Web 2.0, SaaS and Cloud Computing to lead IT spend in 2010, finds Infrastructure Agenda Survey

Last year, when the world economy crashed, India also felt the shivers. However, amidst all the gloom, Indian economists still declared that GDP for the country would still grow by a healthy 6 percent. India was seen as the one bright spot in a world that was still showing growth, when most economies were delivering negative growth. Today, as the world economy gradually limps back to normalcy, India is leading the pack as one of the world’s fastest growing economies. A recent RBI report pegs India’s growth to be at 6.5 percent in 2010.

This bullishness is clearly witnessed in the Infrastructure Agenda 2010 survey, which mirrors the confidence of the overall industry. For the uninformed, Infrastructure Agenda is an in-depth research study conducted annually by Network Computing, which maps the IT deployment priorities of Indian enterprises every year.

For this year’s study, we invited CIOs, CTOs, IT Heads and senior IT professionals from some of India’s leading companies across different sectors. They shared their opinions on different aspects of technology deployment within their organizations. Overall, more than 120 professionals participated in the survey. As part of this exercise, we also spoke to over 50 Indian CIOs for their perspective on key technologies and areas that will drive their investments in IT in 2010.

IT Budgets northward bound

Figure 1: IT purchasing plans for 2010 in comparision to 2009

The survey reveals that more than 50 percent of the respondents across all sectors intend to increase their IT budgets for 2010. While 38 percent of respondents said that they will increase their IT budgets in a range of 20 to 40 percent, 15 percent said that they will increase their IT budgets by more than 40 percent (See Figure 1).

Technology Spending Priorities
The Infrastructure Agenda 2010 survey highlights that BI and Security continue to be in demand in 2010, accompanied by new areas of interest such as SaaS, Virtualization, Open Source and Web 2.0.

BI to provide new insights and new markets
While most companies deferred their IT investments during the slowdown, the positive signs emerging from the global economy have again fueled the optimism of Indian enterprises.

To remain competitive, Indian enterprises are investing heavily in software that will give them the capability to improve their revenues and margins. This explains the thrust on BI solutions. A significant 87 percent of respondents said they will increase their IT spend on BI solutions—solutions that are vital for every business segment, as they give enterprises actionable data that they can use to drive their market share. While a company such as Shoppers Stop will use the power of BI to gain insights into buyer behavior, another company Mercedes Benz, will use BI tools to get a complete profile of the customer.

India Inc still feels insecure

Figure 2: Technology investments in 2010

A rise in phishing attacks and increased incidents of data leakage have pushed Indian enterprises to increase their investments in security. This fact is corroborated by this survey—89 percent of the respondents have indicated they will increase their IT budgets with respect to security. Some companies like DLF India are going beyond basic security policies to implement IRM policies for data security. To handle new security challenges, enterprises are also creating separate Info security functions, which are distinct from the IT function.

Powering efficiencies virtually
Virtualization is another big area that is seeing a lot of interest among Indian enterprises. About 88 percent of respondents in the Infrastructure Agenda 2010 survey say that they would increase their investments in virtualization technologies (see Figure 2). Clearly, though enterprises such as Patni, HDFC Bank, Reliance Capital, ICICI Bank, Mahindra & Mahindra and Kansai Nerolac have used the power of virtualization to improve the utilization of their IT assets, the potential for adoption of virtualization is much more. As Indian enterprises are virtualizing their IT assets in phases and the percentage of virtualized infrastructure is still relatively lower, one can expect a greater level of adoption in 2010.

Increased interest in enterprise Web 2.0 tools
Indian CIOs are exploring the potential of effectively leveraging the interactive functionalities of social networking tools for internal usage by employees. Enterprise Web 2.0 tools have proven their mettle in accelerating the ability to share ideas, reduce the time taken to access knowledge and improve productivity levels.

The survey results indicate this growing interest in Web 2.0 tools, with 60.8 percent of the respondents saying they will increase investments in this area in 2010. Enterprise vendors too have recognized this trend, and have incorporated social networking features in their products. Microsoft’s SharePoint has features such as wikis and blogs, while IBM offers mashup tools via its Lotus Connections software.

Open Source inside

Figure 3: Extent of usage of different SaaS-based tools

We also queried organizations on the level of open source usage in their firms, and the results show that the usage of open source today has gone beyond operating systems. Though a majority of organizations (41 percent) use open source operating systems, there are a few surprises in other areas. For example, an impressive 21 percent of respondent firms use open source databases. A similar percentage uses open source messaging systems.

Open source development tools are used by 34 percent of the respondent base, while 38 percent use open source office applications. Interest in open source is also picking up gradually in open source security applications (15 percent) and storage (7 percent).

Overall, open source usage is the highest in the Manufacturing segment (18 percent), followed closely by Services (16 percent), BFSI (13 percent) and IT/ITeS (12 percent).

SaaS drive

Figure 4: Top challenges faced by Indian CIOs

The combination of factors such as growing awareness, ease of use and a low cost of ownership have translated to a strong growth in SaaS adoption levels in India. The survey provides a glimpse of this adoption, and finds out that a massive 95.7 percent of the respondents use SaaS-based solutions in some form.

Enterprise Applications (ERP and CRM) tops the list with 30 percent of respondents preferring the SaaS model. Messaging is next with 22.9 percent of respondents indicating usage. One surprising highlight from the survey is the growing acceptance of SaaS-based security solutions. The survey results show that over 15 percent of respondents use SaaS security solutions. This adoption is significant and quick, as many of the SaaS-based security solutions were launched in India only this year. A hosted security solution is ideal for many enterprises as the SaaS vendor ensures that all security-related maintenance with respect to patches, updates and fixes is continuously done.

Biggest challenges of Indian CIOs
In a challenging economic environment, most CIOs were asked in the first six months of this year to do more with less, and do more with the same. While CIOs across sectors have been asked to innovate and take initiatives that can redefine their company in the marketplace, a majority of the basic issues still remain the same for Indian CIOs.

When asked to list the top challenges facing the CIO, an overwhelming majority of the respondents (45.7 percent) highlighted ‘Integrating disparate systems and Applications’ as their greatest challenge. With most Indian companies in a growth phase, many of these organizations face a huge challenge in integrating legacy applications and making them work with new systems.

‘Lack of budget’ is rated second in the list of topmost challenges. Of the respondents, 37.1 percent refer to the tightrope Indian CIOs have to walk when it comes to delivering increased value at lower budgets. In a challenging global economy, the Indian CIO has been asked to identify projects that deliver returns quickly, improve decision-making ability, and target markets or customers more efficiently—all at lower costs than what had been budgeted.

This is also the time when a CIO’s fiscal management expertise will be severely tested. Accordingly, our respondents have been using a mix of tools, technologies and techniques—such as virtualization, open source, video conferencing, SaaS, and automation of manual processes—to cut down IT costs.
Despite a tough economy, the right IT skills are still in short supply. Over 32 percent of respondents said that tackling IT skills shortage is still a major challenge. The survey reveals a hitherto unknown aspect—the CIO’s grouse with the management. Of the respondents, 31.4 percent believe that unclear and unrealistic business objectives are a huge challenge. Other challenges include tackling data breaches, change management and compliance to various industry regulations.

Future Directions
Having recently emerged from a crushing recession, Indian enterprises will focus their energies and initiatives on technologies and concepts (such as open source, virtualization, unified communications, SaaS and cloud computing) that will help them not only cut costs, but improve overall efficiency levels. Indian enterprises will also be aggressive in adopting new age technologies such as Web 2.0, that have the capability to significantly transform their internal or external communication mechanisms.
BI and Analytics will play a key role in 2010, as businesses are required to come up with ideas that will help boost sales. BI will play a significant role here, and can be of critical importance for targeting and fulfilling customer demands accurately.

In 2010, as the IT function seeks to transform
itself from being a follower to one that leads the business, one can expect more Indian CIOs to don business hats and take initiatives that will help their organizations chart the future growth of their business with much more clarity.

As a catalyst for growth, the increased spend on IT indicates a definitive trend—just as global leaders have used recession as an opportunity to innovate and enter new markets, Indian CIOs too clearly understand the importance of continuously investing in IT to not only cut down operational costs, but also differentiate and increase market share.