"Ill blows the wind that profits nobody." -- William Shakespeare, Henry VIBritish Prime Minister Harold Macmillan coined the phrase: "You've never had it so good." He was describing the comfort and opportunities of post war Britain to the British electorate. However, he could just as easily have been talking to a group of IS professionals in these last years of the twentieth century.
Certainly it's consistent with the findings from IDC Australia's latest Forecast for Management survey. Over the last 12 years IDC has issued an eight-page questionnaire to some 5500 CIOs and senior IS executives across Australia and New Zealand. The study asks these senior IS professionals questions about their spending, technology use, plans and challenges in running an IS department today. The results are then compiled into a statistical database.
This year's findings show that IT spending -- as a per cent of turnover -- is the highest it has ever been. In 1990 the median spend on IS was 1.39 per cent of turnover; today it is 2.25 per cent. This constitutes a 62 per cent relative increase in the money available for IS investments during a period when most businesses have spent much of their energies ruthlessly curtailing their operating expenses. It is particularly noteworthy that in the last 12 months alone, the median level of IS spending increased by 10 per cent. Furthermore, IS budgets are set to grow even more over the next two years. Forecast for Management asked respondents to predict the outlook for IS expenditure over the next 18 months. In line with last year, they anticipate increases in the IS budget of around 5 per cent over the next two operating periods.
Finally, IS has never had a higher profile in business. The survey asked respondents to identify the executive position to which the CIO reported. This year the dominant response is to the CEO. This is a rise from 36 per cent of respondents to 1996's survey to 44 per cent this year. The increase is particularly noticeable in the finance/business services sector where, over the last two years, the number of CIOs reporting to the CEO grew from 52 to 70 per cent.
However, it is also clear from the survey how IS is changing its focus. The breakdown of IS expenditure shows that more of the budget is being increasingly allocated away from hardware and software towards items such as networking.
Hardware and software now make up around 28 per cent of this budget while the network and line costs are not much further behind at 21 per cent. Clearly, the impact of intranets, the Web and the mobile technologies are starting to be reflected in the make-up of IS projects and plans.
Another interesting statistic from the survey is that IS executives are reducing their dependence on external support staff. In the 1996 and 1997 studies 14 per cent of the IT budget was allocated to these people; in 1998 this dropped to 11 per cent. Talking to InTEP members I see a trend emerging: people who were traditionally consultants are now taking up full-time positions. Apparently they are seeking to build up their skill sets to prepare themselves for the barrage of IS projects that will emerge once the year 2000 issue is addressed.
Forecast for Management also spotlights the technologies in which IS executives are investing. Given the increasing proportion of the IS budget allocated to networks it is not surprising that networking technologies show the greatest increase in usage between the 1997 and 1998 surveys. Use of technologies such as ATM, frame relay, WAN switches, LAN switches, wireless networks, and even ISDN, all grew significantly over the last 12 months. Of these, the largest growth is in the advanced networking protocols of asynchronous transfer mode, (ATM) and frame relay. Usage of these increased by 55 per cent and 87 per cent respectively over this period.
This expansion is particularly pronounced for frame relay in a number of market sectors, including production (120 per cent), the public sector (113 per cent) and organisations with annual turnovers of greater than $250 million (121 per cent). On the other hand, ATM recorded its strongest increases in the finance/business services sector (400 per cent) and in organisations with more than 1000 staff (233 per cent).
As an extension of networking technologies Forecast for Management also asked questions about mobile technologies and work practices. This included a diverse range of subjects such as telecommuting, videoconferencing, Citrix Winframe, data transfer through mobile phones and radio networks, remote access servers and smart cards. Surprisingly, given the amount of press they have received, growth in these areas is modest. The largest increase is in the use of mobile phones and radio networks for data transfer at 20 per cent (although the distribution industry sector recorded a 58 per cent rise). The only other mobile technologies recording double digit growth are videoconferencing (17.6 per cent), Citrix Winframe/thin client computing (15.3 per cent) and telecommuting (10.2 per cent).
No study of technology adoption would be complete without some examination of the Internet, its permutations and its ramifications. The Forecast for Management findings reveal a number of insights into how local IS executives are embracing the wired world. Harnessing the Internet for electronic commerce is by far the fastest growing usage. This increased on average 76 per cent over the last 12 months with the fastest growth in organisations with annual revenues between $50 million and $250 million (246 per cent) and in those with annual revenues greater than $250 million (165 per cent).
Actual usage though is still relatively low at an average of 15 per cent of businesses. Perhaps the best indicator of the wired world we live in is the utilisation of e-mail with external organisations: some 86 per cent of respondents have implemented it. Furthermore, 58 per cent of respondents indicate their organisation have established a home page and 44 per cent report use of a World Wide Web server. However, the most impressive statistic in this area is the number of businesses that have developed an intranet. Two years ago few organisations had heard of an intranet. Today, more than half (51 per cent) have created one and a further 37 per cent expect to do so by the end of next year. Often overlooked, the biggest impact of the Internet for most organisations seems to be as an internal tool to help the business better leverage staff experiences, best work practices and employee skill sets.
Forecast for Management asked IT executives which areas within their business had deployed intranets. The highest use is in the IS department where intranets are helpful in recording documentation and change management procedures.
However, word about the potential of intranets has clearly travelled beyond IS's domain; all business areas reported at least a 40 per cent growth in the use of an intranet over the 1997 survey. This was especially the case in the areas of finance, sales and HR, which recorded growth of 74 per cent, 71 per cent and 66 per cent respectively over responses to the 1997 study.
Wired world advocates will applaud the fact that replies to the survey indicate a gradual decline in most of the perceived obstacles to harnessing the Internet. Issues such as cost, the ability to reach the target market and security are considered less of a problem this year compared to last. However, as Internet experience grows, so too does an appreciation of the challenges in better utilising it. It is noteworthy that in the areas of reliability of service and in-house skills, more businesses perceive these as obstacles to utilising the Internet than did so last year.
While it may present some problems, the Internet isn't uppermost in IS executive's hearts and minds when it comes to the overall challenges IS executives face. Forecast for Management asked respondents to identify the top three challenges they face from a list of 23 potential hurdles they need to surmount. Connecting to customers/partners/suppliers electronically rated as the tenth most significant challenge IS executives face overall. This is somewhat lower than in the US, where CIOs regard this as their fifth most important challenge. This may reflect the fact that IS executives in the South Pacific are lagging their North American counterparts in fully capitalising on the potential offered by the Internet.
Most respondents regard completing the year 2000 upgrade as one of their three most important challenges. This is a particularly prevalent answer in organisations of greater than $250 million in annual revenues (52 per cent) and businesses in the production (47 per cent) and distribution (43 per cent) market sectors. As one would expect, these sectors also have the fewest number of organisations with systems that are already year 2000 compliant. Only 6 per cent of distribution businesses report their systems are complete for 2000. The situation is only marginally better in organisations with over $250 million in annual revenues where 8 per cent say they have finished their year 2000 upgrade projects.
The next three top-rating challenges have dominated the last six Forecast for Management surveys; these are the old perennials of aligning IT to the business, meeting end users' expectations and migrating to new platforms. The continuing presence of these challenges seems to reflect the high profile, expectations and dependency that organisations, and employees, now have on the performance of their IS department. It also now seems clear that these issues will not be solved by miracle cures, but will remain -- like world-weary friends -- an expected part of the territory for most CIOs.
Nevertheless, the study highlights some emerging challenges for CIOs. In particular, HR issues rate significantly higher as a concern than in any of the previous five surveys. The task of recruiting and retaining skilled staff rated the seventh highest challenge overall, a rise from eleventh last year. This responsibility was rated particularly challenging by CIOs in the finance/business services sector and in organisations with more than 1000 employees.
Another indication of the emergence of recruiting and retaining staff as a major challenge is revealed by the attrition rate for IS staff. Each year Forecast for Management asks IS executives to determine the percentage turnover in their departmental staff. This is calculated on the number of staff separations as a per cent of the average number of IS staff over the same period. For the early part of the 1990s the attrition rate hovered at around 11 to 12 per cent. However, last year it rose to 18.7 per cent and this year it rises to 21.89 per cent. The rate is even higher in organisations with under $25 million in annual revenues (35 per cent), in Queensland-based businesses (30 per cent) and in those located in South Australia (34.4 per cent).
Not surprisingly, businesses are turning to outsourcing to address the challenge of recruiting and retaining staff. However, as the use of external staff declines it is also clear that companies are more discriminating about where they deploy outsourcing. For the last five years, IDC has asked questions about the level of outsourcing of various activities in the IS department. This year's results show a significant increase in the number of organisations outsourcing most or all of the help desk, network operations and systems network design. The use of outsourcing to provide these services increased by 52 per cent, 37 per cent and 14 per cent over the last two surveys. However, there is a decline in the percentage of businesses using outsourcing in the areas of systems technical support (-30 per cent), systems integration (-10 per cent) and network technical support (-10 per cent) over the same period.
Clearly, as IS executives get more familiar with outsourcing, they are more discerning when it comes to ceding control of their IS operations.
It seems that this consideration of when and when not to deploy outsourcing is another example of an increasing sophistication in the management strategies of IS executives. Furthermore, other evidence from the Forecast for Management study shows an increase in the use of benchmarking IS performance as well as an expansion in the use of IS steering committees. In addition, representation on these committees has widened to include a greater cross-representation of various types of business users. With enhanced funding and executive support comes the duty to deliver value to the business. The indicators are that, through listening to customers and objectively scrutinising their performance, more and more IS executives are clearly understanding this message.
Peter Hind is the manager of User Programs, which includes InTEP, at IDC AustraliaOn the LineFor some time, IDC has been concerned that in the emphasis on electronic commerce IS executives may be overlooking the potential for computer telephony integration (CTI) to enhance the operation of their organisation. This is borne out by the inclusion of CTI specific questions in the Forecast for Management study. For the first time, IDC asked questions about the use of inbound and outbound call centres, various customer service numbers (such as 1800 and 13 lines) and about CTI options (such as caller line identification), predictive dialling and choices of carriers.
The first surprise from the findings was how few organisations had implemented either an inbound or outbound call centre. With customer service such a critical activity in these low margin times, it is surprising only 61 per cent of businesses have considered the potential of channelling that service through a call centre. Moreover, the industries that are the slowest in deploying call centres -- production and the public sector -- could probably get the most benefit from them. Certainly, one would think manufacturing companies could use them in areas such as sales and post sales support. Furthermore, given the massive cut-backs afflicting the public sector in this era of low taxation, one would think that call centres might just offer a more efficient means of servicing consumers, ratepayers and voters.
Given the fact that a number of CTI services have only recently become available it is probably to be expected that utilisation of a number of the advanced facilities is still embryonic. This included features such as: predictive auto dialler (5 per cent) and caller line identification (18 per cent). However, as any external caller who has ever battled with an interactive voice response (IVR) system can testify, IVR has been around for some time -- yet only 16 per cent of respondents recorded that their companies used IVR. The other mystery was why, with a plethora of special call rates available, so little use is being made of telephone information management systems (TIMS).
These relatively inexpensive programs can interactively determine the most cost-effective carrier for any call and make the connection. Still, despite the opportunity they provide to prune the ever escalating expense of line costs, only 15 per cent reported using a TIMS facility.
Finally, the study revealed that there is plenty of opportunity for organisations to exploit the new breed of special telephone service lines.
Despite being available for several years, only 53 per cent of organisations indicated they are availing themselves of 1800 numbers (although above average use was reported in the finance/business services (70 per cent) and the leisure (83 per cent) sectors). On the other hand, 13 numbers are not as common as most consumers might expect. Only 14 per cent of respondents are utilising them.
Even lower use is being made of 1900 and 0055 numbers at 3 per cent and 2 per cent respectively. In fact, despite popular myths to the contrary, the leisure industries only make minimal use of 0055 facilities.
Can I Have Some Information, Please?
One of IDC's InTEP members -- someone with a wealth of experience in IS -- has a favourite catch phrase. He says the challenge for IS departments is: "getting the information out of information technology". Despite being with us for nearly 50 years, computers have been notoriously bad at providing executives with the type of insightful information they need to make informed business decisions.
Nevertheless, things have improved immeasurably on this front in recent years.
Through Forecast for Management IDC has been assessing the impact of a number of decision support technologies and methodologies. These include: data warehousing; OLAP (on-line analytical processing) and executive information systems (EIS).
As two recent InTEP sessions have highlighted, any decision support system must be built on the foundations of a good data warehouse. This ensures that the data is properly catalogued and that consistency and data quality standards are maintained. The good news from the Forecast for Management survey is that more and more CIOs in the region are following this advice and building data warehouses. Two years ago just under 13 per cent of businesses recorded that they had implemented a data warehouse. Today 22.6 per cent have one. It is most common in finance/business services organisations where 31.5 per cent of respondents reported having implemented a data warehouse. Furthermore, 51.5 per cent of businesses with more than a 1000 staff had installed one.
With the right structure in place companies can exploit the potential of the new generation of data mining and data analysis tools available. In fact, this year's study showed that CIOs are moving away from the traditional EIS reporting systems towards the multi-dimensional analysis capabilities of the OLAP toolsets. Over the last 12 months the number of companies using EIS declined from 30 per cent to 28.6 per cent, while those using OLAP rose from 6 per cent to 14.4 per cent. OLAP usage is particularly pronounced in the finance/business services sector (21.9 per cent) and in companies with over $250 million in annual revenues (36.9 per cent).
The study also asked those CIOs not using these technologies to predict their likely use of them over the next two years. Again the responses paint a heartening picture on the importance CIOs are giving to effective end-user decision support tools. Another 44.8 per cent of businesses anticipate deploying a data warehouse by the end of next year, while a further 30.8 per cent expect to be using OLAP toolsets by then.
It is interesting to note that the industry sector with the most buoyant outlook for these systems is the leisure industry. With the increasing importance that tourism holds in the Australian economy, it is encouraging to note that staff in these organisations are likely to be well equipped with the right information to best serve their customers.
So are you flying on New Year's Eve 1999?Top 10 challenges faced by local CIOs for 1998 97 96 95 94 931. Completing year 2000 update N/R N/R N/R N/R N/R2. Migrating to new platforms 2 1 3 3 N/R3. Aligning IT to the business 3 1 2 2 24. Meeting users' expectations 1 1 1 1 15. Reducing costs 4 5 9 6 36. Developing effective IT investment 7 11 8 5 77. Recruiting & retaining skilled staff 11 9 11 11 58. Managing change/migration 4 4 N/R N/R N/R9. Ensuring effective use of the desktop 15 6 N/R N/R N/R10. Keeping abreast of technology 6 6 5 7 610. Connecting to partners electronically N/R N/R N/R N/R N/RN/R= Not rankedSource: IDC Forecast for Management (1993-1998)
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