It is one thing to recognize that IT and telecommunications are essential for business efficiency, quite another to ensure that they are aligned with the business goals of the organization. Indeed, aligning IT with business has emerged as the most serious challenge that Indian enterprises will grapple with in the next year.
In a time of an appreciating rupee, the booming stock market and the launch of special economic zones that have become a source of intense controversy, our Infrastructure Agenda survey gives an insight on the challenges, priorities and purchasing plans of companies for one of their most important departments—IT—for 2008.
While Infrastructure Agenda was restricted to the top 150 organizations in India during the last two years, this time we extended the scope of the survey to take into account prominent midsized companies as well to provide a broader view of the IT investment priorities and challenges. In the preliminary round, we evaluated companies from the top 200 large enterprises and 100 large midsized companies.
Based on the priority accorded to IT, investments in technology and adoption of new technologies, we took a sample size of 100 companies across eight verticals and interviewed their IT heads. The survey revealed that aligning the IT agenda with the business requirements was their greatest challenge in the next year. Seven of these responses had to be discarded due to inadequate data provided.
Close to 25 percent of all the companies surveyed are planning to increase their annual IT spends by more than 40 percent over the previous year. But the spending trend is most acutely visible in the sectors of retail, with its huge expansion plans in the country; utility, looking at remote areas for oil and gas exploration ventures; and BFSI, looking to tap the overseas as well rural Indian markets.
Our survey showed that close to 67 percent of CIOs in retail, 50 percent in the utilities, and 31 percent in the BFSI segment intended to increase their IT spends by over 40 percent.
The research pointed out that spending on IT security, which always got a major portion of the spend pie, has paved the way for disaster recovery (DR), business continuity (BC) and enterprise risk management (ERM). In terms of priorities, these technologies were ranked at number one by the respondents.
Most of these companies have a mature IT infrastructure, and with a clear and consistent DR/BC/ERM framework in place, they could assess and respond to the collective risks that could impact their business. Also, with expansion high on their agenda, understanding of global risks, design of strategies to mitigate those risks, and the building of a corporate culture with a focus on risk management has become extremely important.
To draw a parallel with the rest of the world, a survey conducted last month by UK-based Aon Global Risk Consulting revealed that only one in 10 companies in the Americas and Europe have a fully integrated ERM strategy.
While 59 percent of the manufacturing companies and approximately 70 percent of the BFSI and services companies rated DR/BC/ERM as one of the top 10 technologies they intend to spend on in the coming year, spending on data and information security came a close second in terms of overall priorities.
The threat environment has turned intense and dangerous, with attacks becoming targeted and intentional in nature. This, combined with compliance, software consolidation, mobility, and Service Oriented Architecture (SOA), would call for enterprises to focus heavily on effective security governance policies. Industry insiders opine that the use of SOA brings with it a massive change in software deployment, and it would require some effort to secure Web services.
Business Intelligence (BI) /data mining/ data warehousing tools and applications are also poised to register decent spends from companies in the next year. With increasing data and competition, enterprises want to derive benefits of BI that can vary from a range of targeted mails shot to customers to the improved and on-time evaluation of risks.
Use of BI tools and systems is becoming popular across the verticals of BFSI, pharma, retail, services and utility, with most of the CIOs planning to put them in place by the end of next year.
Use of BI and mobility technologies were ranked as the top two technologies in the retail segment and accounted for 25 percent of the total responses in terms of priorities.
Backup solutions, WAN infrastructure and storage systems were some of the other technologies on which enterprises would spend in 2008.
We asked CIOs to rate on a scale of 1-5 (1 being the most important and 5 least important) their greatest challenges from 11 options listed.
The results revealed that the greatest challenge for CIOs in the next year would be to align their IT agenda with their business requirements. IT departments are transforming themselves into service providers for their internal as well as external customers in order to meet increasingly complex business requirements. Data is growing at 40 to 60 percent every year with new types, such as digital records and instant messaging, adding to the growth. Managing this growth, along with more complex information infrastructures and operations, demands a strategic approach for optimized, cost-effective deployment of products and services.
Among the verticals, the challenge of aligning the IT agenda with business found favor with 86 percent of the FMCG companies, 75 percent of pharma companies and 70 percent of the manufacturing companies.
Application integration and information delivery, selecting new technologies, and implementing security and privacy measures were some of the other major challenges for CIOs across verticals.
Web-enabling of applications seemed to be the least of the challenges for enterprises as per our survey. The majority of enterprises have already invested in it and have gone ahead with porting legacy applications and data on the Web.
There is a strong inclination among companies to outsource facilities management and disaster recovery activities in the coming year. With cost savings becoming an important factor for enterprises, outsourcing facilities management would be a move to reduce operating costs and improve efficiency.
WAN support, desktop systems support and asset management were some of the other activities that would be outsourced by these companies.
Enterprises made it clear that they do not intend to outsource their IT strategy function in the next year. Data management and IT security were the other functions that didn’t gel well with the CIOs’ outsourcing formula.
Virtualization emerged as the most popular technology across all sectors when we asked survey participants what technologies they thought would have the most significant impact on IT infrastructure in 2008. Close to 23 percent of the total responses stated that virtualization of servers, storage and desktops would help to consolidate applications, control costs and increase efficiency of the IT infrastructure.
A sector-wise analysis also revealed some interesting figures. About 30 percent of the IT/ITeS companies and 28 percent of the FMCG companies stated that virtualization would prove beneficial for their companies.
The second important technology that got the CIO nod was Unified Communications (UC). The technology garnered 22 percent of the total responses in its favor. Many of the enterprises, such as Marico and NIIT, have already deployed UC, and there are numerous pilots running in the country.
UC offers businesses the capability to converge voice, data and video communication, and enable organizations to significantly increase workforce productivity. It integrates collaboration technology such as calendaring, email, Web conferencing, team rooms and instant messaging with communication tools which include mobiles and landlines, audio and video, and voice messaging.
CIOs also told us that since there were many consolidations happening in the UC space (Cisco acquiring Five Across and WebEx, Microsoft buying TellMe) they would adopt a wait-and-watch strategy before jumping on the UC bandwagon.
Web services/Service-Oriented Architecture (SOA) and the use of Software-as-a-Service were the other technologies that companies thought would have a significant impact on their IT strategy.
Last year, our survey revealed that 50 percent of the enterprises would deploy SOA architecture in 2007. Many of them have already completed deployment while some are still in the deployment phase. This year’s survey suggested that 21 percent of the enterprises intend to deploy SOA in the next year.
SOA has enabled firms to simplify interconnection and use existing IT (legacy) assets as well as update the system with newer technology. This, in turn, has enabled the firms to respond more quickly and cost effectively to changing market conditions.
In November 2007 we conducted Internet-based surveys as well as face-to-face and telephonic interviews with CIOs across the verticals of banking, IT/ITeS, manufacturing, pharma, FMCG, retail, services and utility. Our main focus was to bring out emerging IT trends and the spending plans of companies for the next year.