CIOs: Tech Will Drive Economic Recovery

By Darryl K. Taft  |  Posted 2002-10-30

CIOs: Tech Will Drive Economic Recovery

NEW YORK—The IT function could be the leading factor in pulling the economy out of its slump, according to the chief information officers at some of the nations leading institutions.

At the Society for Information Managements CIO Forum here Wednesday, CIOs offered advice on cutting costs and generating revenues to help enterprises steer their way through tough economic conditions.

Shelley Leibowitz, managing director and CIO at Morgan Stanley, said that for 2003, key issues for the enterprises include heightened risk management, new opportunities, regulations and increased oversight coming out of the Sept. 11 terrorist attacks.

IT can play an important role in helping the economy pick up "because IT is all about productivity. Your technology strategy is critical," said Leibowitz

Leibowitz, like other CIOs at the event, said outsourcing could be a positive presence for enterprises. Yet, she said, Morgan Stanley does "as much co-sourcing as outsourcing, meaning we dont completely let go." Some of the activities her group has outsourced include data center maintenance and monitoring, quality assurance, legacy system support and some development.

One criterion Morgan Stanley uses is, "if its a function that transcends financial services, its a great candidate for outsourcing," she said.

James Noble, vice president and CIO of Phillip Morris Companies Inc., said his company follows a shared service model, where the companys IT organization maintains the "company store," where Phillip Morris various departments can buy their IT products and services.

"If you get a shared services organization right, youll be saving between 10 percent and 30 percent of your annual IT spending," he said. However, he advised organizations not to try to grow just by squeezing costs out of IT.

Noble, who also has been CIO of AOL Time Warner and General Motors, among others said the fastest way to get a successful shared service organization going is to engage in a venture with a partner.

"Ive lived through all the models and I was looking for a better way," he said.

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Marilyn McMillan, CIO at New York University, said her job continues to evolve because of advances in technology. She said four years ago only 38 percent of incoming freshmen brought PCs with them; today more than 96 percent do. "And the first thing they want to do is plug in and suck bandwidth," she said.

McMillan said the IT function has helped provide a return on investment in various ways. For instance, instructional technologies that enable students to chat and to do coursework online has freed up physical class space in the buildings on campus, she said.

"We were able to cut down on class space," McMillan said. "We run 7,000 classes a semester and were always tight for space."

McMillan and other CIOs said something that has worked for their organizations, helping to save money and drive productivity, is the ability to fund smaller portions of projects and deliver them.

"We dont have to wait until something is complete and perfect before we can deploy on it," she said.

For instance, she said NYUs portal has been implemented in phases and has been successful.

"We were able to bootstrap the success of the deployment to get through to the next release," she said.

Meanwhile, Dale Kutnick, chairman and co-research director at the META Group, gave a list of dos and donts for IT organizations. For example, he recommended that companies stay away from are public key infrastructure projects because "all the vendors selling PKI are all that close to going out of business. We think its going to die and its going to be replaced by MKI, the Microsoft key infrastructure. They own the desktop," he said.

Other areas to be avoided include strategic enterprise application initiatives, massive convergence initiatives, mobile infrastructure and ubiquitous customer relationship management projects with channels synchronization.

Some trends Kutnick said IT organizations should be on the lookout for include the rise in communications costs, "so make long-term contracts now," he said. Others include data center consolidation, third-party sourcing, improved storage technology, licensing price structure with software prices going down but maintenance going up, and benchmarking to reduce costs.

Kutnick also said application development will make a comeback.

"For the newer classes of applications, there just arent any packages," he said. "Packages increasingly will sit on top of infrastructure and well build our applications around infrastructural elements."

Leibowitz said that at Morgan Stanley, it is sometimes difficult to go with an enterprise suite versus best-of-breed applications.

Meanwhile, Kutnick said he was big on Web services.

"The standards are there and are bubbling up," he said. "Web services are all about provisioning business services. Forget about all the technical mumbo jumbo, at the end of the day the business value of Web services will be easier provisioning. Web services are about business functionality and business function outsourcing. It will level the playing field for small and medium sized business. There are tremendous efficiencies thats why Web services is going to happen."

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