green and who’s actually delivering.

Just don’t expect anything too quantitative just yet.

Mingay’s presentation at the Gartner Symposium ITXpo caught my attention given that every vendor is talking green IT, sustainability and multiple environmental catchphrases. In a nutshell, Gartner and the World Wildlife Fund set out to rank technology vendors based on their green policies and cut through “greenwash,” all the marketing mumbo jumbo you hear daily.

A few key highlights from Mingay’s chat:

Read the rest of this entry »

October 14th, 2008

Cisco's Chambers sees collaboration fueling productivity gains; Web 2.0 as new enterprise engine?

Posted by Larry Dignan @ 8:54 am

Categories: Cisco, Cloud computing, Datacenter, Enterprise 2.0, Gartner Symposium, Gartner Symposium 2008, General, Hardware Infrastructure, Software Infrastructure, Web Technology

Tags: John Chambers, Web, Collaboration, Cisco Systems Inc., Web 2.0, Internet, Larry Dignan

Cisco CEO John Chambers said Tuesday that there will be an “instant replay” in technology-led productivity gains in the current downturn just like the U.S. saw in the mid-1990s.

The difference this time around: In the mid-90s those productivity gains were based on big enterprise resource planning rollouts that could wreck a company. Today, Chambers is talking implementations of Web 2.0 tools and collaboration.

And there’s a payoff. Chambers said that collaboration tools and Cisco’s Telepresence technology saved the company $150 million a year in travel expenses. “For the first time collaborative IT will be so intertwined with the business strategy you won’t know the difference between the two,” he said.

In a question and answer session with Gartner analysts Ken Dulaney and Tom Bittman at the Gartner Symposium ITxpo, Chambers said in some companies IT is viewed as an expense. In others, IT is viewed as an advantage. Those two flavors of companies will see vastly different IT budgets.

Chambers, who noted that Cisco’s IT budget will be up 10 percent, largely talked about his familiar refrains: Collaboration, Web 2.0 and the network being the hub of everything. In fact, it took Chambers about 45 seconds to say “Web 2.0.” He talked about how Web 2.0 will transform companies and drive productivity. Chambers expects collaboration to see rapid implementation.

Chambers positioned the company as being more than a plumbing company to one focused on scale, productivity and collaboration. On that latter item, Chambers said the company has reorganized to focus on collaboration and walked its talk with its internal tools such as WebEx. He likened implementing Web 2.0 tools as the newfangled ERP system.

Among other topics:

• Chambers said Cisco has never been just a hardware or software company, but is learning on the fly to be the glue between the two categories. That glue is expected to be collaboration. On business applications Cisco will partner with Oracle, SAP and Microsoft to offer collaboration. Internally, Cisco has restructured itself around collaboration. For instance, there is no single head of engineering. Instead Cisco has a council of 9 top engineering heads at the company.
• Cisco sees the network becoming a service being pushed to any device–phones, TVs, DVRs. Chambers said Cisco will have 26 priorities this year, up from one or two in previous years. The new markets may take Cisco into new verticals such as sports and entertainment.
• On being visible on the desktop for networking, Chambers said Cisco wants more play on the desktop but with partners. He said he was pleased with Cisco’s partnership with Microsoft. Chambers noted that Cisco intends to be a player in consumer virtualization and services.
• Does Cisco want to be involved with network management software? Chambers noted that Cisco has to add intelligence to the network, which requires common security and performance features. In other words, Cisco is already involved, but quietly with partners.
• Chambers said video will be a key feature for mobile phones. Voice will just ride shotgun. He added that he expects the bandwidth to be there. Deskphones will become more video and data than a tool for voice.
• Cisco is tracking the emissions and energy impact for its routers and other products. “Anything connected to the network can and will be green,” said Chambers. “Smart grids will happen.” Cisco is working with a bevy of cities to examine smart traffic flow, efficient energy use and property planning. Chambers argued that the network can be a green IT enabler.
• Chambers noted cloud computing will become a mesh of interconnected networks. Cloud computing “is just another evolution of the Internet.” On software as a service, Cisco said WebEx use internally is up 2,500 percent with discussion forums and blogging has also increased dramatically.

October 14th, 2008

Are software megavendors too big to stumble?

Posted by Larry Dignan @ 6:57 am

Categories: Gartner Symposium, Gartner Symposium 2008, General, IBM, Innovation, Microsoft, Oracle, SAP, SaaS, Software Infrastructure

Tags: Software, Gartner Inc., Tools & Techniques, Management, Larry Dignan

There’s a good chance you get most–if not all of your software–from four massive companies: IBM, Microsoft, SAP and Oracle. And their game is simple: Grab more of your so-called wallet share.

The big question is whether these vendors are so massive that they can do no wrong or whether they’ll collapse under their own weight. It’s not hard to find folks that argue that latter, but the reality is quite different–these hulking software companies can raise your maintenance fees with the greatest of ease.

Those are some of the thoughts bouncing around in my head as Gartner analysts Yvonne Genovese and Jeff Comport present their take on megavendors at the Gartner Symposium and ITxpo in Orlando.

In the grand scheme of thing, these vendors are essentially growing by gaining more share among existing customers. They aren’t luring new ones per se. In sum, Genovese and Comport note:

In a strange contradiction, we see rapidly changing technology in an industry that seems to be maturing. Vendors are focusing more on the “business of software”, rather than solely on product competition. Users faced with increased vendor power and lower price flexibility are looking for alternatives, containment strategies and ways to lower vendor switch costs. How the vendors react to these changes and pressures will be the basis for changes in their competition over the next five years.

It’s hard to argue with that. But what’s going to break? Customers have little clout. The business of software is just swell–both SAP and Oracle have raised maintenance fees. And Oracle is confident its margins will be strong no matter what the economy does. Alternate delivery models? Perhaps, but we aren’t there yet.

Among the trends highlighted by Gartner:

• The sustainability of profit margin growth is under attack from many directions (SaaS, new models, buyer relationships).
• Megavendors keep adding to their stack of stuff. These moves are really about “installed-base harvesting” and adding more products to cross sell.
• Software giants must offer alternate delivery models. Software and IT will be delivered as a service and the downturn may accelerate the swap. How software giants navigate this sea change will make or break them. I buy this argument to a degree, but the disruption will take time to develop.
• Power is going to the user. Consumerization, multiple devices and Web 2.0-ish features are unavoidable. Ultimately software giants will have to cater to these digital natives who demand their personal life user interface at work. I’m lukewarm on this one. User interface clearly matters, but anyone that has seen real enterprise applications knows that the consumerization movement will take a long time to develop–if it develops at all.

So what’s a megavendor to do? Lock you in.

Obviously Gartner’s chart shows that there could be a trainwreck ahead. At some point, software giants won’t be able to milk any more money out of existing customers. However, the big unknown is timing–it’s telling that Gartner doesn’t have specific years on its time axis. How soon will disruptive models put a dent into these massive software vendors?

October 14th, 2008

Dell negotiations: Street ball without the refs

Posted by Larry Dignan @ 5:00 am

Categories: Dell, Gartner Symposium, Gartner Symposium 2008, Hardware Infrastructure, Hewlett-Packard, IBM, IT Management

Tags: Dell Computer Corp., Negotiation, Free Trade, Pricing, Finance, Marketing, Larry Dignan

Negotiating hardware deals with Dell isn’t for everybody. In fact dealing with Dell can be downright difficult relative to other hardware vendors.

That takeaway came from Gartner analyst Leslie Fiering’s presentation at the Gartner Symposium ITxpo. In that presentation, Fiering noted that Dell’s pricing isn’t transparent if you’re an IT buyer.

Why? If you go to the Web site you’ll find prices that change frequently. For enterprises, this approach can be tricky. They want so-called list prices. IDC tracks Dell and publishes these prices.

Fiering also said you have to watch Dell closely. It may give you cheaper prices and then inflate fees for things like shipping and handling.

The point warranted some followup as I was wondering why Dell played hard ball and whether there was a long term impact to the company. Fiering said that Dell’s approach wasn’t bad and it certainly wasn’t unethical, but when you negotiate with the company expect a battle relative to HP, IBM and Lenovo.

“Going against HP and IBM is like playing basketball in an air conditioned gym with hot showers,” explained Fiering. “With Dell you’re playing street basketball with no referee.”

Her comments prompted one buyer in the audience to ask whether anyone could get a good three-year deal from Dell. Her answer was a definitive yes with a few caveats.

For starters, Dell has its own rules. Sometimes Dell’s rules fit with your buying strategy and sometimes they don’t. Fiering notes that Dell allows as few exceptions are possible–that’s how it makes money. IBM, HP and Lenovo use a sales model that Fiering describes as a “cocoon,” which says to the customer “don’t worry we’ll take care of you.”

In other words, most hardware vendors will bend to make a sale. Dell doesn’t bend. That’s what has maintained Dell’s profit margins and kept costs down. For instance, Fiering notes that one large customer needed 30,000 PCs in three days. Dell could not get it because it delivers in five to 7 days. If you had a 14 day window Dell would have been fine. Another point: You have to be proactive with Dell to get better pricing over a term of a deal.

“You have to see if you fit in with Dell’s model. If you do you’ll have a fine relationship. If not the negotiation will be hard,” said Fiering.

Fiering didn’t seem to think that Dell’s negotiating approach is necessarily a handicap. In fact, she shot down my question asking if Dell faces a tough time as larger rivals bend on hardware to sell services and software. However, I don’t think the question is that easily dismissed. In a down market with competitive prices do technology buyers really want a tough negotiation too?

October 14th, 2008

Gartner: The Net killed media; Financial services, healthcare next

Posted by Larry Dignan @ 3:08 am

Categories: Gartner Symposium, Gartner Symposium 2008, General, Innovation, Web Technology

Tags: Financial Service, Media, Industry, Gartner Inc., Health Care, Vertical Industries, Benefits, Healthcare, Financial Planning, Financial Services

The Internet has killed the basic economics of the media industry and healthcare and the financial services industry may be next.

That’s the message from one of Gartner’s so-called “maverick” presentations where analysts go out on a limb. Mark Stahlman and Michael McGuire did the presentation at the Gartner Symposium ITXpo and recapped how the Net killed the media industry by disaggregating content, messing up the vertically integrated model and leaving the industry flailing to please consumers and protect turf with DRM, lawsuits and other silly ideas.

But we know that story already.

The next industries that could be rattled by the Internet are healthcare and financial services. The argument goes like this: Consumers have their life online, are looking for integrated experiences and want to assemble digital teams in the clouds.

Meanwhile, there are two inefficient industries ripe for blowing up: Healthcare and financial services.

Stahlman and McGuire note that personal health records, choices for treatments and alternatives for prevention and monitoring along with social networking all spell doom for health care as we know it. Toss in how the Internet–and the access to top experts everywhere–can make health care more efficient and you have a similar situation to the media industry.

It’s a similar story for financial services–or wealthcare. Financial histories and goals will be mapped, the Net will cut advisory fees and you will benefit from the experience of the crowd and simulate various portfolios.

As for the money slide, here it is:

Sounds great but…it’s a bit of a stretch. Both financial services and healthcare are regulated and it’s not like some startup can just walk in and blow up business models. Meanwhile, it’s unclear whether digital natives can push things along. Those young folks are healthy so they’re not looking to change health care per se and they are broke so who cares about financial services.

And then you toss in the fact that Gartner’s dynamic duo assumes that people will be comfortable putting their financial and health histories in the cloud and you can see where these prognostications are dicey.

Stahlman and McGuire acknowledge the risks to their predictions–and security is a big one. But I don’t think they are completely wrong about financial services and healthcare. The big question is timing–it will take a long time to overcome hurdles. But let’s hope financial services and health care gets upended by the Net. Both could use a revolution.

October 13th, 2008

CEOs freak out; IT preps a do-over

Posted by Larry Dignan @ 12:26 pm

Categories: Business Intelligence, Gartner Symposium, General, Hardware Infrastructure, IT Management

Tags: CIO, Information Technology, CEO, Technology Department, Pricing, Business Intelligence, Tools & Techniques, Strategy, Databases, Enterprise Software

Being a CEO today just stinks. The economy is melting down. No one trusts each other. And the chieftains don’t even know if their customers will survive. What’s this mean for your technology department? A lot of upheaval and perhaps one big do-over that starts in 2009.

Listening to Gartner analyst Jorge Lopez’s presentation at the Gartner Symposium ITXpo I really have to wonder how much is actually going to get done on the technology side of the equation.

Here’s Lopez’s money slide on the state of CEOs these days:

It’s hard to argue with that assessment.

In a word, restructuring will be the mantra of 2009–layoffs, deleveraging, consolidation and company failures–and that probably means the IT department will revamp also.

Lopez argues that CIOs have to be ready to “clear the table” of current plans and start over. CIOs will also have to deliver cost savings, lay off folks and cancel projects. These items will be replaced by projects surrounding acquisitions and divestitures and speedier high risk projects.

In other words, CIOs will become the CEO lackeys. CEOs are trying to write off everything and move along and CIOs will have to follow. Lopez had one chart predicting that CIOs will have to support varied business intelligence requests, emergency due diligence and new vendor sourcing to support financial re-engineering.

I don’t doubt that Lopez is on to something. But if Lopez is right I’m not seeing much IT strategy developing here. In fact, CEOs are freaking out and technology departments will be whipsawed instead of setting companies up for a better future.

Lopez noted that things like reputation management, e-discovery and business intelligence will hot technical areas. But where Lopez seems to veer off is his argument that it’s possible that companies will take social networking and Web 2.0 more seriously.

Hmm. Let me get this straight. Company worried about global meltdown. Company copes by getting all Facebook-ish. It doesn’t quite add up.

Lopez also covers sovereign wealth funds–wealthy countries looking to invest and build a portfolio–and has an interesting point. The thought: These sovereign funds are known as “patient capital.” In theory these funds would allow a multi-year IT project because it doesn’t need a pay off in 12 months max.

Here’s the Lopez slide, which may actually hold promise for CIOs.

That’s probably the best case scenario for IT, but I wonder how patient these funds will really be. One thing is certain: Your CEO’s sleepless nights are likely to impact the technology department sooner rather than later.

October 13th, 2008

IT warning: Turbulence ahead

Posted by Larry Dignan @ 9:26 am

Categories: Gartner Symposium, Gartner Symposium 2008, General, Hardware Infrastructure, IT Management, Software Infrastructure

Tags: CIO, Information Technology, Gartner Inc., Strategy, Management, Larry Dignan

The technology budget is on the skids. The business types don’t quite get IT (and by the way you don’t get them either). And amid all this turmoil all you have to do is keep your infrastructure humming and solve the 25 most contentious business-technology issues by the first half of 2009.

Boy those Gartner folks can paint quite a picture.

The opening scenes at the Gartner Symposium ITxpo in Orlando are a touch gloomy. Think cost cutting, a Wall Street shellacking, vendors vs. customers and struggles to innovate amid this mess of an economy.

Gartner analysts Ken McGee and Dale Kutnick set the scene.

Meanwhile, CEOs are moderately confident, but the Wall Street fiasco has probably tempered that view. Gartner’s statistics on CEO confidence were dated given recent economic events (bailouts, bank failures, the Dow etc).

Add it up and your average technology budget isn’t beating inflation. The figures below are based on Gartner’s survey of 1,498 CIOs representing $132 billion in IT spending.

There are a few caveats: Companies that are aiming for what Gartner calls “distinctive IT” are spending more, but overall budgets are anemic. But here’s the problem: Business is expecting more. In fact, McGee and Kutnick argue that the most contentious issue in 2008 is that business expectations for information technology have outstripped the internal ability to deliver.

From the Gartner presentation:

At least four years ago, we started noticing a growing desire by enterprise executives to have their IT organizations increase their external focus on customers, new products and services, new geographies and business processes. Unfortunately, most CIOs recognize their staffs do not possess the correct skill sets to adequately meet these externally focused demands. As a result, the CIO’s side of the debate on this issue maintains that to meet the new demands on IT, additional funding will be required to hire the “right” people. On the other end of this debate, executives are dismissing the plea for additional funding and instead are recommending the CIOs transform their staff to meet the new needs.

That expectations gap is just the first friction point for IT. Here’s a look at a few of the looming issues highlighted:

• How do you modernize IT and cut costs? The upshot: Pick projects that modernize and pay for themselves. Think virtualization.
• Spreading the responsibility for security and risk assessment. IT is the fall guy for information security, but there’s usually more than enough blame to go around. Gartner argues that technology managers want business folks to lay out how much risk they are willing to bear for any initiative. The problem: Businesspeople don’t want the burden and sure aren’t going to deliver a hard risk metric.
• Everyone wants business intelligence, but no one wants responsibility for it. This take from Gartner was a bit surprising, but CIOs are reporting that there’s a big business intelligence disconnect. Among the problems is a lack of vision, data integrity, a common vocabulary between groups and lack of sponsorship.
• When do you modernize your applications? Believe it or not many critical systems still run on COBOL code that was cooked up decades ago. When and how you move off of those systems to something like a services oriented architecture will induce migraines in the near future.
• And finally there’s a looming vendor-customer battle ahead. We’re already seeing this with the SAP pricing flap and Oracle’s near gloating about its ability to boost margins on maintenance increases.

McGhee and Kutnick argue that vendor management is becoming a critical issue. Vendors say they are meeting whatever contract was signed and customers complain the supplier isn’t doing enough to deliver innovation. In other words, there’s a big disconnect between the sales pitch and what is actually delivered.

October 13th, 2008

Negotiating with your hardware vendor 101

Posted by Larry Dignan @ 7:05 am

Categories: Datacenter, Dell, Gartner Symposium, Gartner Symposium 2008, General, Hardware Infrastructure, Hewlett-Packard, IBM, IT Management

Tags: Hardware Maker, Hardware, Larry Dignan

Squeezing the most out of technology budgets seems to be a running theme these days, but customers frequently give up leverage in negotiating hardware deals.

According to Gartner analyst Leslie Fiering most hardware negotiations go wrong early on. A customer’s maximum leverage occurs when a company is assessing its needs–also known as the time it isn’t even close to making a selection. Fiering was speaking at the Gartner Symposium ITxpo in Orlando.

Once those discussions with a vendor start leverage goes out the window. Why? The vendor knows whether it will win the business. By time you actually start buying servers or PCs your leverage is history.

Ed Bott: Six money-saving secrets to help stretch your tech budget

While Fiering’s talk focused on hardware, I’ve heard of similar circumstances with software. Here’s the common refrain: CEO, CFO and other C-level execs talk to vendor on a golf course. These folks talk “solutions,” but the promises are never recorded. Once a decision is made the procurement folks are told to close the deal quickly. By then the vendor has all of the control since it knows the customer isn’t likely to walk.

Among Fiering’s tips:

• Beware of the pricing details. For instance, Fiering said Dell pricing isn’t transparent. Prices on the Web change daily–sometimes hourly. Fiering said that Dell is implementing a list price approach. Dell will also give you cheaper prices but inflate fees for shipping and handling.
• Do the prepwork before you put out a request for proposal. A company should know what it needs, where it’s needed and all the service level agreement details. In theory that should take 2 to 4 months–the longest part of the deal.
• Use the hardware cycle as a way to update your software. The PC refresh cycle should match what you plan to do with your operating systems.
• Detail service level agreements early on. The more specific the better. If a hardware vendor is installing PCs set a date, note the locations and detail penalties if those goals aren’t met.
• Aggregate volume. The trend of late appears to favor going with one hardware vendor to get maximum pricing and better terms.
• Desktops can last four years easily. Laptops have a high failure right in the first year–roughly 15 percent. Bottom line: Replacement cycles will differ between desktops and laptops. North of 30 percent of laptops will fail in fourth year. Plan accordingly.
• Negotiate three year deals with hardware vendors and talk volume ahead of time. Fiering says it doesn’t make sense to negotiate longer deals. “You need to put the vendor on notice that they don’t own you,” she says.
• Little things matter. If you’re buying at the end of the quarter, can take delivery in a centralized location and can pay cash instead of credit you have more leverage. Even being a reference account can get you a deal.

October 13th, 2008

Gartner's worst case for 2009 IT budgets isn't so bad

Posted by Larry Dignan @ 5:56 am

Categories: Datacenter, Gartner Symposium, Gartner Symposium 2008, General, Hardware Infrastructure, IT Management, Innovation, Offshore outsourcing, Outsourcing, Software Infrastructure

Tags: IT Budget, Information Technology, Gartner Inc., Strategy, Management, Larry Dignan

Gartner has revised its 2009 IT budget prognostications, a move that isn’t surprising, but the firm’s projections could be a lot worse.

Peter Sondergaard, senior vice president of research at Gartner, outlined the research group’s new projections in his opening keynote at the Gartner Symposium ITxpo in Orlando (all posts and the firm’s Twitter feed). Gartner’s opening keynote is an analyst relay that is part sales pitch and part pep talk to urge technology managers to innovate, manage through tough times and be aligned with the business better.

The meat of the talk, however, was the downturn. The upshot:

• Gartner had expected budgets to grow 3.3 percent in 2009.
• Now the most likely case is IT budget growth of 2.3 percent to 0 percent;
• The worst case is that IT budgets will be down 2.5 percent.

While Sondergaard noted all of the gloom and doom, he said information technology execs are most suited for this upheaval. Why? IT folks have already been through this–has anyone really forgotten 2001 to 2003?

His overall message is that IT has options. Sure, it would be silly to think that budgets written two weeks ago are going to stick. As for overall technology spending, financial services customers, the public sector, retail and manufacturing are all likely to curb spending.

However, Sondergaard said budgets aren’t likely to totally collapse. “IT is embedded in your business now. You can’t invoice somebody without IT,” he said. Sondergaard also noted that Western Europe has the worst IT spending outlook, but Asia Pacific will still grow at a healthy clip. North America looks flattish.

Overall, Sondergaard said technology execs need to do two things. Focus on disruptive technologies that can cut costs and think like your CFO. Here are Gartner’s top 10 disruptive technologies:

1. Multicore and hybrid systems
2. Virtualization and fabric computing
3. Social networking
4. Cloud computing
5. Web mashups
6. User interface
7. Ubiquitous computing
8. Semantics
9. Augmented reality
10. Contextual computing

Of those technologies the first four will fit best with the budget you have. The latter ones are projects to ponder in the future.

And here are Gartner’s top 10 recommendations for managing through an economic crisis.

1. Reduce headcount or freeze hiring
2. Renegotiate with technology and service providers
3. Curtail data center expansion, virtualize assets and lease them back
4. Consolidate systems
5. Outsource commodity
6. Offshore outsource
7. Investment shutdown
8. Prioritize projects
9. Mothball businesses and projects
10. Change leadership and restructure IT teams

Also see: Forrester cuts 2009 IT spending projections

October 13th, 2008

Gartner's CIO pep talk: Make a difference or be automated (or worse)

Posted by Larry Dignan @ 3:00 am

Categories: Gartner Symposium, Gartner Symposium 2008, General, Hardware Infrastructure, IT Management, Innovation, Offshore outsourcing, Outsourcing, Software Infrastructure

Tags: CIO, Information Technology, Gartner Inc., McDonald's Corp., Strategy, Management, Larry Dignan

Gartner analyst Mark McDonald late Sunday laid out the chief information officer agenda for 2009 and the big theme is that tech executives need to make a business difference or fade away. Why? Companies have other options–software as a service, cloud computing and shared services–that could deliver more value than the technology department.

McDonald’s argument, delivered at Gartner’s Symposium and ITxpo, goes like this: Information technology’s traditional strength has been implementing and operating systems (enterprise resource planning for instance). Anyone that views the future to be an extension of those skills could be toast.

Meanwhile converging trends such as digital natives, global customers, green computing and convergence will require a different CIO, one that’s more innovative and looped into the business. According to Gartner CIOs expect their companies to require them to innovate, expand into new markets, mine business intelligence and become a competitive advantage by 2011 without a lot of incremental spending.

This chart from Gartner’s research shows what CIOs are up against:

How a CIO delivers a difference will depend on the company, but the bogeyman is standardized IT services from elsewhere. In general, IT has to make a difference in your company’s market.

McDonald’s other message: Effectiveness doesn’t correspond with budgets. This chart tells the tale, but you’ll need a few glances before it hits you (click to enlarge).

My takeaways from that chart are the following: The most effective IT departments outsource less (16 percent vs. the bottom rung at 26%) and have been spending more on hardware (24 percent vs. the bottom rung at 16 percent). All groups mentioned in that slide spend about 31 percent on personnel.

In the end, McDonald’s talk, which focused on picking projects and measuring results, really boils down to people. Without the right staff–and CIO for that matter–the IT department could be in for a world of hurt.

April 11th, 2008

Traditional software licensing: Why you pay more and a look at your options

Posted by Larry Dignan @ 3:42 am

Categories: Enterprise 2.0, Gartner Symposium, General, IT Management, Linux, Microsoft, Offshore outsourcing, Open Source, Oracle, Outsourcing, SAP, SaaS, Salesforce.com, Software Infrastructure

Tags: Software, Software-as-a-service, Open Source, Software Company, Margin, Tools & Techniques, Software As A Service (SaaS), Management, Emerging Technologies, Larry Dignan

It’s hard to believe that some of the most profitable software companies in the world–Oracle, Microsoft and SAP–are sitting on a licensing model that is untenable in the long run and will increasingly irk customers. But there may be a revolution in the cards that could tip the balance of power, argues Gartner.

In a presentation, Gartner analyst William Snyder makes the case that software profit margins will erode. These software giants will fall to the same pricing pressures their hardware cousins. Snyder spoke at the at the Gartner Emerging Technologies Conference this week.

See more from Gartner:

• Gartner: Windows collapsing under its own weight; Radical change needed
• Video: Cisco’s virtual health care project
• Video: Sun Labs looks into ‘proximity communications’
• MGM Grand’s IT green field: RFID meets alcohol; predictive modeling; bandwidth galore
• Gartner: $100 laptop still too expensive for the emerging markets

Let’s face it: The hardware market is commoditized, workers are being offshored and budgets are being cut. Yet you’re paying more in support and maintenance of software. Snyder says something doesn’t add up here. I’m inclined to agree, but there’s a reason software pricing sticks: It’s an oligopoly market dominated by just a few vendors–SAP, Oracle and Microsoft. And these software giants are just getting bigger via acquisition. These giants have the largest installed bases and feature applications that are difficult to uproot. Snyder argues that open source may change the equation. I reckon a little customer revolt wouldn’t hurt either. Snyder hints at a budding revolution:

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