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GFC creating new opportunities for CIOs: IDC

GFC creating new opportunities for CIOs: IDC

CIOs taking more risks and re-negotiating vendor contracts

Rather than forcing CIOs to batten down the hatches, the global financial crisis (GFC) is prompting many ICT leaders to take risks and create new opportunities, according to IDC.

Speaking ahead of the research firm’s annual Directions conference on trends and challenges in ICT to be held on May 6, associate vice president research ANZ, Tim Dillon, said that CIOs were paying attention to the message that carrying out “business as usual” during the recession would not be enough to see their organisations get through.

“We are seeing organisations make a lot of headway and use the global financial crisis as an excuse to change anything from an internal IT architecture perspective through to different forms of engagement with the vendor community,” he says.

“Some organisations have done some quite aggressive technology deployments simply to take advantage of the scenario where they can take risks that normally they wouldn’t be comfortable doing.”

According to Dillon, in light of the budget constraints imposed by the GFC, CIOs could be seen becoming increasingly hard-nosed in their negotiations with vendors for hardware, software and services.

“Organisation are saying to their vendors, ‘That’s the same proposal you gave me last year. It may be five percent cheaper to take into account that budgets are tighter, but that isn’t good enough; come back to me when you have something compelling’,” Dillon says.

With the focus on cost-cutting, CIOs are increasingly concerned with their balance sheets, he says. In light of this, whether a proposed project could be classified as cap-ex and op-ex was playing an increasingly large part in whether a project was green-lighted or not.

“They’re saying that they don’t want to have cap-ex on their books,” Dillon says. “You need to help me deploy a solution that doesn’t have a large amount of cap-ex on my books. As soon as the CFO sees it, it isn’t going to go anywhere.”

Similarly, CIOs were putting serious pressure on vendors to provide increasingly short return on investment windows. In some cases, even on company-wide deployments, ROI was down to under 12 months, he says.

CIOs were also demanding that contract lengths dramatically shorten, as well as -- somewhat perversely -- lengthen, Dillon says.

“In the area of IT applications, enterprise customers are signing three month contracts with the expectation that two months and two weeks from now, they know vendors are going to drop their prices again, so they’re going to take advantage of that,” he says. “There are others that say they want some stability, so they are locking in a good price now by signing year and a half contracts.”

Dillon says that the GFC is also spurring CIOs to re-look at the IT strategies and assess what emerging technologies such as cloud computing and virtualisation can offer them

“You are seeing organisation which 12 months ago would not have considered it, are now doing so because of perceived costs savings and operation efficiency,” he says.

More information about IDC directions can be found here.

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Tags recessionglobal financial crisisIDC

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