During the early days of technological development, IT was traditionally seen as a nice embellishment to any company's operations, providing any firm with the right push in being competitively advantageous against other companies.
But recent changes in economic conditions, the rapid pace of technological innovation, and the mounting demand to meet customer expectations have changed the way business is done, subsequently shifting the tides for IT's role in the company.
"IT acting as a cost center meant not viewing technology as a strategic partner of the company," notes Jaime D.L. Caro, department chair of the computer science program at the University of the Philippines, during his keynote speech at Computerworld Philippines' yearend CIO Forum held last December, with the theme "Revolutionizing the IT Department: from Cost Center to Profit Center."
In driving organizational efficiency, Caro states that aligning the workforce with the company's strategic initiatives is key to driving growth and earnings. "The role of the CIO, therefore, lies in aligning IT with overall business goals," he explains, "thereby getting the best from its people, processes and information."
But in the progressively competitive business environment, the CIO's task quickly becomes a two-fold balancing act, according to Caro. "CIOs must be able to foster technological innovation and workforce productivity, while optimizing operational costs and delivering ROI quickly," he notes.
The IT department, therefore, moves away from its utilitarian function and eases into becoming a critical element in driving profit for the organization. "The CIO now needs to understand the business carefully, and articulate a clear vision for IT governance," Caro points out. "IT, therefore, becomes both the enabler and the driver, by providing tools for delivering business change that increase the company's bottom line."
The Cloud Agenda
This "balancing act" scenario for most CIOs is echoed by Winston Damarillo, CEO of G2iX (Global Gateway Innovation Exchange), a software development firm with Morph Labs, a cloud computing design provider, under its helm. "For CIOs, the year 2010 means balancing [the company's] focus on cost, risk, and growth," he says.
The recent financial crisis, Damarillo says, has forced companies to take a second look at utilizing its dormant IT resources. "There has been a lot of innovation last year, so we're seeing 2010 as the year for reinvesting in IT again," he explains.
One key technology that continued to gain momentum is cloud computing, which Damarillo illustrates as "taking the entire stack of a company's infrastructure, and making all of it deployable by software."
Cloud computing, according to Damarillo, enables convergence and optimization of the IT infrastructure. "Right now, only 9% of actual physical infrastructure for every firm is utilized. Think of it as having a generator for every home; you buy the whole thing even if you don't really use it all the time," he says.
This costly method of using infrastructure is costing companies revenue, while enabling other firms to get ahead of the competition. Cloud computing, Damarillo narrates, is easily deployable, scalable, flexible, and, most importantly, very cost-effective. "The technology gives you 30% to 50% of immediate cost savings due to less hardware purchases. So you are bound to save no matter what," he explains.
This potential cost benefit from cloud computing is continuously driving the market to prime, Damarillo shares, with analysts predicting a $160 billion reach by 2011. "The market is transitioning rapidly, and the technology is creating new markets especially in developing countries," he notes. "What makes it so powerful is enabling companies to consume resources on demand."
During Computerworld Philippines' bi-annual meeting with CIOs, Damarillo demonstrated the power of cloud computing by pooling together servers, databases and applications using their own Morph application. In just about 20 minutes, all network protocols and addresses are already in place, solidly verifying Damarillo's claim of quick and easy deployment. "It's a lot like drawing a map of your infrastructure," he quips.
The Cloud's Nebulous Future
Yet despite all the bells and whistles cloud computing providers have continuously harped on, adoption remained at a dismal rate. According to an independent survey by CIO.com in June 2009, at least 51% of surveyed CIOs have security concerns with the cloud, while 37% fear losing control of their data.
The cloud's reliability and uptime guarantee also poses real concern for IT executives. Just this year, Gmail's downtime sometime in February and the number of outages that followed months after raised particular concern over the consistency of cloud services. The relatively infantile stage of the technology is hindering companies from quickly jumping into the bandwagon.
Damarillo attributes this trend to a general apprehension about new technologies, comparing the new technology to previous innovation such as mobile phones and the Internet, which eventually became mainstream. "It's important for CIOs to gain complete knowledge and understanding of how cloud computing works," he suggests. "It actually has mechanisms in place to provide security, so there's no need to worry."
The challenge, hence, for CIOs next year, Damarillo says, is to "get to know the cloud" in order to fully experience its benefits. "Eventually, the competition will force them to move their data center into the cloud, as more adopters reap the multitude of benefits," he predicts.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.