Special Report – What’s on the CIO’s Mind: Key Issues in 2010

2010 ‘s top IT priorities

Infrastructure virtualization – Ongoing Hackett research continues to show that virtualization remains the primary technology-architecture-based initiative aimed at keeping IT infrastructure cost in check. Despite focus in the trade press on “external cloud” offerings, virtualization for most companies entails building “internal clouds.” Study participants have achieved dramatic improvement in utilization of resources, while the speed and flexibility of infrastructure resources has improved as well.

This improved technical capability has resulted in improved services agility, eliminating the need for large capital outlays as well as introducing variability to infrastructure cost. There is still a question as to the impact on long-term total cost of ownership (TCO) of virtualization strategies. But virtualization is now a mature architecture approach and is rapidly growing in adoption. Companies with internal virtualization experience are in a better position to leverage off-the-shelf external virtualized infrastructure offerings as they mature.

Project portfolio management – Companies are widely implementing project portfolio management, or PPM, to address demand management capability. Most already do some form of PPM, so the emphasis for 2010 is on improving processes and capabilities, as well as expanding the scope of initiatives governed by the PPM process.

Note that this initiative does not imply companies are accelerating implementing dedicated best-of-breed PPM tools. Such implementations require large investments that are hard to fund under current economic conditions. The foremost focus of this 2010 initiative is therefore on improving process, governance and skills.

IT reorganization – Repeated, painful downsizings have forced many IT organizations to rethink their organization structure, reporting lines, span of control, etc., in order to reduce headcount. In 2010 and beyond, IT organizational changes will be more related to service delivery model (SDM) optimization. Organization structure (along with governance and service placement) is at the heart of the SDM design.

The 2010 study finds that 67 percent of companies plan to make such organizational changes in the very near future. Moving to common standards, including shared services, is currently by far the most popular enterprise initiative. In IT, this “leverage movement” will advance rationalization strategies, especially in application portfolio management.

Business application portfolio rationalization around a common ERP – Migrating a fragmented application portfolio to a common ERP platform has been on IT’s agenda ever since ERP become the transactional platform of choice for large and midsize companies. Although most have by now settled on a company ERP platform standard, migration of operating companies, individual functions and end-users onto the chosen platform is ongoing. Indeed, application portfolio rationalization continues to be one of the main issues Hackett Group clients struggle with.

At the same time, application portfolio complexity is one of the metrics most highly correlated with IT performance, so the payoff from complexity reduction is significant. For example, Hackett data indicates that world-class companies have just half the number of applications per 1,000 end-users as companies in the peer group.

Strategic implications

The financial crisis of 2008-2009 accelerated several ongoing IT transformation trends. These changes are leading to a totally different business environment, and thus an equally different IT environment. Specifically, structural changes in the global business environment will have far-reaching implications for the way IT services are funded and provided, and how IT performance is assessed.

The days of undertaking multiple strategies in the absence of a unifying service delivery model are over. In practical terms, companies need to define their strategic IT priorities and corresponding initiatives for 2010 and beyond to reflect changing business priorities. In 2008-2009, survival was the sole business priority for many companies. In 2010, the priority is to retool the IT organization to support the business in an environment characterized by historically high rates of risk and volatility, accelerated globalization and need for innovation. IT must accomplish this transformation with resource levels that have been permanently reduced.

About the authors

Erik Dorr is senior research director. He has over 15 years of experience in the IT industry in a variety of positions. Currently, he advises Hackett Group clients on a broad range of strategic IT issues, ranging from application management to enterprise architecture and IT governance. Mr. Dorr has responsibility for the firm’s IT and business process globalization research agendas. In the past, he has taken a consultative and management role in helping large organizations with enterprise system strategies and implementations. Before joining The Hackett Group, he was a research analyst and consulting director for a large IT research and consulting firm and vice president of IT at a global manufacturing company.

Honorio J. Padrón III, is global practice leader, IT Executive Advisory. Mr. Padrón’s career spans 30 years in business technology management, enterprise business transformation, shared services, outsourcing, and customer experience engineering. He is an expert in all facets of G&A service delivery strategy, design, and implementation. He has held senior executive positions in government and at a number of Fortune 500 corporations, including CEO of Exelon’s Business Services Company, Inc.; CIO and SVP Exelon Corporation; CIO and EVP of CompUSA; CIO and SVP of PepsiCo Restaurant Group; and Head of Global Reengineering for Burger King Corporation. He also served in various program management roles at NASA Kennedy Space Center. CIO Magazine selected Mr. Padrón as one of its “Top 100 CIOs,” and RetailTech as one of its “Top 10 CIOs.” Additionally, he is the recipient of a Computerworld Smithsonian Award for CRM innovation and a Contract Design Award from the Outsourcing Institute. Mr. Padrón is a contributing author to e-Enterprise, The Alignment Effect and Winning the 3-Legged Race: When Business & Technology Run Together.