Value Is Watchword for 2005 Budget

By Peter Coffee  |  Posted 2004-11-08

Value Is Watchword for 2005 Budget

With budgets largely flat or even still shrinking, IT professionals are looking for value at every tier of the enterprise stack—but theyre not making radical changes to core technologies.

Members of eWEEKs Corporate Partner Advisory Board are eyeing the potential of new technologies and tools, but theyre also polishing their political skills to build momentum from business needs inward—not from technologies outward.

The mission that emerged during a roundtable teleconference held last month is one of communicating the IT value proposition to the rest of the enterprise and building demand for what IT can deliver.

The mood of group members seemed to be that technology improvement proceeds at its own pace but makes a difference to their organizations only when costs are well-defined and well-controlled—and when operational issues, such as security, are managed at a level that keeps general managers comfortable.

These veterans of past vendor promises, and the disappointments that often follow, are very much drawing their own road maps rather than letting any vendor assume that role. Theyre still kicking the tires, for example, on Microsoft Corp.s Windows XP Service Pack 2. They appreciate its intentions, but theyll assure themselves of its readiness for smooth deployment before they push it out to their desktops.

The mandate that they all do accept, and that they all must find the resources to satisfy, is to meet rising legislative and regulatory requirements for IT support of corporate governance improvements—a new and most likely permanent addition to plates already well-filled with demanding tasks.

The participants in the roundtable, which was moderated by eWEEK Labs Peter Coffee, were: Randy Dugger, president, Dugger & Associates; Gary Gunnerson, IT architect, Gannett Co. Inc.; Susan Nowicke, network manager, U.S. Court—Eastern District of Michigan; Fran Rabuck, president, Rabuck Associates; Robert Rosen, CIO, National Institute of Arthritis and Musculoskeletal and Skin Diseases; and Kevin Wilson, product line manager of desktop hardware, Duke Energy.

How do emerging technologies fit into the budget planning at Gannett, Gary?

Gunnerson: Weve seen that the dark-fiber world is looking pretty good, and weve made investments there, and that still continues. If anything, those ROI [return on investment] projects look very good there.

Click here for an in-depth look at Gannetts emerging dark-fiber strategy.

What about the adoption of Web services or service-oriented technologies?

Gunnerson: Weve had pilots that weve been moving along, and we have a group thats dedicated to taking a look at Web services where they make sense, but things really havent changed much from last year.

Does that mean you feel that the technology is promising but hasnt jelled enough to be a platform for large-scale deployments, or you just havent established what its good for yet?

Gunnerson: Web services to us is another architecture approach, and were embracing it as it makes sense to us. Were not saying, "Lets go out and create a whole mess of Web services for third parties," as much as, "Why dont we make sure that when we architect things internally that we follow the Web services approach so that we can start using them as virtual resources inside our firewall."

How are things at U.S. District Court, Susan?

Nowicke: Whats looming on our horizon and getting worse and worse every year is a reduction in budget.

So your budget is not flat but actually still shrinking?

Nowicke: Well, it happens on several levels. As part of a federal judiciary, we make up a very small percentage of the federal budget. But even so, a lot of the budget resources are being redirected to homeland security, making even less and less available for the judiciary.

Last year ... we experienced a cut in our local IT budget of about 40 percent, and its expected to be at least that much again this year. So now were reading directives about cost-containment initiatives, and there are even some discussions about aggregation of servers regionally.

When you get told that your budget is going to shrink by 40 percent, what are your targets when you have to cut that much?

Nowicke: Well, to do whatever we can at no cost better and to find ways to streamline and maybe even combine resources so that we can do things better.

Its impacting salaries, too, not just in IT but across the board. A figure that I saw this morning said that within the federal judiciary, 6 percent of salaries are made up of IT people. So were looking at ways to combine or aggregate resources so that when a RIF [reduction in force] goes through, they can include IT as part of the group that gets RIFed.

Has anyone been discussing the offshoring of any of your operations or management to get that done?

Nowicke: Not that Im aware of, and I think there may even be some conflicts of interest in doing that.

Next page: SP2 strategies.

Page Two

What is the IT budget situation at Duke Energy, Kevin?

Wilson: On the workstation side, budgets are cruising along just comfortably.

Meaning essentially flat?

Wilson: Were cruising comfortably—no excess, yet no really tight pinching. Security continues to get the focus—intrusion prevention systems, firewalls, additional software to help protect the desktops from threats that may get into the system.

What would you say is the representative workstation that youre acquiring these days? What class of hardware are we talking about here?

Wilson: Id put our normal offering at 3GHz and 512.

A 3GHz processor and 512MB of RAM?

Wilson: Right, probably for 80 percent of our people.

And these are primarily Windows machines?

Wilson: Right, XP.

And what has your strategy been on the Windows XP Service Pack 2 deployment?

Wilson: SP2 is going out probably March/April of next year. Were not pushing it as a security fix right off.

Is that because of specific reservations or because you havent done your due diligence yet?

Wilson: We upgrade desktop software in cycles, with integration testing of several updates at one time, and were rolling SP in with some other updates that were doing next year. Therell be a lot of testing going on with it in November and December.

Do others have a defined position on SP2 at this time?

Gunnerson: I dont think weve even put it on the threshold yet.

Nowicke: Weve been testing it in the IT department. I think probably well include it the next time we do a refresh.

It doesnt sound like any of you are in any hurry to get it out there to deal with any security issues.

Wilson: Were still looking more at our software firewall and intrusion prevention facility ... in the near term—not necessarily what comes with SP2.

Click here to read more about IT administrators skepticism about SP2s security.

Frank, is the IT budget opening up any at Bose?

Calabrese: Weve been asked to cut our per-desktop unit cost by 5 percent. On the upside, were going to be capturing an additional 10 percent of units this year. So Ill make up in volume what Im losing in unitized costs.

Is your unit cap increasing because of an increase in the size of your user base?

Calabrese: Really, its more accurate counting, as well as a change in focus on how were actually doing our charging.

Weve assumed a desktop ratio based on demographic profiles of our user base, and our financial guys would come to the table and agree in principle and then charge based on people—for example, with the assumption that engineers have two machines and accountants have one machine. And the numbers would reconcile, and wed move forward.

It turns out that engineers have three machines and some accountants have two machines, and [Microsofts] SMS [Systems Management Server] has the ability to pick up on that. So the system of record will be SMS tracking instead of our human resources database—net-net is Im adding roughly 900 additional units.

And the result of that is youll be able to get those resources without, in effect, saying you need a budget increase?

Calabrese: Exactly. So whereas weve got flat head count, it is funding my efforts for desktop firewalls, it is funding my efforts for automated password management tools. So all of these capital expenditures around tools are being underwritten without reflecting against my budget.

Next page: Managing costs and efficiencies.

Page Three

Now, it used to be when we had these conversations that wed talk about technology thresholds being crossed, but most of what Im hearing today has to do with security and operational and security issues rather than core technology performance improvements. Is that by necessity, or do you feel that technologies are about as good as they need to be?

Calabrese: I think its just that were so used to that amount of technology change that goes on year upon year. I can sit here and talk to you about some of our wireless initiatives, some of our mobile work force initiatives, but the focus really is on managing the costs, managing the efficiencies. Im spending an awful lot of time these days working on service-level agreements and making the services predictable.

One of the things we have talked about with you in the past, Frank, is having a work force distributed across international boundaries and working with technical and design teams and so on. Are you satisfied with your ability to handle security in those environments?

Calabrese: Were floating a proposal to charge out our services on a unitized basis for our machines outside of the United States, where before we would do it under the guise of a project. We would send a team to Europe to do some standardization, some work, and then charge that effort directly to the cost centers that were affected by it.

Now were saying, "OK, a portion of our lab has to deal with globalization, so were going to charge a portion of the lab, were going to charge a portion of our help desk."

Were creating a model where we can again unitize costs. We can use SMS to do the management, the inventory tracking, and then turn around and say, for every European desktop computer, its going to be "n" number of dollars per month payable to our corporate information systems group for licensing, support, internationalization, hardening—all of the core pieces of technology we offer to that population.

Bob, are things any different with IT budgets in your government sector?

Rosen: Our budget is essentially flat. Our emphasis is still on storage—storage is just a beast that devours all. We keep generating data so fast, and were trying to find places to put it. If we do make any investments, [storage] is primarily where theyre going to be—improving our storage and storage management.

Id really like to move along to what everybody is calling "information lifecycle management." But every time you talk to people and say, "How long do you need this data?" they say, "Forever." So it is a challenge.

I know that you have a somewhat diverse and independent user community, Bob. You have some people who are very definite about "this is what I need to do to do my job, and I need you to make it work." What are the costs of heterogeneity doing to you? Is it getting easier than it used to be? Apple Computer Inc., for example, has tried very hard to promote the idea that coexistence of OS X and Windows machines is a much smoother proposition than it used to be. Are you seeing any operational benefits from that effort on Apples part?

Rosen: I think were seeing some, in terms of OS X, but the full benefit remains to be seen. Were still suffering from the multiple varieties of Unix that exist. And so, in some sense, its yet another variety of Unix.

Next page: Consulting war stories.

Page Four

And for the very processor-intensive stuff that some of your people are doing, are you seeing any Linux clusters or grids that are coming in and posing new integration challenges?

Rosen: We just put in [an IBM eServer pSeries] P670, on which well run four partitions—AIX and Linux partitions. So thats just starting to come up as we speak.

What was your basis for going forward with that choice?

Rosen: Performance, and the ability to do the dynamic partitioning, so we can move things around depending on where theyre needed, without having to shut the whole machine down.

Rabuck: From a consulting standpoint, I have a couple of war stories.

Please proceed.

Rabuck: Im working with a large health care company that has done a lot of outsourcing during the last couple of years. And now, looking into the 2006/2007 time frame, theyre saying, "We need to start bringing things back in-house," because theyre finding that the work thats getting done is only about 75 percent complete, and then they have to have some amount of work—25 percent—done here.

Im working on some wireless projects. Im finding that the way these things are justified overall is the long-term approach. Its not that IT puts them in the budget, its that somebody says, "Hey, theres a better way to do our field maintenance or our sales maintenance or whatever were doing." So it becomes an incremental budgeting project, where youre going to do it either by regions or areas or lines of business.

And youre seeing success when a business unit comes in and says, "This is a capability wed like to have," and they become the owner and the patron of that project, as opposed to it being an IT-generated initiative?

Rabuck: Absolutely. And the role of IT has diminished in that sense. No longer does IT try and go out and innovate or push something. But I think, at the same time, because companies are under pressure to increase performance, its forcing them to take a look at what technologies can do that. I think that becomes the opportunity for IT.

Dugger: Things are interesting here in California. Local governments are still belt-tightening, but, interestingly, the police departments of some local governments are going forward with new projects. Theyre looking at tying together all of their information, as far as common look-ups for local-type information. Theyre looking at doing more types of information sharing and having it as far down as the cars.

And theyre doing that because of the benefits to the service they can provide, or because they think it will let them reduce redundancies in areas like dispatch?

Dugger: Well, I dont think its going to reduce dispatch so much, but I think its areas such as getting information faster and more directly to the officers on the street. They can pull somebody over and find out that they were pulled over last week in City Z for the same thing.

So, providing a much more global view over the entire region.

Dugger: Right, and thats their push—theyre taking it from a regional standpoint. And a lot of it is being funded by grant money, some from 9/11.

So you mean federal grant money? From the Department of Homeland Security?

Dugger: Yes.

Who takes charge of things like that? Are there existing consortia of public service agencies in the area, or do new clusters of interested people come together to find some way of sitting around the table to talk about these things?

Dugger: More the latter.

So its not being driven by the IT department; its more mission-driven.

Dugger: Yes, but the IT department is obviously involved because they have to make sure the architecture is going to work with everything they have.

As we near the end of our time together, I need to ask: Whats the one area of your budget thats taking resources you wish you didnt have to allocate?

Calabrese: Id have to say security and hardening, in an effort to stay within government compliance.

The actual costs that hit you as a result of security—are they primarily remediation, or the costs of things like patch management and bug track monitoring? Whats the actual expense of security that you incur?

Calabrese: Well, its avoidance. Its pre-emptive stuff. Its the individual desktop firewalls that we just deployed for all our machines. Its that whole gamut of compliance-related issues.

Next page: Additional viewpoints.

Page Five

Carol Knouse
Vice president and CIO
The Donna Karan Co. LLC


Is your organizations IT budget up, down or flat for 2005?

Our budget is down for 2005 as a result of increased automation and process improvements made within the IT department during 2004.

Are there any major shifts in how the IT budget is being allocated?

In the past, the IT budget has borne the cost of all IT-related expenditures, even if an expenditure could be directly attributable to a specific business unit. For 2005, any expense that can be identified with a particular business unit is being budgeted by that business unit to accurately value the contribution of that unit.

Is there any one product or technology on which you wish you could spend more or less?

We would like to spend more money on business intelligence tools and services, but the rising cost of securing our infrastructure against intrusion, viruses, worms and so on is negatively impacting our ability to spend elsewhere. While security of our computing environment certainly is a top priority for me and all of our senior executives, it is not contributing to our bottom line. —E-Mail Response

Kevin Levesque
IT manager


Is your organizations IT budget up, down or flat for 2005?

Looks like our IT budget will be up for 2005, even after a considerable jump in spending in 2004. Stability, redundancy, disaster recovery and consolidation of resources are the driving factors for us.

Are there any major shifts in how the IT budget is being allocated?

ATX has shifted allocation of funds based on the specific project and has migrated away, in a sense, from traditional servers to a blade server/SAN architecture that seems to scale well in a high-growth environment such as ours.

Is there any one product or technology on which you wish you could spend more?

Security is always an area that I wish we could allocate more time to. Perhaps this year will be the year of the full-time security consultant–either contracted or hired. —E-Mail Response

Bill Conati
Director of IS
MAAX Spas Arizona Inc.


Is your organizations IT budget up, down or flat for 2005?

Budget is flat to guarded.

Are there any major shifts in how the IT budget is being allocated?

Yes, as we move toward a lean manufacturing and office environment, a portion of our savings is reinvested directly into the company—information systems-related or otherwise. There is strong incentive to incorporate lean initiatives because it provides excellent access to funding for support of IT projects throughout the organization.

Will you be making investments in new technology areas in 2005?

Yes, but it all depends on lean initiatives.

Is there any one product or technology you wish you didnt have to continue to spend (or spend so much) on?

Security, anti-virus, anti-spam devices. Seems that more and more of my IT budget is being allocated to the annual cost of these kinds of technologies instead of in innovating products that improve competitiveness, bottom line and so on. —E-Mail Response

Michael Schwedhelm
Vice president and CIO
United Labor Bank


Is your organizations IT budget up, down or flat for 2005?

Up 40 percent over 2004.

Are there any major shifts in how the IT budget is being allocated?

Yes, in 2004 we cut back sharply on maintenance because of other companywide priorities. This year, were doubling up on the maintenance portion of our budget to "catch up." Also, we have two major IT projects: The first is a new core processing system. Were switching vendors and converting to a new system. This will touch every employee in the bank as well as every customer, and it has to be done right the first time. The second will be a new Internet banking system. Getting the two systems to talk and process correctly will be challenging, to say the least.

Will you be making investments in new technology areas in 2005?

Well be making investments in more technology but not acquiring any new (that is, not used at the bank before) technology.

Is there any one product or technology on which you wish you could spend more?

More wireless. It would make life much easier, but there is a good deal of reluctance to accept this by other managers, as well as by our regulators, because of security fears.

Is there any one product or technology you wish you didnt have to continue to spend (or spend so much) on?

Clearly, this screams "security" to us. It would be great if everyone on the Internet was nice. Theyre not, so we have to continue to spend a decent portion of our budgets on defensive and tracking technologies that could be spent elsewhere. —E-Mail Response

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