I just returned from Forrester Research Inc.’s Services & Sourcing Forum in Chicago. Newsflash: Chicago is a windy city! Another newsflash: The road to creating and managing IT outsourcing contracts is a long and winding one – especially when business users start procuring their own services, such as applications via Software as a Service, or SaaS.
When my colleague Christina Torode covered the Burton Group’s Catalyst conference this summer, the buzz among IT executives was that business users were purchasing SaaS services without running these agreements by IT first. As Torode reported:
“Business users tired of waiting for IT to provision a new application or service are tapping cloud providers and bypassing IT along the way, much as they have for many Software as a Service applications over the past few years. And cloud providers are not calling on the IT department, but rather going to department heads to pitch their wares.”
But if this trend makes it harder for IT outsourcing contract professionals to oversee the company’s IT assets as a whole, there is also a flip side: When business users procure their own software, it doesn’t come out of the IT budget.
During a breakout session on SaaS services and cloud computing outsourcing contracts, Forrester senior analyst Liz Herbert said that she’s heard that some IT outsourcing contract professionals would actually prefer that individual departments continue purchasing their own SaaS services for this reason. In this economy, with all budgets and spending being scrutinized so closely, why make it look like IT is doing the spending if these other departments are willing to foot the bill?
To be fair, I noticed some snickers from the IT contracting professionals in the room upon hearing Herbert’s comment, so perhaps it’s not a common point of view but I thought it worthy of mention nonetheless. Certainly, it speaks to the need for governance in IT outsourcing contracts on an enterprise-wide level – a subject I’ll be delving into in the coming week.
Has your IT organization surrendered oversight of SaaS services contracts procured by the business, or do you still intend to oversee all these IT outsourcing contracts throughout your organization?
In a few hours, I’ll be bound for Chicago to learn more about IT services and sourcing, but don’t think I would leave you without your weekly wrap-up of CIO content! Check out the latest pieces to run on SearchCIO.com by clicking the links below:
CIO management mistakes that can harm CIO careers, cause IT failures – Are you an effective CIO or senior IT leader, or are you poised for failure because you’ve made one of these mistakes? Here are eight things you might need to change before it’s too late.
Do you have the qualities of a good leader? Test your leadership IQ – The qualities of a good leader transcend industry, organization and circumstance. Do you know what it takes to be a good leader in IT? Take our quiz and find out.
Maturing an ITIL strategy beyond incident, problem, change management – Some ITIL implementations stall once IT gets incident, problem and change management under control. Here’s what ITIL practitioners advise to keep driving benefits and maturity.
ITSM and ITIL best practices for process improvement – ITSM and ITIL processes continue to gain traction in enterprises as CIOs seek to cut costs and increase efficiencies through business process improvement. Learn more in this guide, our latest CIO briefing.
There are a lot more than eight ways to torpedo a CIO career, judging from the response to my piece this week, “CIO management mistakes that can harm CIO careers, cause IT failures,” a compilation of eight common CIO missteps. Fred Held, former CIO at Mattel and Bercor and IBM executive briefing consultant, offered two more:
- Don’t be clueless how the organization works. Since the systems that are under the CIO process the transactions of the organization, you have the best opportunity to be the focal point on how the organization works. This is a huge asset that most CIO don’t get.
- Don’t be reactive, be proactive. Learn influence management techniques to initiate projects that both make the company more competitive and secondly, save money. These can be very short-term, inexpensive projects that give the company even the tiniest of a competitive edge to huge systems that take years. There is nothing that a sales force and top management and the marketing team love to do more than brag about some superb system for the customers.
Enterprise architect and CTO of ObjectWatch, Roger Sessions, weighed in with his top two:
- Failure to speak the language of the business. CIOs who talk techno-babble are rapidly ignored by the business.
- Failure to understand the need to control complexity. Complexity is the single biggest reason for IT failures. Control it, or it eats you for lunch!
Sessions lit up the blogosphere this week with his post, “Cost of IT Failure,” pegging the total cost of worldwide IT failures at $6.2 trillion.
To get to the cost of IT failure for any one country, Sessions came up with a factor that can then be multiplied by a country’s GDP. He derived the factor .089, by multiplying the amount of money spent on IT hardware, software and services by the fraction of IT projects at risk, by the failure rate of at risk projects, and by indirect costs associated with the failure.
IT failure hurts — countries, careers, CIOs. Avoiding career-damaging mistakes keeps CIOs from getting fired so they’re around long enough to create sustainable business value. Hopefully, our tips will make that true for more of you.
Lately, I’ve been contemplating the questions CIOs should ask as they formulate or revisit their IT outsourcing strategy. The analysts at McKinsey & Co. must be reading my mind (or perhaps I’m reading theirs?), because their blog this week includes a post about how organizations can make IT outsourcing strategy decisions based on business requirements. This is pertinent even to those organizations already outsourcing IT functions, as business needs can change, particularly in this economic climate.
According to McKinsey, the four questions to ask when considering or revisiting an IT outsourcing strategy are:
1. From which areas is the business looking to derive value from IT enablement?
2. What capabilities are required to deliver that value?
3. What are the expectations for IT in creating those capabilities?
4. In meeting those expectations, how can resources be procured in a way that meets our cost, timing and skills requirements?
I’d add a few more questions to that list, since we’ve found that organizations are seeking to outsource functions that will allow them to globalize, operate more efficiently and, of course, save money:
1. Will the cost savings provided by IT outsourcing cover the risks and management overhead of doing so?
2. Are we interested in consolidating or broadening the number of vendors with whom we outsource?
3. How will we measure success in IT outsourcing? What are the baseline results against which we’ll measure our IT outsourcing activities to determine whether we are saving money, increasing customer satisfaction, globalizing the business or whatever business goal we hope to reach?
I’m planning to attend Forrester Inc.’s Services & Sourcing Forum in Chicago next week, and will share more insights soon. Anybody else going? Look me up via email or Twitter — I’m @rlebeaux.
Good morning! Last week on SearchCIO.com, we surfed the Google Wave, examined the email retention policy (or lack thereof) that’s caused such consternation in Boston, explained how to complement your ITIL framework with other process methodologies, and presented some data recovery solutions for CIOs. Read the stories linked below and feel free to share your comments!
Google Wave: A sea change for business collaboration, communication? – Businesses are getting caught up in the Google Wave, contemplating how such mashup collaboration technologies stand to change the way they operate internally and do business.
Miscues abounded in Boston email retention policy, practices – Boston CIO Bill Oates talks about measures taken to tune an email retention policy after disconnects between user practice and system capability set off a political firestorm the week before the city’s mayoral primary. (Also see our initial story on the email scandal.)
Complementing your ITIL framework with other process methodologies — ITIL can be more effective when used with other process methodologies, like Six Sigma, PPM and ISO 20000. In this story, learn how to leverage mixed process methodologies and increase efficiencies in your company.
Data recovery solutions must address a range of concerns – In this piece, our expert describes how to do a reality check to ensure that your disaster recovery strategy and data recovery solution pay off in the long run.
SIM’s annual survey is out, and perennial CIO issues — IT security and business continuity/disaster recovery — have plummeted on the lists of both CIO management and technology priorities. What’s going on? I asked Jerry Luftman, executive director of graduate information systems and programs at Stevens Institute of Technology and SIM vice president for academic affairs, emeritus.
“This is a special year, given the economic conundrum,” Luftman said. “If you take a look at the top CIO management concerns, the first two are business productivity and cost reduction and the second is pervasive business IT alignment.”
During typical economic doldrums, IT cost reduction has topped the list of CIO management concerns. This year it is No. 5 — evidence, says Luftman, that CIOs are spending more time working with the business on leveraging IT to cut overall costs than on slashing IT budgets.
Is it possible that IT is no longer viewed as the profligate offspring of the corporate family but — gasp! — fiscally shrewd? A cost fixer? Certainly, CIOs feel compelled to step in, according to the SIM survey.
If CIOs are not concerned about cutting IT costs (already down to the bone, many CIOs have been telling us), they are also not blowing any dough on IT hardware and software.
As for security — scary as it is — CIOs have clearly put it on the backburner of CIO management and technology concerns. Antivirus protection, the No. 1 technology investment in 2008, has dropped off the list.
“When you look at IT budget allocation, the thing that has taken the biggest hit is IT infrastructure stuff, the hardware and software, and security is right there,” Luftman says.
Moreover, security, the only technology to make last year’s list of top CIO management concerns, is no longer on the headache list. Disaster recovery and continuity planning, the No. 3 technology investment in 2008, fell to No. 6.
Seems it’s not prudent to try to sell insurance for something bad that might happen when the business is struggling to survive what is happening — a very real economic disaster.
Emotional fatigue, or SOP
The question, says Luftman, is if the decline of security and antivirus protection as a top priority represents a “continuous change.” “Will it come back again when the economy turns around and we need to refocus our interest on infrastructure stuff?”
And his view? “Security was hot last year. Over time, as we either help address it or we emotionally feel that we have done as much as we can do, it will go away from the top list. The question is, how much time will it take to drop off the radar, or become accepted as standard operating procedure, is hard to tell.”
We’ll be delving into the results over the coming days for more insights. Meantime, here are the 2009 rankings:
2009 IT Management Concerns
- Business productivity and cost reduction
- IT and business alignment
- Business agility and speed to market
- Business process re-engineering
- IT cost reduction
- IT reliability and efficiency
- IT strategic planning
- Revenue-generating IT innovations
- Security and privacy
- CIO leadership role
Top Six Applications and Technology Investments
On the following list, priority No. 4 jumped out at us as a newbie on the list. Customer corporate portals give customers direct access to the information they seek without going through an intermediary. Luftman explains the reason behind the jump: “These are things that can help improve business productivity and reduce costs, the No.1 CIO management concern.”
- Business intelligence
- Server virtualization
- ERP systems
- Customer corporate portals
- Enterprise application integration
- Continuity planning/disaster recovery
Running large data centers is expensive and getting worse. No one knows that more than Google and Yahoo. At a panel on green data centers at MIT’s Emerging Technologies Conference this week, Yahoo’s senior director of data center engineering and operations, Scott Noteboom, described how Yahoo has grown its server plant by 12 times since 2005. Google’s head of data center research and development, Chris Malone, explained that Google has had to come up with its own server designs to accommodate the ultra-high densities of their data centers. Both have a maniacal focus on improving data center energy efficiency.
Yet both firms are doing things that ordinary enterprises can learn from:
1. Reconsider your business continuity plan. Yahoo is eliminating UPSes and backup generators. Instead, they are architecting each data center as a backup to the others. That eliminates UPSes as a significant power loss. They’ve had to install software that restarts servers in a controlled fashion after power resumes, however. Google took a different tack: eliminating larger UPSes in favor of small battery backups on each server motherboard. Either way, both data center approaches yield significantly greater energy efficiency.
2. Consider the weather when you site a data center. Yahoo is no longer building raised-floor data centers. By locating in more moderate climes, they’re able to utilize prebuilt warehouse-type buildings that use extensive ground-level air intake of cooler ambient air and roof-level exhaust of hot air.
3. Raise the temperature and humidity. Modern servers can run warmer and moister than you might think. A lot of conventional wisdom about server environments stems from the mainframe days, when you didn’t want punch cards wilting.
4. The big win in facilities power reduction in the data center is in cooling. Malone points out that typical chiller systems are only 60% efficient; Google has gotten to 90% by switching to evaporative cooling. Focusing on electrical transmission issues is good but yields much less improvement.
Google and Yahoo make extensive use of virtualization to improve capacity utilization and reduce the overall load. Noteboom and Malone stressed that senior IT managers need to make these issues part of the discussion with system architects, project managers and developers. All too often, those folks start from the premise of buying a certain kind of server for a certain kind of app, rather than asking how existing capacity could be deployed to meet that need.
And the result of all those efforts at Google and Yahoo? Dramatic improvements in power efficiency. The typical metric for this is power utilization efficiency, which means the ratio of total power consumed by the data center to total power consumed by just the servers themselves. Most contemporary data centers are in the 2.0-2.5 range – for every watt of power that a server uses to compute, they burn more than a watt in transmission loss, battery loss and cooling. Google is at 1.19 and Yahoo is targeting 1.03 in its next-gen data centers. In other words, if you’re typical, you’re spending twice what they are on power per server.
Good afternoon! This past week, SearchCIO.com looked at the importance of service portfolio management and culture management as part of ITSM and ITIL implementations. We also took a look at an email scandal that’s threatening to rock Boston’s mayoral race and serves to remind CIOs of the importance of an email retention policy or archiving system. Check out the stories linked below!
Service portfolio management: Helping IT get back to business — More mature IT shops are adopting ITIL v3’s service portfolio management approach to better manage the service lifecycle and provide business-centric services to the organization.
Culture management critical to ITSM and ITIL implementation — The goal of any IT Service Management program is not purchasing the tool or implementing the processes. Instead, it’s about creating an organizational culture that will positively embrace these new best practices.
For CIOs, email deletion scandal shows need for email retention policy — The email deletion scandal brewing in Boston is fair warning to CIOs to get their email policies in order.
A dinner this week on women in IT focused on midlevel women in technology and their challenges in getting ahead, given their frequently high family responsibilities and their own perceptions (realities?) of what advancing really demands. The program, featuring Telle Whitney, president and CEO of the Anita Borg Institute for Women and Technology and sponsored by CA, featured research on 1,795 women who work for technology companies in Silicon Valley, but sounded out themes that would resonate with any woman in IT regarding workplace realities and work/life balance.
The institute’s mission is “changing the world for women in technology one woman at a time.” You might also say that overcoming this gender gap means improving IT, corporate America and entrepreneurship one person at a time, since allowing success breeds more of it. Here are some of the ways we can all make that happen:
Be a mentor. Women need mentors, and often those mentors are men, who are three times more likely to be in a leadership position, according to Whitney. A story we did on high-powered women in IT also showed that nearly all of them had male mentors at some time in their career. No mentoring program at your organization? Start one. It needn’t (and shouldn’t) be gender-specific; the point is to get senior people involved in mentoring promising midcareer professionals.
Advocate for a family-friendly company culture. Some companies allow job shares or a split workday so parents can be home when school’s out or there are soccer games. My company, for instance, is very big on flextime, and we have a very generous maternity leave (12 paid weeks of time off). You can bet I work with a lot of smart folks who are also young parents.
Encourage our daughters, nieces and granddaughters to consider the sciences. Just one in four college or graduate science students today is a woman.
Then once they pursue the studies, help them get the skills they need for the workplace. One attendee suggested giving them the book Women Don’t Ask. And in that vein, let’s all tell someone today what we need to succeed, or reach out to a younger colleague with an offer of support. We can make change happen too, one person at a time.
I just returned from an amazing week in Costa Rica and have the tan (really, the sunburn) to prove it. Maybe surfing at the sunniest time of day wasn’t the smartest move? Anyway, I’m re-discovering how difficult it is to get back into the swing of things at work post-vacation, so this lineup of our latest work is as much for my benefit as it is for yours!
Over the past two weeks, SearchCIO.com has examined ITIL project leadership, swine flu preparedness, business continuity, IT disaster recovery outsourcing, IT strategies in a bad economy and more. Please check out the pieces linked below and let us know what you think!
Effective ITIL project leadership: Plan-Do-Check-Act – Successful ITIL project leaders are using the Plan-Do-Check-Act cycle to ensure their teams stay motivated, follow the same processes and contribute innovative ideas.
Uniting ITSM, PPM process methodologies yields IT management benefits – ITSM and PPM are typically separate disciplines, but integrating them can increase visibility, help with budgeting and more. Learn more about this dynamic duo.
Tips for business continuity and contingency planning for swine flu – IT business continuity plans for swine flu outbreaks focus on people and remote access issues. Here are experts’ tips on what to include.
IT disaster recovery outsourcing: A planning guide for enterprise CIOs – Planning for IT disaster recovery outsourcing requires CIOs to assess their DR needs, make the case for funding and select technologies. Learn more in our latest CIO briefing.
Talking swine flu and Conficker with the CIO of the CDC – In this Q&A, the CIO at the Centers for Disease Control and Prevention (CDC) discusses how preparations for H1N1 and other human viruses compare with the computer variety and more.
Tips from the CDC’s CIO on H1N1 flu preparedness – Get a CIO checklist for H1N1.
CIO advice: IT strategies in a bad economy – CIOs should consider re-evaluating their IT strategies in this economy. Get advice on addressing ROI, innovating and achieving project success in this podcast.
Swine flu preparedness: Business continuity during an H1N1 outbreak – Swine flu preparedness will top enterprise CIO agendas this fall as offices create business continuity plans in case of widespread absenteeism. Learn more in this H1N1 flu guide.
Health care security, HIPAA compliance on deck for CIOs in Obama era – HIPAA enforcement has long been lax, but that’s changing with stiffer HIPAA security and privacy rules and incentives to move to electronic health records.