Brian Walker, Managing Director, IT Consulting

As 2011 quickly approaches, our clients are asking about the areas in which they should focus their attention, and those in which the greatest opportunities for improvement exist. Following are some of our thoughts, highlighting areas in which our clients are achieving significant value or managing risk within their organizations.

Cloud – SaaS in Human Resources, Worker Productivity and Collaboration

Cloud may be the most overused word in the media. It is an ambiguous term that means everything and nothing, and many of our clients – often large multinational or public sector organizations – are trying to sort out the vapor and slideware from operable solutions. The service provider community is investing heavily to deliver cloud solutions, and much of cloud’s promise remains future state. But we have observed a few solutions mature enough to support a large user base. In some areas of the cloud, notably SaaS applications, organizations have reduced total cost of ownership by 30-40 percent in key (not critical) applications. Areas in which our clients are successfully accessing the cloud today include:

1. Desktop Applications – Several of our large enterprise clients are evaluating Google applications, Gmail, Lotus Live and Microsoft Office in the cloud. These client companies range in size from 12,000-85,000 employees, and are working business cases that generate savings of 80 percent prior to transition. Because of the scale and scope of the projects, the savings are reduced when transition costs are factored in, but most expect 30-40 percent savings.
2. CRM – One of our clients is looking at a massive salesforce.com migration to replace its current CRM solution, and expects annual savings in the range of 20 percent. The primary driver for the change is to move its IT team out of the CRM support business, enabling it to focus on mission critical applications.
3. HR, Workforce Management – We are seeing quite a bit of traction in HR SaaS as clients seek the innovation and transformation needed to manage human capital without the organizational burden of an enterprise application implementation. Human capital management service providers are winning massive engagements as clients become increasingly comfortable with a solution that supports their employees’ needs yet sits outside of their enterprise.

Data – Virtualization and/or Consolidation

A recent Gartner study predicts enterprise data will grow by 650 percent in the next five years. With the near-term economic horizon suggesting sluggish growth, we expect continued pressure on IT departments to keep their budgets flat. As a result, a combination of levers exists to impact increasing data needs on decreasing budgets.

Virtualization offers significant cost reduction opportunities, often with minimal business disruption. One of our chemical industry clients removed one-third of its server estate through a recent virtualization project. Its number of applications and increasing levels of data pushed it to look for cost saving alternatives, and virtualization delivered tangible savings while meeting its core business computing objectives. With clients reducing their server estate by 20-60 percent, virtualization is an item that should be placed on the pending 2011 budget to ensure cost containment and/or reduction issues are met.

Consolidation also offers significant opportunities to reduce costs, and many of the reductions are increasingly coming in areas outside of traditional IT such as for real estate and facilities management. Within data centers, organizations are able to load increasing numbers of servers due to technical advancements, thereby reducing the space and cost needed to support the organization.

Reviewing these items in combination may yield results for companies looking to reduce costs and retain business support needs in the coming year.

Application Rationalization

While a common theme we hear among our clients is the burden of duplicate applications, many organizations still feel it is cheaper to keep their current application environment, rather than making a change. But this near term view, compared to total cost of ownership/longer term view, does not hold the same business case. Rather, we find clients who root out and address duplicate computing environments will yield measurable savings over time.

Common areas in which we see duplicate computing support include financial analysis, health, safety and environmental applications, tools for OSHA compliance and numerous custom applications, when the needs could instead be served on existing licensed software. Since applications drive two-thirds of total IT cost, we see great long-term value for clients that focus their application inventory and rationalize down to the critical applications required to support the business.

Security and Compliance

While security and compliance do not offer cost savings as a primary driver, security risks permeate every business with an increasingly virtual workforce, disparate systems and extended client touch points. These fragmented operating models place organizations at greater information risk than ever before. Additionally, the regulatory environment remains in a state of flux with signals of increasing pressure to secure data that will demand IT organizations spend an increasing level of time and money to manage compliance requirements.

As such, this is a mission critical 2011 agenda item. To understand if your organization is prepared, important security and compliance questions you must ask include:

1. Does your IT organization have a defined set of security standards to support the enterprise?
2. How do you measure the success of your security programs?
3. How do you measure success in your compliance requirements?
4. Have you evaluated your exposure areas? Do you have mitigation plans to manage these exposure areas? How often do you review and assess the risk?
5. What is your strategy for complying with emerging global laws?

Outsourcing Governance – Multi-Provider Strategies and Tools

We rarely speak with an organization that does not have a multitude of outsourcing service providers supporting its business. The increasing number and complexity of providers creates significant governance challenges, and often creates shadow groups or stranded costs within the organization until the governance structure and tools are challenged and ultimately aligned for maximum effectiveness. Best practice governance models to effectively support a business with multiple providers, and tools that can help automate the analytical and administrative governance roles, often reduce the cost of governance by one percent of the total annual outsourcing contract value.

Wondering what items should be on your CIO’s 2011 agenda? We recommend placing these five at the top of the list.

Filed under: CIO Agenda, Cloud Computing, Information Technology (IT), Market Trends and News by EquaTerra