Making do is becoming, painfully, business as usual. No ones happy about it, but most IT pros are gearing up for 2003 with a plan to stretch limited resources—again—while waiting for the economy to shift out of neutral.
Some industries are more battened-down than others, with the landscape ranging from nuclear winter to temperate. Everywhere, however, IT executives say that big new projects are at least a year away.
“My vision right now is rather myopic, to be honest,” said Jorge Abellas-Martin, an eWeek Corporate Partner and senior vice president and CIO of Arnold Worldwide Partners, an advertising agency in Boston. “Advertising has been hit pretty hard. … Everybody is focused on reducing costs to the bare minimum so what little new business comes in can go directly to the bottom line.”
Few IT managers or industry observers expected the recession to last this long.
“This time last year, people predicted a tough first half then an upturn in the second half. Obviously, that slid,” said Fred Amoroso, CEO of Meta Group Inc., an IT research and consulting company in Stamford, Conn.
Amoroso said he agrees with predictions that the economic downturn will bottom out by years end and be followed by a gradual recovery.
Nonetheless, IT spending will trail the macroeconomic trend, Amoroso said. “In 2003, most companies will continue to see a decline in IT spending as a percentage of their overall budget.” That decline is likely to be 12 to 15 percent, although, on an absolute basis, it will be only 5 percent, he said.
Amoroso said there is not much new activity in external spending—for example, on consultants, systems integration and major new projects, such as enterprise resource planning.
But initiatives that could save money are getting some attention. These include server consolidation; SANs (storage area networks), to centralize data storage; mobile computing; and, in the financial services industry, so-called straight-through processing, to streamline financial services transactions.
In addition, many IT departments are becoming tougher customers and looking to squeeze every penny out of the contracts they sign with IT vendors. In the background—with the Sept. 11 terrorist attacks in mind—is ongoing concern over disaster recovery planning.
Abellas-Martin said that Arnold and its parent company, Paris-based Havas, will soon achieve a significant savings by consolidating contracts for purchasing Intel-based systems. Its the sort of thing that was overlooked before times got tough.
“Before, we had Dell, HP, Compaq, Toshiba and IBM; now, its all Dell and HP, and were controlling the configurations. There are no more vanity items,” said Abellas-Martin. “The Dell deal will save the whole company hundreds of thousands of dollars.”
To increase billable hours, Abellas-Martin is looking to make Arnolds account executives more productive on the road. Hes exploring third-generation cards for Sprint PCS devices, for example. “Its all about getting more out of the people we have,” he said.
The publishing industry, like its advertising cousin, has been hit hard.
“Capital budgets have been cut in half, but for the capital thats left, expectations are twice as acute,” said Bill Godfrey, vice president and chief technology officer of Dow Jones & Co. Inc., publisher of The Wall Street Journal, in South Brunswick, N.J.
Even so, Dow Jones continues to invest in long-term projects. The financial news company is in the midst of implementing a corporate strategy its calling Business Now, which includes 10 major initiatives, according to Godfrey. A centerpiece of the plan, he said, is a new, $26 million advertising system for Dow Jones major publications.
The system will let advertisers use a secure private key to access accounts with Dow Jones. The system relies on Web services and Microsoft Corp.s .Net architecture, embracing technologies such as Simple Object Access Protocol and the C# programming language. It runs on Intel-based servers that use Microsoft operating systems.
The advertising system is being developed in partnership with Atex Media Command Inc., of Bedford, Mass., which is building the system according to Dow Jones specifications and will later sell it as a product. About 30 Dow Jones employees and some 100 Atex employees are at work on the project.
Business Now also includes a recently launched CRM (customer relationship management) initiative that mines data on subscribers to wsj.com, the online edition of The Wall Street Journal. Dow Jones is working with Booz Allen Hamilton Inc. to develop the business process redesign road map for the project, which is expected to start early next year. “Were starting with strategy, not with product,” said Godfrey. “Were not working with big CRM vendors because we want objectivity—what is best for Dow Jones.”
All this activity takes place against the backdrop of a major relocation coupled with a beefed-up backup strategy. In the wake of Sept. 11, the company moved its main operations out of Lower Manhattans World Financial Center and into offices in South Brunswick. During the summer, however, a major bureau was re-established at the gutted and refurbished World Financial Center. Meanwhile, a major backup facility was established in Secaucus, N.J., which also houses operations for wsj.com. Headquarters is once again in Lower Manhattan, although the majority of workers remain in South Brunswick.
An initiative to support reporters with advanced mobile technologies is also part of the mix. Using a Security Dynamics Technologies Inc. SecurID card, reporters can access a Web-based newsroom research system from anywhere in the world. “They dial the URL, and they have access to those [research] tools,” said Godfrey.
In government, too, the prevailing winds of cost containment are blowing hard.
“All those big budgets have disappeared. You dont know how much money homeland security is going to suck up,” said Robert Rosen, CIO of the National Institute of Arthritis and Musculoskeletal Skin Diseases, in Bethesda, Md., and an eWeek Corporate Partner. “Unless Congress gives you more money, what youve got is what youve got,” he said.
With a war in progress and the economy sputtering, a windfall of tax dollars is not likely for his department, said Rosen. In addition, the money that does come in will be used in large part to trim expenses. “In 2003, were looking at server consolidation, SANs and disaster recovery. Its cost-containment-oriented,” he said.
Rosens server consolidation would mean running larger and fewer Intel servers. Those servers now run a mix of Windows NT and Windows 2000, and Rosen is looking at Unix and Linux alternatives. “We could realize savings by going to Linux. Were running Linux in the research labs,” he said.
Rosens institute, which serves 500 users, is scattered over a number of sites. Hes investigating the implementation of SANs in different locations that could be pooled to offer virtualized storage, but the sticking point so far is cost. “The software is there, but its all very expensive,” said Rosen. “Thats a key point. Were really looking at ROI analysis.”
Rosens new disaster recovery plan is also oriented toward his institutes many locations. “We need to make sure we have the right things at the right places,” he said. “Do I have copies in the same place, or in two places?”
Rosen is also looking at increased use of wireless technologies to satisfy growing demand among end users. Hes willing to give wireless a look because it does not involve large new infrastructure investments but would enhance the experience of IT users. Before that happens, though, Rosen said questions need to be answered about the security of medical data over wireless networks and the possibility that the radio emissions of wireless equipment would interfere with the functioning of his institutes medical equipment.
Straight to the Point
In financial services, straight-through processing is attractive because it saves time and money. The idea is to automate the customer order; the trade itself; the confirmation to the customer and; ultimately, settlement and custody.
“There are a number of steps that one has to go through. Its about automating middleman processes and linking processes more closely together,” said Meta Groups Amoroso.
Companies are spending money to save money with straight-through processing. But while many large institutions will have to retrofit legacy systems, one Internet-based company built straight-through processing into its architecture from the start.
“We were doing it from the very beginning,” said Jerrold Grochow, CTO at Foliofn Inc., a Web-based online portfolio trading company in Tysons Corner, Va. “Those that didnt are at a severe cost disadvantage. In fact, we are in an extremely cost advantageous position because we were able to build this from the ground up rather than having to retrofit it into older systems.”
In mainstream heavy manufacturing, the budget watchword is caution.
“Its going to continue to be a tough economy. That will influence how many things we do and how fast we go,” said Pat Flynn, CIO of Paccar Inc., a truck manufacturer in Bellevue, Wash.
At Paccar, Flynn said, multiyear projects are not on the front burner: “What can we get done in 2003 and not let linger on? Weve tried to carve up projects into manageable chunks.”
But Flynn wont be facing budget cuts, as will many CIOs. Hes counting on an IT budget that is at least as large as last years—maybe larger. “The company continues to believe that IT is an important part of value creation,” he said.
Still, Flynn is being cautious. “Were not going to go out and hire a bunch of people. Were focusing on things that add bottom-line value,” he said.
Rather than launching big, open-ended projects, Flynn is planning to do proof-of-concept deployments in several of Paccars worldwide locations. If they work, theyll be tried elsewhere.
This cautionary approach extends to watching expenses. “Were being smart about managing costs,” said Flynn. “We have been using Microsoft NetMeeting much more [than traveling or videoconferencing]. Our videoconference costs are down 75 percent over the last two years.”
Flynn is also keeping an eye on which vendors can survive these trying times. “Weve been much more careful about writing contracts. Were also taking a jaundiced look at startups,” he said.
Flynn is interested in consolidating servers in Intels Itanium-based clusters. Hes also investing in SANs to conserve data center space.
Disaster recovery figures in his thinking, especially since the Seattle area withstood a major earthquake in February. “That made us look at our disaster recovery plans,” said Flynn. “Our previous plan was to put tapes on an airplane, but 9/11 showed that would not work. We may be better off just building redundancy and resiliency in our network.”
Even with the near-term focus, Flynn is trying to keep his eye on a more distant horizon. “Its all about extending our corporation up and down the supply chain, the value chain,” he said. “How can we provide what our customers need on a global basis?”
Executive Editor Stan Gibson can be reached at [email protected]