Industry analysts such as IDC Australia know that empirical research must support industry predictions and insights. That is why every year, for over 15 years, IDC Australia undertakes a survey of Australasian IT departments.
Titled the 'Forecast for Management' study, the aim of this eight-page, 43 question research is to give insights into technology usage, spending patterns and the challenges facing CIOs across Australia and New Zealand. Peter Hind, IDC Australia's manager of User Programs, spearheads the 'Forecast for Management' project. He provided CIO with highlights of this year's studyOne thing the IT industry never seems to be short of is gurus. Each week my mailbox creaks with the weight of invitations to seminars, conferences or symposiums.
Various industry prognosticators and analysts regularly front up, "sharing" their forecasts and insights on how the IT industry and its associated technologies and services will unfold over the next few years. However, there are no better indicators than those provided by the men and women whose jobs put them at the IT frontline - the CIOs and IT executives.
The latest results from IDC's "Forecast for Management" study are just in and they provide many valuable insights. For CIOs the findings supply a yardstick for comparing their performance to that of their peers. On the other hand, the data assists IT vendors by highlighting where they should focus their marketing efforts over the next few years.
Perhaps the most encouraging information to come out of this year's survey is that investment in IT has increased over the past 12 months in the region. A year ago respondents indicated that their organisations were investing a median of 1.99 per cent of turnover on IT. In the current survey the figure rises to 2.04 per cent. This means that locally investment in IT has continued to grow for the past three years. Not surprisingly, the survey shows spending on IT is highest in the white collar industries of the financial and business services sector (4.50 per cent) and the public sector (2.96 per cent).
IDC has long recognised that not all IT investment is channelled via the IT department. With the dramatic reductions in the price/performance ratios for desktop systems, many end-user departments are purchasing PCs directly from their own budgets. This year's "Forecast for Management" survey reveals that the median average for [direct] expenditure in Australia and New Zealand is 0.97 per cent. This is almost lineball with figures from the past two surveys, indicating that while pro and con arguments for the centralisation of IT control persist, there's been little practical impact on most CIOs.
Information technology is still regarded by most organisations as a vital investment, but equally important to management is where the money is spent and why. As such, the survey asked respondents to identify what technologies they were currently using and which ones they envisaged using over the next two years. The four largest are: external e-mail (70 per cent currently use); mobile computing (62 per cent currently use); client/server (61 per cent currently use) and ISDN (61 per cent currently use).
Certainly these are impressive figures, but more interesting are those technologies with usage figures showing substantial growth over the past 12 months. Work group computing and data warehousing are at the fore; each growing close to 50 per cent between the 1996 and 1997 surveys. The other big riser year-on-year is executive information systems with almost 25 per cent growth.
Because "Forecast for Manage-ment" also queries intended technology usage, projections are possible.
Respondents were asked whether their organisations were planning to implement certain solutions either by the end of 1997 or by the end of 1998. Given the hype surrounding the Internet, it's no surprise that the usage of electronic commerce via the Internet shows the greatest projected rise (see "The Shape of Things to Come" p33) - from 9 per cent of organisations currently to 31 per cent by December 1997. This represents a 344 per cent growth over 12 months.
Other systems with high anticipated growth include: OLAP (283 per cent), smart cards (250 per cent) and workflow (236 per cent).
In the longer term smart cards will continue to grow dramatically. By the end of 1998, 26 per cent of organisations responding anticipate using the technology. This represents a 650 per cent growth over current reported usage figures.
The longer term outlook is also bright for vendors of networking and communications solutions. Use of the asynchronous transfer mode (ATM) protocol is forecast to grow by 550 per cent by the end of 1998. Frame relay has a projected rise of 152 per cent. Wireless data networks are tipped to grow by 420 per cent and wireless LANs by 525 per cent. Associated with this is the high growth in the network computer/thin client approach; some 42 per cent of respondents envisage utilising it on the desktop over the next two years, a 420 per cent growth rate.
The above figures support another finding of this year's "Forecast for Management" survey: The make-up of the IT budget is changing. Networking components and solutions are taking a larger slice of the IT budget pie, up from 12.4 per cent in 1996 to 13.9 per cent today, and growing to 14.1 per cent by the end of 1998. On the other hand, the hardware component is projected to drop from just over 30 per cent two years ago to 26.4 per cent by the end of 1998. Instead, CIOs will likely spend more on software. This slice of their budget is tipped to grow from the 14.9 per cent reported last year to 17.9 per cent by the end of 1998.
Those promoting the advantages of outsourcing should find comfort from the survey's results. For the evidence suggests that here lies the biggest change in the shape of the IT budget. In the 1996 survey, internal staff represented 27.6 per cent of the IT budget. That number has dropped to 25.8 per cent, with all indications showing a further drop to 25.4 per cent by the end of 1998. At the same time, the portion of the IT budget allocated to external or outsourced IT staff increased from 11.6 per cent in 1996 to 15.9 per cent in 1997, with respondents indicating a rise to 16.3 per cent in 1998.
For the past four years the "Forecast for Management" questionnaire has asked respondents which IT activities their organisations currently outsourced. As in the previous two years the principal activity outsourced by CIOs is education/training, with around 50 per cent utilising third party resources.
This is followed by application development (38 per cent), application maintenance (35 per cent) and system technical support (32 per cent).
At the other end of the spectrum, unlikely IT activities for outsourcing are quite surprising. Contrary to popular belief, the least likely IT activity to be outsourced is data centre operations, according to the survey. Some 87 per cent of respondents indicate that their companies outsource little or none of this work. Another surprise is that very few organisations outsource the preparation and evaluation of IT tenders. Around 84 per cent of respondents indicate little or none of this work is done by external organisations.
There's also no rush to outsource help desk management. However, while around 80 per cent of the organisations are outsourcing little or none of this work, there has been a gradual increase in the use of external suppliers. Over the past three surveys the percentage of organisations outsourcing most or all of help desk management increases from 6.1 per cent to 9.3 per cent. Given the plethora of products IT departments have to support, as well as frequent updates of desktop applications, it is remarkable that more businesses aren't turning to outsourcing for help desk assistance.
In regard to internal staff who aren't being made external, the majority are deployed in systems development (29 per cent). This is slightly down compared to previous years, but is still high given most organisations' preference for packages solutions. Presumably, many of these people are working on resolving the Year 2000 problem. Most IT departments in Australia and New Zealand report that they have either completed or are well under way with resolving this issue (see "Crying Wolf"' page 7).
Still, on average the survey confirms that there has been greater stability in local IT departments over the past 12 months. Attrition levels drop from 15 per cent to 12.66 per cent of total staff. While staff stability is usually good, it might also indicate the unavailability of alternative positions. It's worth noting that attrition levels in 1993, the last year of the recession, are similar to the recent figures.
More IT&T responsibilities are falling under the CIO's domain in Australia and New Zealand. The "Forecast for Management" survey asked respondents to identify the degree of responsibility that the most senior IT/IS manager had for various IT-related activities. In nearly all the categories the percentage of CIOs with responsibility for all of the activity increases. The most notable year-on-year increases are in the areas of mobile telephones, user support and PC LANs. The number of CIOs with total responsibility for these activities grew by 13.6 per cent, 10 per cent and 5 per cent respectively.
More CIOs may control mobile telephones purchasing in their organisations, but there is a surprising drop of 13.3 per cent in their having total responsibility for the operations and management of their organisations' PABX and voice networks. While other research indicates growth in Computer Telephony Integration (CTI) applications, it is likely that control for these applications remains with the appropriate business users rather than with the CIO.
The CIO has his or her work cut out in other areas though. A section of the survey focused on IT management issues. Here, 85 per cent of respondents revealed that their organisations had an IT strategic plan. Two-thirds of these companies update it annually, while a further 25 per cent of CIOs update it every three years. In addition, 61 per cent of respondents indicate the existence of an IT steering committee and in 45 per cent of these cases the CEO or MD is represented. Furthermore, just under 72 per cent of CIOs benchmark their IT/IS operations on issues such as: completing projects on time (40 per cent); completing projects under budget (38 per cent); customer IT satisfaction (41 per cent); and, systems reliability (39 per cent).
However, quality accreditation is one area relatively few CIOs embrace.
Sixty-nine per cent of respondents indicate that they have no plans to implement a system in accordance with ISO standards.
After all this investment and effort in harnessing IT the burning question is: "Has it all been worth it?". On the whole, the answer is yes.
CIOs were asked what was the overall impact of information technology on their business. Twenty-one per cent indicated that IT is a significant source of competitive advantage, while another 62 per cent felt that IT is a steady contributor to their continuing operational capability. Only 2 per cent of CIOs reported that they are generally disappointed with their return on IT investments. This positive attitude, together with the continuing growth in IT investment levels by the majority of organisations, is clearly an endorsement for the importance of IT in many companies. As such, it is clear that while the CIO role will remain a challenge, it will also be very much in demand for quite some time.
Fair Weather Friends
The catch cry of most IT vendors these days is that they are no longer a hardware or software company but rather a services organisation. As such, it is probably of interest to these people to find out just what sort of help most local CIOs require. The final question on the "Forecast for Management" survey asks respondents to identify the three major challenges facing their IT/IS department over the next 12-18 months.
Given the barrage of new technology and options which confront CIOs each year, it is perhaps surprising that the top three identified challenges have remained more or less the same for several years. The issues are: meeting users' expectations (37 per cent); migrating to new hardware and software platforms (36 per cent); and, aligning IT with the business direction (31 per cent). The challenge for vendors is how to structure solutions that address what are largely internal political issues.
The positive news for vendors, though, is that a good proportion of IT managers are prepared to listen to what they have to say. Some 26 per cent of respondents identified hardware and software suppliers as a strong or overriding influence on their IT decisions. Only 4 per cent identified matching vendors' claims to reality as a challenge.
Perhaps the best trick suppliers could learn would be to better leverage the experiences of their other users. MIS management is nominated by 89 per cent of respondents as the major influence on their IT decisions, with user groups selected by 36.45 per cent.
As they face these challenges, CIOs can take comfort in the fact that their authority in their organisations' internal political hierarchy has remained stable over the past three years. "Forecast for Management" asked respondents to identify the IT reporting structure. Thirty-seven per cent of IT managers in Australia and New Zealand report to their chief executive officer, a slight rise over responses to the previous two surveys.
If you're interested in receiving the complete "Forecast for Management" results, in a format which allows you to "slice and dice" the findings by dimensions such as industry sectors, geography or size of company contact Peter Hind at IDC Australia on (02) 9922 5300. Normally, the database with installation and training costs $2000. Mention that you're a CIO or ComputerWorld reader and you'll save $100.
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