Key IT Challenges for 2009

Here are some of the key IT challenges I see for 2009 based on feedback from our customers, the media, and my own understanding of key technologies coming on the scene. In addition, these challenges reflect the broader economy which is going to go through a global recession in 2009, impacting IT budgets in a number of different ways (see my previous post on this issue).


Challenge #1: Maximizing Existing IT Investments

In the past 2 years, there have been a significant amount of investments made in new technology platforms that were supposed to empower office workers to higher productivity and less dependance on IT. Products like content management systems, portals, data warehouses, analytics, CRM, ERP, etc. all have become increasingly mainstream over the past couple years as the economy boomed and CIOs were looking to make long term investments.

This year, in this time of restraint, I see a key challenge for all IT departments in maximizing existing investments that were made over the past two years. For example, how many companies have invested in SharePoint and are only using it to power their intranet? I have many customers who are looking to see how can they can justify their SharePoint platform investment through more advanced applications. For consultants, this is an opportunity to sell more vertically integrated, business centric solutions and move away from selling the latest technology and this will continue for at least another year.

Challenge #2: The Proliferation of Virtual Machines

The virtual machine as a server platform has really hit the IT mainstream. Virtualization has been around for years but thanks to a very mature platform with VMWare ESX and an upcoming push from Microsoft Hyper-V, the use of virtual machines is expanding rapidly.

Virtual servers have started replacing physical ones, first with non-core systems such as development servers to now in some cases full production environments.

One of the key challenges with Virtualization is that because it becomes so easy to spin up a new server, the number of servers proliferates, leading to VM sprawl. Management of virtual servers doesn't easily map from the physical world especially when doing tasks such as asset management (how do you manage a virtual asset). IT managers will spend a lot of time in 2009 coming to terms with these challenges.

Challenge #3: Web 2.0 Goes Mainstream

As technologies go mainstream, the language, terms and concepts that were reserved for leading edge technologists land in the hands of business managers, stakeholders and consumers. Unfortunately, they get them typically without the deep technical or even conceptual understanding.

This happened a couple years ago with the concept of "Portals". Everyone wanted a portal. Portals went from being these esoteric technologies to jargon words in marketing magazines. The same is happening now with concepts like "Blogs", "Wikis", "Web 2.0", etc.

I'm now receiving RFPs from government agencies with requests to "use Web 2.0 technologies" with no rationale, purpose or objectives. Some manager has now heard of Facebook and so now wants it on their web site. As technology consultants, the challenge will be seperating the myth from the fact, selling the real effort it takes to use these technologies effectively and trying to guide stakeholders to realize relevance from what has now become a Fad.

Challenge #4: Storage

Even a few years ago, it was a big deal to have a Storage Area Network (SAN). SANs were reserved for large organizations with lots of data. With the proliferation of media files, volumes of emails and documents, and no discipline when it comes to archiving in most organizations, managing the ever increasing demand for more storage is becoming a major headache. With hard drives getting increasingly cheaper the perception that storage is nearly free is pervasive (I can go buy a terrabyte backup drive now at BestBuy for about $100). Unfortunately, corporate storage is nowhere near as cheap when the requirement includes high performance, highly redundant and low power consuming. For example, at my last organization we spent almost $50,000 implementing a SAN in order to gain faster I/O access for our core databases. The SAN has 28 drives in it, is highly redundant, etc. but even with its several terrabytes of storage it will fill up rather quickly if not managed well.

Challenge #5: Search and Document Management

I mean search here in the broadest sense - finding stuff. Go try and find a document on your corporate intranet. Try and locate a file on your file server. Try and understand the taxonomy or meta-data structure for your document repository (assuming your organization has even defined one).

Creating documents is now so easy that they have proliferated. In addition, there is typically in most organizations very poor meta-data strategies for indexing data and immature archiving strategies to remove old documents. For example, at my last position we had a file server with about 4 terrabytes of documents. We did a scan of the thousands of documents on that server and found that over 80% had not been touched in the past 2 years. Even if they are not being accessed they act as an information clog when trying to find important documents.

Document management used to require very expensive and proprietary software such as OpenText, Documentum, HummingBird, etc. and was reserved for companies such as law firms who had very regulated and structured document repository. But with lower cost tools such as SharePoint you can quite easily now implement some decent meta-data taxonomies and start to catalogue, version control and archive documents in a methodical way.

The biggest challenge isn't the technology - its getting commitment from the business to organize the thousands of old documents and migrate them into the new structure. This is a massive effort and requires significant involvement from the business. While there are some tools to help with this effort, the clean-up effort of document migration is still a continuing challenge.

Corporate IT Departments Trends for 2009

Corporate IT departments are, at the best of times, the internal consulting organization for their organizations and provide strategic technology services to help propel the overall success of the business. The role and objectives of the corporate IT department will change in 2009 as the economy continues to lag, technologies mature and organizations that saw "Web 2.0" as bleeding edge now start to adopt some of more mainstream applications of online technologies.

Here are some of the key trends I see in 2009 for the corporate IT department. For consultants such as myself, this will have a major influence on how we can continue to provide high value to our internal IT partners by providing services and solutions that contribute to the value proposition for the corporate IT department in 2009.

Corporate IT Departments Will Lag Behind in Upgrades

With budgets tightening, corporate IT departments will take the hit in upgrades for both hardware and software. IT departments will be asked to do more with less and those departments who may have planned on an Office 2007 upgrade, a SharePoint 2003 to 2007 conversion project, a .NET framework 1.1 to 2.0/3.0/3.5 upgrade project, server refreshes, etc. will be asked to defer them to save costs.

Scrutiny on Capital and Cash Flow

Typically, large scale expenditures can be amortized over a 3-5 year period. For example, if a Director IT needs to purchase $500K in new servers, they can typically budget these over a 3-5 year amortization period so they don't get hit with the entire cost in year one. However, from a cash flow perspective, the money still gets spent and in cases where cash is tight (e.g. credit crunches) these types of cash outlays will be dramatically curtailed.

As a result, this will lead to arrangements with providers where costs can be paid on a monthly basis, e.g. leases, software as a service, outsourcing, financing, fee for service, etc. where cash flows out of the organization in a more even way than a large capital expenditure.

Long Term Consulting Under Attack, Short Term Consulting Will Increase

As budgets tighten, the following tends to happen during the budget planning cycle:

1. Full time hires are deferred
2. High cost consultants are targeted
3. Projects have to show very quick ROI

If you are a $200 / hr consultant that has been working on a project for 2 years and the project will continue for another 2 years, then expect that cost to be reviewed and for department managers to try and squeeze out consultants and replace them with cheaper internal resources.

However, because full-time hires become blocked, the only way to get new work done in the short term tends to be through direct consulting costs. In addition, because the business does not have long term visibility they will be hesitant to take on a full-time resource as a long term commitment. If the business stakeholder can justify the ROI in the short term, they will tend to outsource the work simply because the Corporate IT department cannot hire any full time resources to do the work. In addition, outsourcing the work as a fixed cost to a consulting firm is less risk and the cost is directly attached to the cost of the project, making it more tangible for a business stakeholder than a resource hire.

Incremental Optimization

For both revenue and profit, the goal for 2009 will be to optimize as much as possible. For example, technologies such as SEO, analytics, data mining, reporting, CRM (especially for those who already have an existing platform), channel management, marketing optimization, etc. will sell very well to organizations who have over the past 2-3 years have been growing their customer base but now need to focus on retention, optimization of marketing dollars and efficiency. Technologies that can help do this will continue to get the green light as they produce ROI faster than brand new initiatives and they are less risk for a CIO who is under budget pressure.

Layoffs for Many, Indispensable Positions for a Few

In tough times, there are typically layoffs. Depending on the speed of action required, layoffs are many times done without proper planning and project/application coverage (the worst case is where you see companies having to hire back the people they just laid off on contract!). For those who are laid off, it means that they are now looking for a job. But for those who are left standing, they can find themselves now indespensable where there used to be three people who knew how to fix an application and now there is only one. In some cases, the one left is a consultant!

For those who are in this position, it provides leverage to those left behind. If you are the only developer who now has access to source code and can run a build, you were kept because they couldn't afford to dump you. If you can stretch to grab the work that was being done by other developers and demonstrate the flexibility and tenacity to help clean up the mess inevitably left behind by these changes then this will be looked at favourably by the company.

For consultants, there are opportunities to fill the gaps left behind in the rush to lay off staff through short term and long term consulting arrangements, especially if the consultant has had previous experience with the applications in the organization. There are also opportunities to pitch alternatives to lay-offs without adequate transition through outsourcing arrangements. A service company can provide flexibility in resource ramp-up or ramp down that is difficult for an internal department to manage especially in a time of crisis. In addition, a consulting company has the advantage of being able to work in stealth, allowing for a Corporate IT Director for example to quietly outsource key functions to an outsource provider while planning a lay off so as to avoid disruption and continue service levels.

Opportunity for Entrepreneurialism

There is an opportunity for IT departments to re-invigorate through a focus on entrepreneurialism. For those IT leaders who can show the business a clear plan to short term revenue, increased profit, etc. this will tend to get more attention than more themes such as scalability, efficiency, etc. Entrepreneurs focus on delivering high value services on a shoe-string budget - this is what is required in an economic down turn.

Business stakeholders will also be more apt to listen when they are also hungrier for more revenue. For example, many sales businesses will find their traditional sources of revenue tapped out and will be looking around for new revenue sources. If the Corporate IT Department has some creativity and can partner effectively, they can help provide some great new ideas for using Web 2.0 technologies, creating online campaigns, optimizing CRM data, using data mining techniques, etc. to squeeze more revenue out of existing channels or to open up new ones.

For consultants, this is the ONLY way to sell business in 2009 - either demonstrate how to squeeze more revenue/profit out of existing channels or show how a very small investment in a new channel can lead to large growth potential. Be prepared to take risks and be entrepreneurial with your customers in how they pay for your services, how much risk you take on, etc. and this will also be attractive to customers who are hesitant to spend money.

Focus on Business Solutions that Make Revenue or Profit, Not Technology

This is always the case with business stakeholders, but in times of restraint this will be even more pronounced: Corporate IT Departments who are focused on generating concrete business centric solutions that create revenue or profit opportunities will be prioritized.

If you are a Corporate IT Department or one of its service providers and your focus is heavy technology buzzword projects like: SOA, Cloud Computing, Web 2.0, Architecture, Software Development Life Cycle, Enterprise Data Warehouse, ERP, etc. then you will be in trouble in 2009. For example, at one of the banks here in Canada for example, I know that their list of thirty major IT has been cut to less than ten for 2009.

Projects where existing horizontal technologies in place are now leveraged to create additional value will have significantly more priority. For example, we have many customers who have previously bought Microsoft SharePoint 2007 but aren't leveraging it effectively or maximizing its use. Incremental investments in adding verticalized and targeted applications on top of this already existing investment will show quicker pay off than investments in additional infrastructure technologies.