cio march 15 2009 issue

Vijay [email protected]

From The ediTor-in-ChieF

A few summers ago, in a city not too far away, an IT executive, was preparing to don the

mantle of a CIO. The prospect of being the IT helmsman of a large manufacturing company was

exhilarating and daunting. A bit more of the latter had him breaking out into a sweat that all the

air-conditioning in the world couldn’t keep from rolling down his face.

“What have I got myself into?” he wondered. The chemicals’ giant that he was about to join

had a home-brewed ERP that was forever

breaking down, and management had felt

the need to migrate to a standard package

with support for analytics. While he’d

done it before, it had never been on this

scale. Just thinking of the number of plants and modules to be covered and the creaky VSAT-

based network, gave him the jitters

“How do I tackle this situation?” he wondered. Then, thinking of a veteran CIO, he perked

up. “He’ll guide me. After all, he always liked me,” he thought to himself, reaching out for his

cellphone to ring up his former boss.

On receiving a forced smile in return for his “Congrats on the move”, the wise one asked:

“What’s the problem?” And, out came the story of the migration.

“Look, you’ll be able to do it, but just so you run into a wall, I’ll share with you a few ways that

have worked for me,” he said.

Handing over three numbered envelopes, the IT war-room veteran said: “Open one of these

if you run up against a problem you don’t think you can solve.”

With a smile on his face, our CIO went off on his way. Things were fine for a while, but when

a year later, the migration had still not been completed, he had a discussion with the CFO, which

was definitely not pleasant. At his wit’s end, he remembered the envelopes. He took out the first

envelope. The message read: “Blame your predecessor.”

Satisfied with his comments, the CFO responded positively, and agreed to extend the deadline.

The migration got completed and things were fine again.

About a year later, the company was hit with heavy competition. All the senior executives

were asked to come up with ways to hone the company’s competitive edge. Remembering his

prior experience, he quickly opened the second envelope. It read: “Re-architect.”

This he did, and the new systems increased efficiency, helping the company bounce back.

Many profitable quarters later, the company once again faced difficult times. Out came the

third envelope. The message said: “Prepare your resume and three envelopes.”

The number of plants and modules to be migrated from a home-brewed ERP would give any sane CIO the jitters.

A familiar tale of ebband flow.

A Fablefor Today

Vol/4 | ISSUE/092 m A R C h 1 5 , 2 0 0 9 | REAL CIO WORLD

Content,Editorial,Colophone.indd 2 3/16/2009 6:46:00 PM

MARCH 15 2009‑|‑Vol/4‑|‑issue/09

FeATUres24 | Fast, Light & green ideasGreen IT | Because being friendly to the environment can help pull up your company’s sagging bottom line, the slowdown could be the perfect time to implement green initiatives.Feature by Mary K. Pratt

28 | going VirtuaL For reaL BeneFitsServer vIrTualIzaTIon | With increasing stress on cost savings, IT departments are turning to server virtualization. They are setting a trend but with caution.Feature by Robert Mitchell

32 | aLways at your serViceCuSTomer ServICe | As every new generation takes to technologies that change swiftly, smart organizations need to redefine their customers and re-align their offerings. Here’s how.Feature by Gunjan Trivedi

36 | aLL hands on inFormation SToraGe | When money is thin, building datacenters at remote locations is heavy on the purse. But now, you can de-duplicate and replicate data anytime, anywhere — as one marine survey firm found out.Feature by Lucas Mearian

42 | agiLe: Fitting in securitySeCurITy | More companies are turning to Agile application development for the flexibility and speed it offers. But they need to ensure that security is not sacrificed at speed’s altar.Feature by Kevin Coleman

46 | Look BeFore you LeapIT manaGemenT | Times change and with it technology. New-age tools come with a set of challenges. Here are five state-of-the-art pitfalls your predecessors never dreamed of. Feature by Mary K. Pratt

52 |datacenters: going out, growing upInfraSTruCTure ouTSourCInG| With growing pressure on IT budgets, more CIOs are turning their datacenters over to managed service providers to cut cost, manage scalability and increase governance. Feature by Gunjan Trivedi

56 | re-drawing your BudgetBudGeTInG | The slowdown isn’t going anywhere, but you still need money to run IT. Here’s how you can work the system to your benefit. Feature by Mary Brandel

60 | roLLing on inteLLigenceBuSIneSS InTellIGenCe | Things are so bad for some retailers that they’d rather hang up a sign and go home. But a few are turning to business intelligence. They are targeting new users and want faster turnaround. Feature by Thomas Wailgum

64 | steady ground in the cLoudCloud CompuTInG | Behind the hype around cloud computing, CIOs are figuring out when and how to use cloud options wisely. Feature by Bill Snyder

68 | wired togetherunIfIed CommunICaTIon | VoIP, IM, streaming video and other multimedia data running on converged networks guarantee lower costs and more efficient management. Feature by Julie Sartain

A speCiAl Cio sUrvivAl GUide:

11 wAys To beATThe slUhe slUhe sl mp24

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content (cont.)

dEPaRTMEnTS

NOW ONLINE

For more opinions, features, analyses and updates, log on to our companion website and discover content designed to help you and your organization deploy IT strategically. Go to www.cio.in

c o.in

The Strategic CIOBusInEss? In thE BACk sEAt | 16 When an IT leader was told his team would drive the push to increase revenue, business asked, ‘the nerds are going to tell us how to make money?’ But they did. Column by Al kuebler

LeadershipsuCCEssIOn PLAnnIng’s DuAL BEnEfIts | 18By developing others, you are developing your organization — and yourself.Column by John Baldoni

Trendlines | 9 survey | Cool and Calm Despite Slowdown finance | IT Fills Bank Lockers It Management | BPM Tops CIO Priority List Research | Green is Nice, Money is Nicer Mobile | The Virtual Mobile Phone Wireless | Warning: Dense Fog Ahead technology | Big Leap in Nano Storage study | Video Will Rule By 2013 Career | Wanted:Network Skills security | Hackers: It’s Party Time

Essential Technology | 72 Pundit | The IT Parachute Column by Michael Hugos

From the Editor-in-Chief | 2 A fable for today

By Vijay Ramachandran

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Netmagic 52,53,54 & 55

Quest 46,48&49

SAS BC

Symantec 9,11,13&15

Symantec 42,43,44&45

Wipro 3

ADC Krone 19

Airtel 67

Bharti Axa after 16

Canon IBC

Cisco 51

Dell 1

eDynamic 61

EmC 36,37,38&39

Emerson 59

Epson 7

Fortinet 21

Fujitsu IFC

Genesys 32,33,34&35

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n e w * h o t * u n e x p e c t e d

cool and calm despite slowdown

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cool and calm despite slowdown

S u r v e y Senior Asian IT executives Senior Asian IT executives are generally cool, calm and cautious about the impact of the global economic downturn, according to research by MIS Asia.

When asked to describe the impact of the current economic difficulties on their organizations more than 70 percent of Asian ICT executives preferred the options moderate (59.9 percent) or marginal (11.2 percent), rather than

serious (28.3 percent). More serious (28.3 percent). More than half the APAC decision than half the APAC decision makers surveyed also said makers surveyed also said that they planned to either that they planned to either

maintain 2008 levels of IT maintain 2008 levels of IT spending, or even increase it spending, or even increase it

this year. The biggest intended this year. The biggest intended increase in spending from the increase in spending from the

previous year was on security and previous year was on security and risk management, IT governance and risk management, IT governance and

compliance and plus staff development.compliance and plus staff development.The top four IT initiatives where The top four IT initiatives where

executives plan to increase spending executives plan to increase spending this year were IT security, virtualization, this year were IT security, virtualization, business intelligence and ITSM.business intelligence and ITSM.

Asia's senior IT executives also Asia's senior IT executives also expect to give priority to investing expect to give priority to investing in new application development and in new application development and implementation, followed by hardware implementation, followed by hardware and then network infrastructure.and then network infrastructure.

Only 20 percent plan to cut IT staff numbers. Their reactions to the economic downturn include negotiating harder with vendors (about 61 percent), deferring hardware and software purchases (about 56 percent), delaying new projects (about 48 percent) and restructuring IT service agreements (about 36 percent). More than 70 percent of the responses came from enterprises with more than 500

employees. MIS Asia Editor Ross O. Storey said the latest IT Nation findings showed that IT executives in the APAC region were reasonably sanguine about the financial environment.

Peter Hind, who analyzed the IT Nation findings, says that, another noticeable finding was that small to medium enterprises or SMEs and medium-sized organizations were more upbeat about the year ahead than small businesses or large enterprises.

"This probably indicates that middle-sized organizations are less likely to be held captive to the trials and tribulations of the share market," says Hind. "They probably have some reserves of resources that will offer them some capability to ride through the downturn, at least for 2009."

The IT Nation 2009 Tech Trends and Enterprise Priorities research was carried by Fairfax Business Research on behalf of MIS Asia magazine.

The research was done from November 2008 to January 2009 — at the start of the economic crisis of confidence — and canvassed about 10,000 senior executive subscribers across the APAC region.

—By MIS Asia staff

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F i n a n c e To blunt the adverse effects of the current financial crisis, banks are looking at implementing certain technologies that will help them generate new income, including IT optimization, virtualization, and SaaS.

Independent research and advisory firm Financial Insights, an IDC company, observes that "the current economic crisis will result in lower demand for banking products, shifts in banking preferences among wary customers, and a rise in delinquencies and defaults." To effectively tame their impact, Financial Insights found that banks are formulating counter-cyclical technology initiatives including portfolio analytics, asset-liability management, and credit collections and recovery.

"Banks have to find ways to generate new demand and find new sources of income. Technology imperatives here include CRM and customer-centric projects, and payments initiatives to generate fee income," says Michael Araneta, senior research manager of Financial Insights Asia Pacific.

Li-May Chew, CFA, senior research manager of Financial Insights Asia Pacific, says that banks have recognized that the modes of operation during boom times are ineffective in a crisis environment. "IT optimization will be the key concern for bank IT leaders as they search for clarity in their existing technology assets, and see how these can be integrated more effectively to meet current and future requirements. The overarching objective is simply to do more with what you have," she says.

Asia Pacific banks are still expected to increase technology spending in several overarching priority areas in 2009, albeit with much lower rates of growth compared to those seen in previous years. The 2009 priority list is made up of discrete projects, typically ad-hoc and tactical in nature. These include virtualization, customer loyalty, customer retention, credit collections and recovery, SaaS and so forth.

Financial Insights says Asia will continue to be an attractive market for banks due to the region's large domestic economies, recent wealth accumulation, relatively stable economic and corporate fundamentals, as well as pockets of under-served banking segments.

—By Melba-Jean V. Bernad

i t M a n a g e M e n t improving business processes is the number one priority of cios, according to analyst firm Gartner. although cios are in the "worst recession of their working lives", cost reductions come second, according to Gartner research vice president michele cantara.

cantara said cost reduction has moved from fifth to second place on the list of cio priorities, but improving business process management (bpm) has retained its spot as number one priority for four years running.

"when we surveyed cios last year, improving business processes was number one in terms of their priorities. it's been number one since 2006 and it's still number one in 2009," said cantara.

but the business environment has changed, and executives need to learn to adapt or risk losing their jobs, said Gartner vice president and research fellow mark raskino.

"ceos are at the most risk of losing their jobs if they don't adapt fast enough," said raskino. ceos will look to restructure in the current economic climate, and that in turn will make bpm even more important.

Gartner analysts said restructuring will be the ceokeyword in 2009.

"make sure you are attentive to this single word whenever it is used. your your y ceo is likely talking about business model restructuring, not just process redesign. but changes in the business model will drive massive changes to business processes," said cantara.

"we're in year one of the recovery. recovery will take a few years. thus, you must do bpm — apply bpm practices — more than just gaining the necessary competencies. later, you'll have to invest time and energy into increasing your competencies. but 2009 must be a year of action," said cantara.

despite cost cutting measures within firms, executives will cushion it budgets from the worst effects of the downturn, and it will be one of the most resilient investment areas.

the analyst group polled 150 us and uK ceos and senior executives in december 2008, and found that it was one of the categories in which most business executives wished to invest substantially, following product enhancement. this means, that while it budgets will be flat, there will be more money in it compared to the rest of the business.

However, cios will still need to exercise caution when pitching for bpm projects. "tactical, boring projects won't tactical, boring projects won't tkill you. it's like going on a diet after christmas, you will look good for it," said raskino.

—by siobhan chapman

BPM Tops CIO Priority List

Vol/4 | issue/091 0 m a r c h 1 5 , 2 0 0 9 | REAL CIO WORLD

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Green is Nice, Money is nicerr e S e a r c h Green IT, which started as a civic responsibility act calling for environmental protection, has now become more of a cost concern for many companies who want to save money, according to a study.

Suzie Tan, country manager of Suzie Tan, country manager of Symantec Philippines, reported that Symantec Philippines, reported that the datacenter's focus on being green the datacenter's focus on being green was driven by cost issues in 2008 with was driven by cost issues in 2008 with social responsibility on the rise.social responsibility on the rise.

The study asked companies on The study asked companies on why creating a green datacenter was why creating a green datacenter was important to their workplace and most important to their workplace and most of their answers surprisingly revealed of their answers surprisingly revealed that cost issues are the ones driving the that cost issues are the ones driving the initiative — not the environment.initiative — not the environment.

"A green datacenter is important "A green datacenter is important because of cost-related issues," said because of cost-related issues," said Tan, adding that reducing cooling Tan, adding that reducing cooling costs topped the survey by 48 percent; costs topped the survey by 48 percent; followed by reducing electricity followed by reducing electricity consumption at 47 percent; and a sense consumption at 47 percent; and a sense of responsibility to the community by of responsibility to the community by 45 percent.

Tan reported that with the ongoing Tan reported that with the ongoing global economic crunch, most global economic crunch, most datacenter managers are now pressured datacenter managers are now pressured to do more with less, meaning they should be able to reduce cost but improve on service availability.

Raymond Goh, director of Symantec's systems engineering in the Asia south region and country manager of Symantec Vietnam, identified key

findings of the study in Asia Pacific, which found that datacenter staffing remains problematic, servers and storage continue to be underutilized, and disaster recovery plans are out of information.

"Staffing remains a big issue as 37 "Staffing remains a big issue as 37 percent of the respondents claimed they are understaffed," Goh said, adding

datacenter spending is even rising, referring to costs on energy, facility, infrastructure, applications, and IT service assurance.

Goh said Symantec recommends Goh said Symantec recommends heterogeneous software, which allows datacenter managers to do more with less by doing the following:

Make use of existing server and storage resources

Free up IT staff (by outsourcing some tasks)

protecting and managing data servers and associated applications on a single platform.

The study entitled, State of the Data Center Report 2008 in Asia-Pacificwas conducted by Symantec. Social responsibility came in last as the focus responsibility came in last as the focus of the green IT trend, which was first of the green IT trend, which was first spotted in 2007. spotted in 2007.

The study was conducted on 1,600 The study was conducted on 1,600 respondents in over 2o countries respondents in over 2o countries globally, 414 of which came from Asia globally, 414 of which came from Asia Pacific region. Pacific region.

The respondents ranged from vice The respondents ranged from vice presidents, senior vice presidents, presidents, senior vice presidents, directors and managers positions directors and managers positions coming from companies with 5,000 or coming from companies with 5,000 or more employees. more employees.

The common criteria was that they The common criteria was that they either hold datacenter management or either hold datacenter management or budgetary responsibilities.budgetary responsibilities.

"Managements should try and "Managements should try and create a framework for greening their create a framework for greening their datacenters, to protect the environment datacenters, to protect the environment as well as to virtualize their physical as well as to virtualize their physical world," Goh said. He added that world," Goh said. He added that companies should look for solutions companies should look for solutions that focus more on applications that focus more on applications and better storage management technologies along with greening their datacenters to cut costs.

—By Tom S. Noda

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M o b i l e We've had virtual storage, virtual machines and virtual datacenters now virtualization vendors are looking to the next frontier: the virtual mobile phone.

VMware has announced the mobile virtualization platform (MVP) aimed at handset vendors to enable mobile users to choose between two different platforms or phone numbers on a single handset. VMware chief technology officer Steve Herrod said that it would enable users who had separate phones for work and for home to be able to use both phones from a single device.

"The way that I envisage it working would be that IT departments would outline a set of policies and particular software build. In essence, this means that users would be able bring any device into the workplace and the IT team could use that device to include any particular workplace policies. "It could even be the case that one device could have multiple operating systems running so that you see Symbian and Android in a single view," Herrod said.

Herrod warned that there were still some issues to be tackled. "Power management is a big issue. We've done power management on the desktop but nothing like the amount we've had to do on the mobile phone."

There are other issues to be tackled however. Julia Austin, senior director for R&D said that one of the biggest challenges was working with carriers. "I think it depends who you're talking to, some welcome the opportunity to simplify the software process, others are more defensive." She said that billing in particular could prove to be a hurdle to overcome, although again she said that some carriers were more responsive than others.

One application where MVP could prove to be useful is for users who have multiple SIM cards from different countries' operators. "Think of it as a way of putting a new SIM card into your phone when you change country — without needing a SIM card," she said. The software for MVP is a result of VMware's acquisition of a French company Trango Software. Herrod said that although MVP has sprouted from Trango's original work, there had been a VMware team working with them to fully incorporate into VMware's product line.

—By Maxwell Cooter—By Maxwell Cooter

W i r e l e S S a 12-mile stretch of highway in california's central Valley that has been the scene of deadly car crashes due to thick fog now has a wireless warning system to alert drivers.

the system, dubbed the Fog pilot project, was installed to combine a wimax network with fog sensors and electronic highway signs, according to the california Highway patrol and california department of transportation.

the system "is a tool we use to send messages to drivers right away that dense fog is ahead, and that they should slow down to a certain speed," says Highway patrol officer matt radke, a spokesman for the central division. the stretch of state route 99 runs through a valley located between the sierra nevada mountains, which tend to trap fog, says radke. large farms in the area sometimes burn off fields, which can generate thick smoke, he says.

the area is notorious for causing accidents, some of which have been deadly, including an 86-car collision in november 2007, says radke. drivers entering a fog zone slow down dramatically but can be struck from behind by cars still moving at a faster speed. the most immediate impact of the warning system has been to reduce the need for the Highway patrol to organize police cruisers into pace cars, which move down a stretch of highway at a slower speed to force the traffic behind them to slow down, says radke.

the system integrates many technologies, including 21 weather detection stations, microwave vehicle motion detectors every quarter mile, visibility sensors, closed circuit-television cameras and electronic warning signs with changeable messages every half mile, according to proxim wireless, one of the equipment providers.

the weather and traffic data moves over wimax, a high-speed wireless network, through proxim radios and is managed centrally by proxim.

radke says fog information can be turned into a warning to motorists in less than 30 seconds. but he adds that the warning system is just another tool for preventing accidents.

"people still have to pay attention to the signs and reduce their speeds," nor should they be using a cell phone while driving or "eating dinner or breakfast at the wheel," he says. "that happens."

—by matt Hamblen

Make wawaw y fay fa or the Virtual

Mobile phone


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t e c h n o l o g y Nanotechnology researchers say they have achieved a breakthrough that could fit the contents of 250 DVDs on a coin-sized surface and might also have implications for displays and solar cells.

The scientists, from the University of California at Berkeley and the University of Massachusetts Amherst, discovered a way to make certain kinds of molecules line up in perfect arrays over relatively large areas. One of the researchers said the technology might be commercialized in less than 10 years, if the industry is motivated.

More densely packed molecules could mean more data packed into a given space, higher-definition screens and more efficient photovoltaic cells, according to scientists Thomas Russell and Ting Xu. This could transform the microelectronics and storage industries, they said. They discovered a new way to create block copolymers, or chemically dissimilar polymer chains that join together by themselves. Polymer chains can join up in a precise pattern equi-distant from each other, but research over the past 10 years has found that the patterns break up as scientists try to make the pattern cover a larger area.

Russell and Xu used commercially available, man-made sapphire crystals to guide the polymer chains into precise patterns. Heating the crystals to between

1,300 and 1,500 degrees Celsius (2,372 to 2,732 degrees Fahrenheit) creates a pattern of sawtooth ridges that they used to guide the assembly of the block copolymers.

With this technique, the only limit to the size of an array of block copolymers is the size of the sapphire, Xu said. Once a sapphire is heated up and the pattern

is created, the template could be reused. Both the crystals and the polymer chains could be obtained commercially, Xu said.

The scientists said they achieved a storage density of 10Tb (125GB) per square inch, which is 15 times the density of past solutions, with no defects. With this density, the data stored on 250 DVDs could fit on a surface the size of a coin, the researchers said. It might also be possible to achieve a high-definition picture with 3-nanometer pixels, potentially as large as a stadium JumboTron, Xu said. Another possibility is more dense

photovoltaic cells that capture the sun's energy more efficiently.

The new technology could create chip features just 3nm across, far outstripping current microprocessor manufacturing techniques, which at their best create features about 45nm across.

Among other things, such a leap ahead in storage density could alter either the amount of content that a person could carry with them or the quality of media delivered on discs, said Nathan Brookwood, principal analyst at Insight64. For example, it might allow movies to turn into holograms, he said.

"Just when we think we're so technically sophisticated in what we

can do, along comes somebody with a notion like this, which has the

potential to fundamentally change economics in so many different areas,"

Brookwood said. Ultra-high-definition displays have

less practical potential, according to IDC analyst Tom Mainelli. The image and video standards of today, including those used in HDTV, couldn't take advantage of a display with 3nm pixels, he said. And when it comes to monitors, price is king.

Insight64's Brookwood said the technology, for which Berkeley and Amherst have applied for a patent, harkens back to fundamental breakthroughs that created the IT industry, he said.

—By Stephen Lawson

REAL CIO WORLD | m a r c h 1 , 2 0 0 9 1 3Vol/4 | issue/08

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S t u d y Nearly two-thirds of the world's mobile traffic will be video by 2013, according to the latest visual networking index forecast by international networking giant Cisco.

The Asia-Pacific region is expected to account for one-third of all mobile data traffic within the next four years and will have the strongest annual mobile growth of 146 percent, second only to Latin America at 166 percent.

The forecast highlights a variety of Internet protocol (IP) networking trends driven largely by the increased use of mobile broadband applications.

It predicts that global mobile traffic will exceed two exabytes — the equivalent of 250 million full DVDs — per month by 2013.

The research forecasts that mobile broadband handsets, with higher than 3G speeds and laptop air or data cards, will constitute more than 80 per cent of global mobile traffic by 2013.

"The findings reflect the trend that consumers will use a variety of services, applications and devices to drive an increase in mobile traffic we're predicting," said Suraj Shetty, vice president of service provider marketing, Cisco.

"The evolving 4G mobile Internet transformation is further diversifying how people access and experience the Internet and is causing an undeniable surge in bandwidth growth," Shetty said.

"The projected increase in mobile rich media points to the inevitable transition to 4G. This will shift the industry's focus towards all-IP networks."

Kelly Ahuja, Cisco's senior vice president, service provider routing technology group, said more personalized services and applications were becoming available on a wide range of devices.

"The key to success will be delivering video-rich any-play services to users, enabling them to move freely throughout the world while maintaining connectivity to others," Ahuja said.

"As a result, service providers will have to take into account the need not only for more bandwidth when planning their network architecture but for greater network intelligence as well."

These are among the key findings of the Cisco Visual Networking Index (VNI) Mobile Forecast for 2008-2013 which projects global mobile traffic to increase 66-fold from 2008-13 with a compound annual growth rate of 131 per cent over that period.

—By Ross O. Storey

c a r e e r a report has revealed that the need for a report has revealed that the need for aspecific it skills doesn't lessen because the economy it skills doesn't lessen because the economy itis bad.desktop support ranked as the most wanted skill sets for 76 percent of cios, with network and windows administration taking the second and third slots with 65 percent and 64 percent, respectively.

database management is considered hot for 55 percent of respondents of the robert Half technology technology tsurvey, and telecom support and wireless network management was selected by 47 percent and 46 percent of cios polled, respectively. on the lower end of the in-demand skills are erp implementation (23 percent), .net development (22 percent) and linux/unix administration (21 percent). other lesser sought-after skills include Xml development and ml development and mlJava development, both receiving 21 percent of cioresponses. and open source development and crmimplementation earned 19 percent each.

"Help desk or technical support and networking tied as the job areas experiencing the most growth, each cited by 15 percent of cios," according to robert Half technology. technology. t

separately, bluewolf projected that salaries for those with networking expertise will spike in the coming months. the staffing firm's it salary Guide 2009 revealed that network managers could Guide 2009 revealed that network managers could Guide 2009experience salary increases of as much as 14 percent, with pay ranging between $70,000 (about rs 35 lakh) and $110,000 (about rs 55 lakh) — which is up from the high end of $95,000 (about rs 47.5 lakh) in 2008.

"investments in several key areas, including network administration and security, business intelligence, wireless communications and web applications have and will continue to drive aggressive hiring," according to bluewolf.

the data in bluewolf's salary study is based on data gathered from roughly 300 clients for many different job openings, amounting to an estimated 4,000 positions.

bluewolf's research also found that pay for project managers will decline this year.

"project managers will earn an average starting salary of between $85,000 (about rs 42.5 lakh) and $125,000 (about rs 62.5 lakh) annually, a decrease from last year's high range of $150,000, (about rs 75 lakh)," the firm found. it executives were polled it executives were polled itseparately by it staffing and consultancy firm it staffing and consultancy firm it robert Half technology and staffing firm technology and staffing firm t bluewolf.

—by denise dubie

Wanted:networK sKills

Videowill ruleby 2013


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S e c u r i t y A study of 57 Website hacks from last year showed that 24 percent were aimed at defacing a site rather than financial gain.

The figures from the latest Web Hacking Incidents Database Annual Report suggest that stealing money and data is not always the overriding motivation for hackers, although it has been a rising trend in recent years.

"While financial gain is certainly a big driver for Web hacking, ideological hacking cannot be ignored," the report said. Although there were hundreds of thousands of website attacks in 2008, the report set a strict criteria for its analysis: it looked at only those incidents that were publicly reported, were associated with Web application security problems and had an identifiable impact on an organization.

These criteria allow people to understand the potential business impacts as opposed to just the technical failure, which is important in order to manage risk, the researchers said.

Website vandalism may carry a lower risk for organizations than a financial attack, but still highlights insecure Web pages.The report found the majority of defacements "were of a political nature, targeting political parties, candidates and government

departments, often with a very specific message related to a campaign. Others have a cultural aspect, mainly Islamic hackers defacing Western websites."

Government, law enforcement and political websites were the most targeted categories. The second most popular motivation was stealing sensitive information, which occurred in 19 percent of the 57 hacks. That was followed by planting malware, at 16 percent, and causing monetary loss, at 13 percent.

The remaining attacks caused downtime for a website, planted worms and linked spam and information warfare. The most common style of attack was SQL injection, which involves inputting commands into Web-based forms or URLs in order to return data held in back-end databases or plant malware in order to infect computers visiting the site. Thirty percent of the 57 attacks were carried out by SQL injection.

In early 2008, security experts were stunned by a wave of attacks that used automated tools to seek out weak websites to compromise by SQL injection. It has been estimated that up to 500,000 Websites fell victim to hacks.

—By Jeremy Kirk

hackers: it's party time

Trendlines.indd 15 3/14/2009 12:17:25 PM

I think I choked. I was the senior IT manager in a meeting called by the CEO of the leaders of our various lines of business. Since his arrival, this CEO had shown himself to be a visionary. He had made IT his focus, directing us to fix

broken and outdated financial and operational support systems. Now, high above Manhattan, he laid out his plans for where to go from there. IT would again be central, but in a role entirely new to it. That's where I choked.

The CEO began by reviewing our progress. Costs were down, and customer service was improving. All well and good, he said, but now we needed to turn our attention in another direction, urgently. With costs already cut, it was time to turn our attention to increasing revenue. "I called this meeting because I've decided that IT must take the initiative and lead this new effort from now on, and I wanted you to prepare yourselves accordingly."

IT would lead a drive to increase revenue? Nothing in my experience had prepared me for a statement like that, much less the reality of leading such an effort. But the CEO was continuing, explaining that a company whose main product was information had to develop electronic means of delivering that product if it was going to survive. Unfortunately, he said, the company's business leaders "just aren't aware of what's going on in technology. So how can they be expected to exploit IT to increase their revenue?"

He finished by laying down a clear challenge to IT: give him a plan whereby IT would collaborate with each line of business to develop new, profitable electronically-based products over the next year. "Just tell me what you need," he said in closing.

Later, alone in my car while driving back to my office in the suburbs, I was in mental turmoil. I wasn't too bad at planning, building or running IT systems and services, but I'd never done a

Al Kuebler StrAtegic ciO

Business?In the Back Seat When an IT leader was told his team would drive the push to increase revenue, business asked, ‘the nerds are going to tell us how to make money?' But they did.

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Al Kuebler StrAtegic ciO

full business plan, and I honestly didn't know in detail how each line of business that used my services made money. And I was supposed to know what their clients would want in the future?

I eventually calmed down when it dawned on me that the CEO's challenge was exactly what the IT team needed in order for it to be a powerful ally and involved partner. This was going to take a lot of work, but the more I thought of it, the more I saw that we would learn a great deal. And some of it might even be fun.

Learn we did, and the first lesson for me concerned what constitutes real leadership.

We're in ChargeAfter some fits and starts, the CEO created a new product development group (PDG) made up of key marketing and sales professionals from each line of business in the corporation, as well as myself and a senior strategy director.

We would write our own charter, the CEO told us. Then he added, "I need your charter and plan of action in two weeks."

A deadline like that can really give you focus. We didn't ramble much, and the resulting PDG charter was simple. Each line of business would identify three new electronically-based products or services in the next six months, and those that won approval for development would be in the marketplace within 12 months. Working together on that charter delivered my second lesson.

Next, we came up with three questions that would help us identify potential these products:

1. Is it real? Is the market real? Is there a need for the product or service? Is there a clear idea for the product or service? Can it be provided? Will customers buy it?

2. Can we win? Can our offering be competitive in its features, promotion, price and timing? Can we be competitive in its marketing, sales and management?

3. Is it worth it? Will it be profitable? Can we afford it? Is the return/risk acceptable? Does it satisfy other needs or build other relationships useful to our future?

Oversimplified, sure, but we figured that if we couldn't answer the questions a stockholder would ask, we'd never get any of our ideas funded for development, much less assure that they would be successful in the marketplace. We also reasoned that our credibility would be very short-lived if we didn't have these answers nailed down.

Raising AwarenessThat brought us to the hard part: getting each line of business to the point where it would consider creating and trying to develop new electronically-based products. Someone in the group pointed out that people will never try something new if they aren't aware of it in the first place.

With that thought in mind, we set out to understand each line of business's customer acquisition and retention cycles and then to inform the business managers about how IT could help

them avoid cost, improve service and increase revenue. We had expected it to be tough to educate them about the possibilities of electronic delivery of information products, since they were pretty much clueless about technology. But we were helped out when our competition began to bring out such products. With no prompting from us, the business managers were saying things like, "If they can do that, why can't we?"

It wasn't long before we realized that in most cases the data, knowledge and wisdom embodied in our traditionally published products was already stored electronically. Repurposing this information was not technically difficult, and offering it electronically eventually became very profitable indeed.

Lessons Learned Leadership means introducing beneficial change. (That's

what the CEO did, even if it meant leaving his charges feeling uncomfortable and dealing with complexity.)

People support best what they help build, and that makes buy-in possible. (We wrote our own charter, how could we argue with it?)

Direct answers to simple business questions are always best (especially if the questions are exactly what the stockholder would ask).

The IT organization has to display real business acumen and show an awareness of what matters to the business side. (The

days when IT could be a reactive bystander to what goes on in the enterprise are over.)

Lasting change always arrives on a path of awareness, trial, adaptation and adoption. (The most important step is gaining awareness, and this happens to be everyone's ongoing job.)

The IT organization must represent itself as a powerful marketing ally to the businesses it supports (which it really is).

As for the fun part? This challenging time had more than its share of pressure, but we all felt that we learned so much and felt so productive, it was well worth it. Not least of what we gained was the realization by both business managers and the IT community that by combining forces we could achieve much more than if we approached our objectives separately.

So, after nearly choking at the prospect of getting in over my head, I had one of the most rewarding experiences of my professional career. That, of course, is no mere coincidence. CIO

al Kuebler is cIO of aT&T Universal card, Los angeles county, alcatel, mcGraw-hill

and director of process engineering for citicorp. he also directed the consulting

activity for cSc Europe. he is now a general management and IT consultant. Send

feedback on this column to [email protected]

By combining forces business managers and it can achieve much more than if we approached our objectives separately.

REAL CIO WORLD | m a r c h 1 5 , 2 0 0 9 1 7Vol/4 | ISSUE/09

Coloumn - 01 Business In the Back Seat.indd 17 3/14/2009 12:21:16 PM

When Mel Karmazin resigned from his position as chief operating officer and president of Viacom back in 2004, he ended what the Wall Street Journal labeled

as "four years of constant tension and sniping." Even though Karmazin was the expected successor to Sumner Redstone — the founder and CEO of Viacom — it was an open secret that he and Redstone did not see eye to eye on numerous issues. When Karmazin left, it did not ameliorate the tension within the organization, however; it has created another succession nightmare. Even now, four years later, a successor to Redstone has yet to be anointed.

Succession BluesThe failure to name a clear successor seeps below the top floor. Bob Nardelli, former chief executive officer of Home Depot and once a successor in running to Jack Welch at General Electric, told a reporter for the Wall Street Journal that the competition for the top spot was like "playing in the Super Bowl, the last two minutes, for two years.... You know you're being looked at through a magnifying glass."

Well, if it's tough on the leader, it is also stressful for the folks underneath; they get drawn into rival camps.

Instead of being able to focus on the work of running the business, more often than not subordinates are often asked — whether they like it or not — to choose sides between one heir apparent or another. What's worse is that, those in the running for higher positions within an organization have often been known to ask members of their teams to withhold information or refuse work on assignments from a rival's

John Baldoni Leadership

Succession Planning Dual BenefitsBy developing others, you are developing your organization — and yourself.


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John Baldoni Leadership

teams. It makes for lousy work conditions and detracts from productivity to say the least.

Competition among individuals and teams over ideas is positive and even healthy for the organization because it can stimulate people to think differently in the pursuit of good solutions. That sort of competition has proved to be very useful in the past. But when competition among rivals turns destructive, it causes friction with heat so severe that it melts everything in its path, including people and teams. Heaven help the direct reports of the heir apparent who did not get the top slot. Siberia may seem a warm and welcoming place for those reports who got caught on the wrong side of the succession plan.

But it does not have to be this way.

While an organization's managers can have little input into succession at the top of the pyramid, they can have much input into their own successors. Here are some things for managers consider.

Identify candidates Succession begins with identifying not only the next in line, but the one with the most to offer the organization. Look for men and women who demonstrate initiative and autonomy; these folks want to do more because they can do more. Enthusiasm is good, too. But do not be blinded by too much willingness; some very capable folks may feel it is unseemly to promote themselves. Therefore, as a manager you need to communicate your willingness to listen to new ideas as well as to look for people who want more responsibilities.

Develop those candidatesEvery successful leader got to where he is now by bringing others along for the journey. Leadership, after all, is not a solo act. Some managers are fearful that if they help their subordinates, they will lose their jobs. Well, that does happen, of course, but most often they lose one position only to gain another one further up the ladder. The mark of a good leader is the willingness to develop others and help them with their own careers by providing challenging assignments, offering cross-functional assignments, recognizing contributions and delivering continuous coaching. Opening the door for others and, more importantly, teaching them about the business and how to navigate the hallways of power, demonstrates strength.

Look to grow your own skillsBy developing others, you are developing yourself. Teaching not only requires effective communication; it demands mastery of a subject as well as a willingness to learn more

in order to share more. Sometimes the learning is about acquiring new skills, but often the learning involves getting to know more about the talents and skills of your people. And that might be the most valuable leadership lesson of all.

Natural ProgressionThe key to successful succession planning is to stop viewing it as a zero-sum game with one winner and one loser. It should be regarded as a natural progression in the health of an organization. While the one who fails to get the top

spot may leave (and often for greener pastures), her people may not wish to move, nor should they. They should be regarded as cherished members of the team; after all, it was their contributions that put their leader into the running in the first place. No organization can afford to lose that kind of talent.

Barry Diller, who, like Sumner Redstone, built a media empire, once quipped to a Harvard Business School audience, "In the entertainment business, you don't really have to be a good manager and some people would even argue that you shouldn't be because it won't do you any good." Toward that end, he has learned to push decision making throughout the ranks rather than hold all the power for those at the top.

Now working outside Hollywood, Diller has changed his tune; he cautioned the B-schoolers about management: "You've really got to set time and thoughtful care to it." That's good advice for anyone in any field and at any level, including those thinking about who's next in line. After all, good ideas, like good people, can come from anywhere in the organization. It's simply a matter of knowing where to look. CIO

John Baldoni is a leadership communications consultant who works with

Fortune 500 companies as well as non-profits, including the University of

michigan. he is a frequent keynote and workshop speaker, and author of six

books on leadership, the most recent being how Great Leaders Get Great

results. Send feedback on this column to [email protected]

By developing others, you develop yourself. Teaching not only requires communication; it demands mastery of a subject and a willingness to learn more to share more.


Coloumn - 02 Leading Succession Planning.indd 20 3/14/2009 11:40:49 AM

omething funny happened on the way to the slowdown: divorce numbers in India took a dive. As capital was sucked out of the financial system, somewhere else life

was being breathed back into another institution, proving that the proverbial silver lining does exist.

Slowing economies present an opportunity for organizations to find new ways to be more efficient, create better offerings for their internal and external customers, and build an environment that will withstand growth when it comes. We tell you how to do all of that — and what to watch out for.

Someone once said: there are no problems, only opportunities. Here’s one. Take it.


“The biggest technology winners this year will be cloud computing, SaaS and technologies that enable companies to integrate these into existing in-house IT infrastructures.”

—Michael HugosCIO-at-large and Mentor, Center for Systems Innovation

“The tech industry will be atomic-bombed… Just as splitting atomic nuclei could lead to massive releases of energy, splitting the vendor can do the same.”

—Thornton A. May, Longtime Industry Observer and Management Consultant

“SaaS will go from being a niche technology to a preferred way of buying technology. Why?

Managements are dramatically reducing funds for capital expenditures.”

—Judith Hurwitz,Industry Analyst and Co-author of SOA for Dummies

SURVIVAL GUIDE

INDEX

24 I Green IT

28 I Server Virtualization

32 I Customer Service

36 I Storage

42 I Security

46 I IT Management

52 I Infrastructure Outsourcing

56 I Budgeting

60 I Business Intelligence

64 I Cloud Computing

68 I Unified Communication


“The biggest technology winners this year will be cloud computing, SaaS and technologies that enable companies to integrate these into existing in-house IT infrastructures.”

—Michael HugosCIO-at-large and Mentor, Center for Systems Innovation

“Strong executives will convince management of the future value of projects that are not showing immediate or near-term value. The rest will resign themselves to project cancellations.”

—David Foote, CEO and Chief Research Officer, Foote Partners

“The tech industry will be atomic-bombed… Just as splitting atomic nuclei could lead to massive releases of energy, splitting the vendor can do the same.”

—Thornton A. May, Longtime Industry Observer and Management Consultant

“Organizations that focus on being well-run companies and maximizing enterprise efficiencies may well discover that they can deliver more value with fewer resources and thrive.”

—Eric Openshaw, Vice Chairman, Deloitte LLP

“SaaS will go from being a niche technology to a preferred way of buying technology. Why?

Managements are dramatically reducing funds for capital expenditures.”

—Judith Hurwitz,Industry Analyst and Co-author of SOA for Dummies

IT infrastructures.”

Could saving the Earth — and your company's bottom line — be as simple as using fresh air to cool your datacenter?

It's not quite that simple, but it can be one step toward those goals, because companies that use natural air to cool their facilities are seeing

big benefits on both the environmental and financial fronts. In fact, IT leaders, analysts and environmental advocates say there are plenty of opportunities for tech organizations to create more Earth-friendly operations that cut energy needs and slash a company's carbon footprint while saving money, too.

But many organizations still aren't capitalizing on such initiatives — even the ones that are relatively easy and inexpensive to implement.

IT executives who responded to Computerworld's annual Forecast survey (Computerworld is a sister publication of Computerworld is a sister publication of Computerworld CIO) seem to echo that reluctance. Nearly half (42 percent) said their IT departments have no plans to launch projects in the next 12 months to reduce energy consumption or carbon emissions, and nearly three-quarters reported no plans to create committees to oversee energy-saving initiatives.

Yet experts say organizations that ignore green computing now are going to have to catch up if they want to stay competitive. "The green issue is not going to go away. There's too much at stake," says Rakesh Kumar, an analyst at Gartner.

Green IT

Because being friendly to the

environment can help pull up your

company’s sagging bottom line, the

slowdown could be the perfect time

to implement green initiatives.

By Mary K. Pratt

Reader ROI:

The financial benefits of green IT

Low cost, fast-yield green IT initiatives

How to approach a green project

Vol/4 | ISSUE/092 42 4 m a r c m a r c m a r c m a r c H 1 5 , 2 0 0 9 | REAL CIO WORLD

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That's not to say IT leaders don't have their reasons for staying away from green computing. Kumar says some of them think it's a fad. Christopher Mines, an analyst at Forrester Research, says others believe global warming is a lot of crock and that there's no need to act on the issue, or they see green as merely increasing expenses.

Many others are nervous about reworking established systems and processes. "The last thing these people want to do is take a screwdriver to IT processes that work and start re-engineering them to make them more efficient," Mines says.

early adoptersIncreasingly, however, IT leaders and other executives are putting aside such concerns and pushing for green IT initiatives.

When IDC surveyed 300 CEOs for its September 2008 Green IT Survey, 44 percent of the respondents said that IT will play a very important role in their organizations' efforts to reduce their environmental impact. Compare that to the 2007 survey, in which only 14 percent of CEOs said they felt that way.

The 2008 survey also showed that energy costs were the most pressing reason for the adoption of green IT.

"We don't see many or indeed any companies that are hesitant to explore green IT projects," IDC analyst Vernon Turner. "In fact, the scary thing is where to start, and it may be that reason why there is somewhat a feeling of lost souls. There has been a lot of marketing by the IT vendor community around green, and I think that CEOs and CIOs are 'green-washed' by it."

To be sure, developing enterprise-wide green policies is a major undertaking. On the other hand, IT departments can implement some green IT initiatives without reworking entire policies, processes and procedures — and without spending a lot of cash.

Moreover, they can sell management on these projects based not just on the initiatives' environmental merits but on their financial rewards as well.

"A lot of stuff is going to give you a short-term payback," Kumar says. He says that given today's economy, CIOs should focus on green initiatives that will have paybacks well within 18 months. Projects with such quick ROI range from reducing energy demands by enabling more telecommuting and teleconferencing to consolidating datacenters, he says.

cIO SUrVIVaL GUIDE I Green IT

“Yes. It is an important way of cutting costs quickly. Switching to LCD monitors and server virtualization reduced our expenses significantly."

H. KrishnanAVP-IT, Indian Rayon

“Green IT may not necessarily result in cutting costs but it will definitely help

reduce overhead expenses. "

Daya PrakashHead-IT, LG Electronics

“No. The most important way to cut costs quickly is to eliminate non-value added processes — not green IT.”

Ravishankar SubramanianDirector-IT & Corporate Services, ING Life

Do you see green IT as the most important way to cut costs quickly?

Cio VieW

REAL CIO WORLD | m a r c H 1 5 , 2 0 0 9 2 5Vol/4 | ISSUE/09

that to the 2007 survey, in which only 14 percent of CEOs said they felt that way.

The 2008 survey also showed that energy costs were the most pressing reason for the adoption of green IT.

"We don't see many or indeed any companies that are hesitant to explore green IT projects," IDC analyst Vernon Turner. "In fact, the scary

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"These, in our opinion, equal green IT," Kumar says. With so many focused on reducing energy demand, IT organizations can easily sell initiatives that reduce power consumption — a quick way to save money and become green, says Katharine Kaplan, product manager at Energy Star for Consumer Electronics and IT at the US Environmental Protection Agency.

"Power management is probably one of the easiest, low-cost ways to get big, big savings," Kaplan says, pointing out that using power management features on desktop PCs can save $50 (about Rs 2,500) per computer per year. Enabling power management tools on monitors can save another $12 (about Rs 600) to $90 (about Rs 4,500) annually per monitor.

Becky Blalock, senior vice president and CIO at Southern Co., an Atlanta-based energy company, says her organization is implementing power management technology to ensure that its 26,000 desktops are asleep at night and during other times of inactivity. Although the numbers aren't in yet, Blalock says she expects high savings throughout the organization.

Managing desktops is just the start, says Henry Wong, senior staff technologist in the eco-technology program office at Intel. He points out that better asset management is another simple step that can cut energy demand and costs. Just examine your operations to identify and turn off any device

that isn't used or needed.Mark O'Gara, vice president of infrastructure management at

Highmark, a health insurance company, says he's examining the need for any device that draws power — any fax machine, printer or copier — and figuring how to reduce its energy demands by either using power management tools or getting rid of the device. He says he's working with the company's facilities department to get baseline readings so he'll be able to measure progress.

"You can start to see what energy we use, find opportunities to reduce power costs and find ways to reduce it through capital improvements," O'Gara says.

Another quick way to introduce green benefits that have financial paybacks is through refresh initiatives and procurement policies, says Michelle Erickson, initiative director of the

sustainable IT program in global operations and technology at Citigroup in New York. For example, Citi is looking at implementing thin clients, which, because they have lower power needs, save money and reduce the company's carbon footprint.

Erickson also recommends setting procurement policies that specify that new equipment must be Energy Star-complaint, thereby ensuring that the company is getting more energy-efficient computers. And with new Energy Star standards rolling out in 2009, the policy will apply to servers too.

Similar strategies can be employed in the datacenter, Wong says. Look at the machines you have, and consolidate where you can to maximize the use of each server — but make sure that you can still meet the needs of your business units.

"We did this at Intel and had a $3 million (about Rs 15 crore) cost avoidance," Wong says. The savings came from not having to build a new physical structure and pay for that new building's ongoing maintenance. As for the green benefits, there's less demand for power and new equipment.

"You can see another building that doesn't have to exist anymore. And it's the HVAC system, the people, the maintenance area — it's not just IT. That's a really big to-do," Wong adds.

But even organizations that aren't ready for those kinds of projects can simply start by controlling the temperature, Wong says. Although it will be necessary to monitor the humidity when doing so, most companies can raise the temperature at least a few degrees and start lowering their air conditioning demands. And don't forget about using that natural air for cooling.

It might not be a big step, but it's a start. CIO

Pratt is a computerworld contributing writer. Send feedback on

this feature to [email protected]

CIO at Southern Co., an Atlanta-based energy company, says her organization is implementing power management technology to ensure that its 26,000 desktops are asleep at night and during other times of inactivity. Although the numbers aren't in yet, Blalock

44%Of CEOs say IT will play a very important role in efforts to reduce their company's environmental impact — up from 14 percent of CEO in 2007.

Source: IDc

cIO SUrVIVaL GUIDE I Green IT

Damn the torpedoes! Full speed ahead!’ Admiral David Farragut's famous American Civil War exclamation could be the rallying cry of the IT executives behind server and virtualization efforts.

Rather than cutting and running as they face deepening economic woes, these IT professionals are pushing harder to complete their projects.

It's easy to understand why: many server and virtualization projects deliver the kinds of cost savings that businesses crave right now. "These projects affect costs... and they affect revenue," says Dennis Smith, first vice president of advanced engineering at The Bank of New York Mellon. The slowing economy has ratcheted up management's sense of urgency to get those projects done.

"Businesses are saying, 'how much faster can you do this, and how much more cost savings can you wring out if we give you more power to do this sooner?'" says James Staten, an analyst at Forrester Research.

Perhaps that's why respondents to Computerworld's(Computerworld is a sister publication of Computerworld is a sister publication of Computerworld CIO) Forecast survey say their No. 1 and No. 2 increases in spending this year will be on servers and virtualization technologies, respectively. Those projects are the second- and third-highest priorities. They are right behind security.

Rockwell Bonecutter, datacenter technology and operations practice lead at Accenture, works with IT executives at many Fortune 100 companies. "I haven't

Server Virtualization

With increasing stress on cost

savings and bottom lines, IT

departments are turning to server

virtualization. They are setting a trend

but with caution.By RoBeRt

Mitchell

Reader ROI:

Benefits of Virtualization

Why this is a good time to invest in virtualization

How it aids in greening the bottom line

GoinG Virtual forreal Benefits

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Server Virtualization

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seen a significant pullback on refresh spending," he says, although new projects are getting more scrutiny — particularly capital-intensive ones. Rather than simply reacting to the recession, some IT executives are leveraging it to push virtualization projects deeper into the business — and to drive harder bargains with vendors."

With the increased emphasis on cost savings and the bottom line, IT organizations that have begun virtualization projects and produced results have unprecedented clout to deliver those savings in areas of the business that have resisted the trend thus far. "This is a great time to take advantage of the situation in the economy to let technology do what it is meant to do," says Bonecutter.

Success in consolidation and virtualization is also lowering resistance to change. "We're seeing a lot of interest from other parts of the organization to leverage IT in ways they haven't in the past," says Matthew Clark, director of IT at San Diego-based Qualcomm. "They're asking us."

it's the sale seasonSmith says the economic crisis has technology vendors banging on the doors of his bank — and cutting deals. "In our space, there are a number of companies that had large orders, and over a weekend, they disappeared. It's a very, very good time [to buy]," he says.

While many banks are struggling, Bank of New York Mellon has remained in a relatively good position to take advantage of those deals, he says.

IT bargains aren't limited to the financial services sector, says Eric Lindgren, CIO at PerkinElmer, a life sciences and industrial technology company in Wellesley.

"The number of vendors pushing discounts has really gotten extreme," he says, and the number of vendor visits to his offices increased sharply as 2008 wound down. Scottrade is one of the few

financial services firms that has benefited from the credit crisis. As the masses have alternately rushed into and out of the market, the St. Louis-based online brokerage has operated one of the turnstiles through which all of that traffic has passed.

"We are seeing record days in our business," says CIO Ian Patterson. During the tumult, Scottrade took in a huge volume of fees on those trades — and survived unprecedented stresses on its server infrastructure.

At one point, programmed trading on a single financial firm's stock drove quote-system volatility to the point where prices

it's Smith says the economic crisis has technology vendors banging on the doors of his bank — and cutting deals. "In our space, there are a number of companies that had large orders, and over a weekend, they disappeared. It's a very, very good

real Benefits

cIO SUrVIVaL GUIDE I Server Virtualization

“Server virtualization enables business growth as you can unify systems, improve controls and quickly respond to the business changes.”

Bihag LalajiVP-IT, Ambuja Cements

“I think it does both. It eases manageability and enables business

growth and cuts cost. However, manageability is its biggest advantage."

Pertisth MankotiaHead-IT, Sheela Foam

“It doesn’t help us in our overall growth as our offices fall in remote locations. Due to certain technological limitations, I see a challenge in using virtualization.”

Shreekant Mokashi, CIO, Tata Steel

Is server virtualization a tool to cut costs or enable business growth?

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were changing 600 times per second. Transaction volumes in the datacenter spiked to 5.5GB/second, says Patterson.

"People were complaining about the markets and the speed. It was insane. I don't think we would have survived if we didn't have some of the hardware that's out there now."

Because it had virtualized its front-end servers and used server blades, Scottrade was able to quickly add capacity to keep up with demand. It's going full speed ahead in 2009 with a planned backup datacenter and has already begun ordering servers.

Patterson says he plans to scale up the servers running the company's mid-tier quoting-system infrastructure — and its

front-end servers. The spanking new servers are fully loaded with the maximum processor core and memory configurations and the fastest processors.

That trend goes beyond online brokerages, says IDC analyst Michelle Bailey. "Virtualization tends to drive a scale-up strategy on the hardware side," she says.

This is happenining because businesses are trying to reduce the total number of physical machines and gain efficiencies by maximizing the number of virtual machines that can be consolidated onto a single physical server. To reduce power and cooling loads in the datacenter, Scottrade will continue to buy servers that

feature energy-saving technologies such as variable-speed fans, high-efficiency power supplies and low-voltage processors.

While that might reduce the datacenter's carbon footprint, being green "is the flip side of what we're doing anyway," Patterson says. Reducing the cooling and power consumption "goes right to my bottom line."

While Scottrade uses embedded virtualization software on its blade servers for rapid deployment on the front-end, hypervisors use too much overhead in the mid-tier transaction-processing environment. With blades, Patterson says, "the backplane isn't fast enough to keep up." Instead, Scottrade uses "the hottest, biggest" 1U and 2U rack-mounted x86-class servers it can find.

Other operations are also moving toward buying fully loaded server platforms to host virtual machines in 2009.

Dan Blanchard, vice president of enterprise operations at Marriott International in Bethesda, says his company remains committed

to rolling out a remote-recovery datacenter this year. Virtual servers will be key to Marriott's fail-over strategy. "We're definitely going with high-end systems. That way, we can fit more virtual platforms on a single box," Blanchard says.

ProCeed With CautionBut many organizations fear that capital-intensive projects might be affected if the economy worsens. At PerkinElmer, Lindgren has a major effort under way to consolidate 17 ERP programs onto Itanium systems starting in early 2009.

The equipment has already been purchased. "Thankfully, that one is ahead of the curve," Lindgren says. In some cases, IT organizations are struggling to fund server consolidation efforts. "It's a 'capital-light' environment right now," but some IT organizations are using server refresh budgets to bootstrap virtualization efforts, says Bonecutter.IT can harness refresh dollars to gain savings quickly by rationalizing the server environment, reducing not just the number of physical servers but the total number of server instances as well.

IT organizations that do that, Bonecutter says, can make virtualization efforts a "self-funding exercise." Many organizations haven't done that in the first phase of their virtualization roll-outs, he notes, adding that rationalizing server environments will be a big priority for his clients this year. "We're buying portions of things over a three-month period so that if the economy changes, we can react quicker," he says. IT organizations are also looking for ways to reduce upfront capital outlays. "[The economy] has customers thinking of more leasing and hosting options," Bailey says.

At Scottrade, Patterson says the new datacenter will be hosted at a collocation facility. Lindgren plans to rely on consultants and third-party service providers, just in case a rapid pullback is called for. "It's not a great time to be taking on a lot of risk," says Lindgren. CIO

Send feedback on this feature to [email protected]

are fully loaded with the maximum processor core and memory configurations and the fastest processors.

That trend goes beyond online brokerages, says IDC analyst Michelle Bailey. "Virtualization tends to drive a scale-up strategy on the hardware side," she says.

4millionThe number of virtual machines that will be deployed in organizations around the world by the end of 2009.

Source: Gartner

cIO SUrVIVaL GUIDE I Server Virtualization

Vol/4 | ISSUE/093 0 m a r c H 1 5 , 2 0 0 9 | REAL CIO WORLD

Customer is king. Always. And that’s truer now.

It is now time for the millennials or Generation Y to rewrite the rules of customer relationship, how organizations engage with them and how they are serviced. The truth, however, is that few businesses are prepared

for this generation. Organizations are scrambling to cope with the millennials most defining trait: the use of IT. Gartner refers to this generation as ‘digital natives’ because technology is deeply embedded in their lives — so much so that many of them haven’t really experienced life outside the Internet and mobile phones.

What’s worrying from an enterprise’s point of view is that millennials are fast outnumbering the baby boomers and have begun entering the workforce. To add to the mix, their influence is extending beyond their demographic. They are driving social networking and Web 2.0 among Generation X and the baby boomers.

This generation, with its traits of word-of-mouth recommendation and need for convenience, quality of experience and style — has begun impacting the way most businesses engage with their customers.

And they are hard to ignore. As the purchasing power of Generation Y grows, businesses need to redefine customer experience and service strategies. Businesses see the rise of millennials as an opportunity to — not only bridge competitive gaps — but also race past competitors by re-aligning themselves to the new realm of customer service.

Customer Service

As every new generation takes

to technologies that change

swiftly, smart organizations

need to redefine their customers

and re-align their offerings.

Here's how.By Gunjan Trivedi

Reader ROI:

How digital natives are different

What IT can do to help organizations service new needs faster

Why consistency is paramount

AlwAys AT yOur

CAs every new

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As a result, customer experience strategies are going beyond basic demographic-based CRM practices like capturing addresses or age groups and extending to include the psychographics of a customer base. Technology is helping organizations reshape customer service strategies to stay in tune with digital natives. Here's how.

HiT THe sweeT spOTLesson: Get customers to the right resource — the first time.

The most important step for businesses is to ensure that they offer superior, customer-centric service. Given the high expectations of millennials, customer-centric routing strategies should first, adequately understand the needs of customers and then find the services that can best address those needs — irrespective of how and when a customer contacts a business.

For example, agents interacting with millennials should have instant access to relevant information and the people with the right skills to address their needs. If customers follow up on an issue, either the same agents should be contacted or new agents should have ready access to the customer’s information — ensuring that customers don't retrace their steps with new agents.

“Our key driver is still customer satisfaction. Our agents are trained to own customer problems and are equipped with the right technologies to resolve them,” says Rajib Chowdhury, GM outsourcing and customer care, Virgin Mobile India.

Virgin Mobile India is among the first national mobile service in the country to targets millennials, about 215 million Indians between the ages of 14 and 25. The prepaid service player has deployed multi-site architecture to allow calls to be re-routed to language-specific agents across the country. The platform optimizes agent productivity with automatic task prioritization and integration and has resulted in a significant increase in calls being terminated at the IVR level.

“We’re still quite low in terms of termination at the IVR, but as we add scale and enhance the self-care capacities of the IVR, we expect termination to go beyond 60 percent,” says Carl Ambrose, CIO, Virgin Mobile.

THe rigHT cHAnnel Lesson: support channels that the customer uses and be consistent — no matter which channel is employed.

Generation Y will not wait on hold to interact with businesses. Instead, they will browse sites, send text messages and use other

and the people with the right skills to address their needs. If customers follow up on an issue, either the same agents should be contacted or new agents should have ready access to the customer’s information — ensuring that customers don't retrace their steps with new agents.

“Our key driver is still customer satisfaction. Our agents are trained to own customer problems and are equipped with the right technologies to resolve them,” says Rajib Chowdhury, GM outsourcing and customer care, Virgin Mobile India.

service

cIO SUrVIVaL GUIDE I Customer Service

“Some of our systems deal directly with our distributors who are our customers — not really retail clients. We will launch a CRM solution soon.’’

T.K. SubramaniamDivisional VP-IT, United Spirits

“Our customers interact with us in three ways: via dealerships, websites and call

centers. We have IT-enabled processes in all these three areas.’’

Rajesh UppalCIO, Maruti Suzuki

“Yes, we do use IT for enhancing customer services. We have a billing portal and a customer care portal and most of our systems work on IVR."

R.K. Upadhyay, DGM-IT, BSNL

Are you using IT to better levels of customer service?

ciO view

non-voice channels such as e-mail and chat. Organizations need to re-look their customer service infrastructure to accomodate customers who may want to use text chat for simple questions, phones for deeper dialogues or co-browse for visual reference. An Economist Intelligence Unit survey reveals that over 70 percent of C-level executives accept that online and e-mail channels are going to be the most important tools to support millennials in the near future, while in-store, in-home or in-office support will shrink to be the least important tool.

Leveraging IT, businesses can create differentiation by allowing customers to choose their channel of communication. Organizations should use various customer service technologies to allocate resources between channels based on traffic and support customers'

need for instant gratification. Virgin Mobile India is a good example of a

company that leverages IT to support its multi-channel strategy of engaging customers. The telecom company supports its customers not only telephonically, but also through SMS, e-mail, the Web and chat channels.

“Our customer service technologies provide end-to-end control of the interaction lifecycle across any media or activity, linking it to overall business processes. These solutions maximize agent productivity with automatic prioritization and the blending of traditional customer service interaction like voice, e-mail or chat with other service-related activities such as training and off-line work item processing,” says Ambrose.

Organizations also need to ensure that customer interaction is not siloed so that customer experience is consistent across channels. Optimus Global Services, the BFSI-services BPO wing of Polaris Software Labs, faced such a dilemma. Siloed channels prevented the BPO to scale up as quickly and enhance customer experience.

“We had outgrown our original call centre infrastructure. Everything about that original architecture had begun to hold us back. It was inflexible, too expensive, and unreliable. It would not support our plans for expansion into other regions of the country,” recalls S.S. Sivakumar, head-IT at Optimus.

“Dialer technology is supposed to boost productivity, but it was having the opposite impact,” Sivakumar recalls. “We needed

a solution that could be managed centrally, and enable us to integrate with our customers’ CRM systems. We also needed greater speed and flexibility in deployment and better reporting capabilities.”

To get rid of siloes, Optimus shifted to pure IP infrastructure and introduced customer service technologies that helped bring in a software-based dialing engine for its operation of 40,000 outbound calls a day.

“Now we are winning more business because we can ramp up very quickly to meet customers’ needs. We’ve also increased agent productivity by over 40 percent and cut dialer-related costs by 30 percent,” says Sivakumar. “We can arm agents to address unique customer needs. All of this integration, including CRM data, helps agents resolve a higher percentage of cases and take more calls overall.”

experience OrcHesTrALesson: Align customers with the right resource, based on customer data and real-time insight.

Businesses need to stress on listening and learning from customers. Organizations that will be most successful with this generation are the ones who introduce reporting and analytics that allows them to study customer behavior, analyze and monitor customer experience, and track trends. Driven by customer intelligence, businesses can leverage their IT infrastructure to support evolving needs and orchestrate customer experience.

“As we roll out new plans and products, the ease with which we can make changes with the customer service technologies will be a great advantage for us. It’s not only a key differentiator. It also helps us gain significant competitive advantage,” says Ambrose. CIO


company that leverages IT to support its multi-channel strategy of engaging customers. The telecom company supports its customers not only telephonically, but also through SMS, e-mail, the Web and chat channels.

54.6%Of CIOs say that increasing customer loyalty is the hardest part of their customer-facing employees' jobs.

Source: cIO India

cIO SUrVIVaL GUIDE I Customer Service

To migrate data from one location to another, Seth Georgion has had to devise some creative ways to transmit data from remote locations, including ships in the Pacific Ocean and taverns in the Australian outback, using T1 lines and satellites.

Georgion, manager of IT for marine survey firm Fugro USA, also had to reduce the amount of information he was transmitting by culling duplicate data that accounted for as much as half of what he was sending.

In the geographical and marine survey business, mobility is key, Georgion says. It means important information should be always available, anytime, anywhere. And most of the time, that means setting up a full datacenter near any location being surveyed to process the terabytes of data collected by sonar and laser equipment.

But for Fugro, with 250 offices in about 55 countries, it was extremely difficult and costly to build datacenters and staff them for every job. This was a major problem but it was just the tip of the iceberg.

New ChaNNelIt also made Georgion's company less competitive — which is always a bad thing. His solution: setting up servers that not only capture, but de-duplicate and then replicate data over distance.

Storage

When money is thin, building datacenters

at remote locations is heavy on the

purse. But now, you can de-duplicate

and replicate data anytime, anywhere

— as one marine survey firm

found out.By Lucas Mearian

Reader ROI:

How to de-duplicate data for low-bandwidth transmissions

Why you should transmit data before storage media becomes obsolete

Importance of storing data in multiple systems

INFORMaTION


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For example, Fugro is now performing the largest hydrographic survey in California's history, producing massive amounts of data about the state's entire coastline to help it understand and determine whether fisheries are healthy.

One type of sonar unit aboard a research ship records not only the seabed, but — at specific intervals — information about the entire water column from the surface to the deepest point of the sea.

The rate at which the sonar unit transmits the data to the ship is so fast that Georgion is unable to use network-attached storage (NAS) with gigabit speeds. That just doesn't work.

A full water column scan shows every substance in the water, displaying the kinds of gases and fish that are there as well as what is occurring in the soil underneath. The amount of data from 100 feet of water can be tremendous.

"We have to use iSCSI just to get the throughput performance to write it from the sonar head to the disk — about 75MB per second," says Georgion, who noted that the California coastal survey project has been under way for about five months and has another eight months to go.

Fugro often produces seabed imagery for oil exploration companies such as Exxon, various military organizations and government conservation agencies. For a company that solely depends on data like this, throughput is critical because the faster survey data is processed; the faster it can be acted upon.

dIvINg deep Fugro's datacenter in San Diego relies on six NAS arrays as storage for processing hydrographic data. That data is backed up using another software.

Georgion uses a tape library equipped with for archiving data. But for fast collection, de-duplication and transmission of data, Georgion turned to disk-based storage appliances.

A compression algorithm is supposed to make sure data being transmitted does not already exist on the host system.

"The main problem people have in this industry is moving data. Once generated, how do you get [it] from point A to point B? Anything that holds, let's say 5TB of storage, is not portable," Georgion says. "So data movement of any kind is the number one problem for anyone in the survey or field scientific world."

On average, Fugro achieves a 50 percent data reduction by using the solution's compression algorithm, which Georgian

survey project has been under way for about five months and has another eight months to go.

Fugro often produces seabed imagery for oil exploration companies such as Exxon, various military organizations and government conservation agencies. For a company that solely depends on data like this, throughput is critical because the faster survey data is processed; the

INFORMaTION

cIO SUrVIVaL GUIDE I Storage

“The challenges are related to data identification, cleansing and verification. Post- migration data verification is critical. Driving change management is also a factor.’’

V. Subramaniam, CIO, OTIS

“I think, resistance from users, skill-set availability and training the

existing staff are some of the issues that come up. ”

Alok KumarSr. VP - IT, Reliance Infosolutions

“The biggest challenge for us was data structuring. The way data was organized in our legacy system was radically different. That was was a huge issue.’’

Sriram NaganathanCTO & COO, Reliance General Insurance

What are the challenges of integrating data de-duplication with legacy apps?

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says is "really good considering that our data is largely image-based, meaning that it's not typically compressible." It basically doubles the line speed for the cost. Or in far-flung locales doubles the line speed that's available," he says, adding that the appliances send data between 20 and 24 hours a day at 100 percent bandwidth capacity.

For the California coastline survey, Georgion set up one appliance on the research boat; it receives its data from a NAS array that collects transmissions from the sonar head. Once the data is copied onto the disk box, the software automatically compares it against a second box in the San Diego datacenter and, after de-duplication, begins sending.

On an average day, Fugro's coastline survey systems create about 100GB of data, "but it just never stops," Georgion says. "It just keeps growing and growing. It's 100GB a day, every day."

At times, hydrographic data floods in at 5TB a day, and that data not only needs to be transmitted to disk arrays aboard ship from the sonar equipment, but then replicated to an onshore datacenter for analysis.

That requires either satellite transmission or T1 lines — and either can be a huge bottle neck. Such a solution not only requires greater bandwidth to transmit data from the ship to the datacenter — the de-duplication algorithm is not as efficient — but it also requires a crew of IT personnel to support the setup. Both are costly.

TIMe Is MONey"There's a real shortage of surveyors in the world," he says. "So if you're going to have them spending three or four hours a day copying data onto disk, verifying it, mailing it back, copying it on the other end, doing all these pieces, you're basically going to be taking away 30 percent maybe 40 percent of your total efficiency. You can't survive doing that. Plus, you can't something like that."

"In this day and age when we're moving 10TB at a time, are we going to move that at 10MB per second or 50MB per second? No." Georgion says the disk boxes automatically compensate for any network latency that can create problems.

So if you tell the appliance the data will take 200 milliseconds to get from the ship to the San Diego datacenter — and let it know the bandwidth of your network — it will automatically stream the data for maximum performance and output.

Compensating for network latency was also key for another Fugro project, which was: surveying 40 percent of Australia's coastline via airplane. The project involves flying a small plane over the coastline and shooting a laser from the plane, which penetrates the water's surface and maps the seabed.

Because the area being surveyed — Queensland in North Eastern Australia — is so remote, the only place available to transmit the data to San Diego without setting up a field datacenter was a small room over an old bar in the outback, says Georgion. He's using a T1 line over the bar's phone.

"It's like one of those places that are not near anything for, like, 1,000 miles or more," Georgion says.

The Australian coastline survey project was split into parts, with half taking place before this year's rainy season and the other half a little after.

The first survey data was collected and transmitted in a traditional manner, by setting up a datacenter with NAS arrays and a tape library in a hanger. Because of the cost involved, that phase was unprofitable, Georgion says.

After the four-month rainy season ended, Georgion set up the disk boxes in the ramshackle outback apartment to transmit the data to San Diego for processing. "It's turned us from unprofitable to [profitable]," he says. CIO


growing. It's 100GB a day, every day."At times, hydrographic data floods in at

5TB a day, and that data not only needs to be transmitted to disk arrays aboard ship from the sonar equipment, but then replicated to

452EB(exabytes) The amount of data that was created, captured and replicated in 2008.

Source: IDc

cIO SUrVIVaL GUIDE I Storage

Trendline_Nov11.indd 19 11/16/2011 11:56:19 AM

The security industry has given 2008 the tag of being the ‘data loss year’ due to the significant number of sensitive information security breaches that occurred. The US Director of National Intelligence Dennis C. Blair, stated that last year global companies may have lost over $1 trillion (about Rs

50,00,000 crore) worth of intellectual property to data theft. Software vulnerabilities represent one of the leading causes. This should concern everyone involved in application development regardless of methodology.

The lack of security built into applications coupled with poor programming techniques are routinely exploited by hackers. That is why security must be an integral part of the application development methodology and the Agile process is no exception.

The Agile approach to software development has been gaining ground in recent years. It is focused on iterative discovery and development that aligns development with customer needs and company goals. That said, there are basic characteristics of Agile that tend to push security off till after the business functionality has been built. Many times security is not included in the initial release of functionality, thus making Agile security bolted on rather than built in.

Industry experts have observed that organizations tend to group application security issues into two categories: business logic flaws and technical vulnerabilities. It has been recognized that security

Security

More companies are turning to

'Agile' application development for

the flexibility and speed it offers. But

they need to ensure that security is

not sacrificed at speed’s altar.

By Kevin Coleman

Reader ROI:

Why it is important to build security in apps

How to ensure security in Agile projects

Importance of release management

Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in Agile: Fit ting in

Security

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must be built into applications rather than bolted on at the end. This presents a challenge when using the Agile methodology and has caused great debate about the suitability of Agile for apps that involve sensitive security information or applications that could provide a covert pathway (backdoor entry) into other systems.

In fact, many believe the Agile processes are unsuitable for security-sensitive software applications. This is primarily due to the lightweight, informal, build-as-you-go nature of Agile processes.

Security FirSt Experts say that security strategy and objectives must be established at the very beginning. After that and during the project definition step, high-level security requirements and objectives must be established, documented and communicated to the development team. Once these cornerstones of security set are fixed, organizations must assess what is necessary to meet these objectives. In the scoping and estimation step, they say time must be allocated to review evolving needs and refine security requirements and objectives. After this, high-level security plans can be are developed.

But before developing these plans, organizations must establish security coordination activities that evaluate the security measures at each point along the iterative development effort and make sure those measures are considered. With the foundation established, organizations can move on to security within the 'Sprints'.

One of the first steps for iterative development is to establish a theme for each Sprint that defines what type of capabilities will be addressed during that segment of development. As the theme of each Sprint is identified, forecasted security implications are discovered and documented and possibly stubbed in during development.

Stubbing is a technique that allows portions of an application to be developed without the entire functionality being coded at that time. It is important to capture security-related scenarios and details that coincide with the capabilities being defined throughout the iterative discovery and development process of a specific Sprint.

As the security requirements are uncovered, a decision on whether to include security capabilities or defer them to later Sprints are made. There are two points that really frame the decision to include security in a Sprint. The most significant influence to this decision is whether or not the software will

organizations must assess what is necessary to meet these objectives. In the scoping and estimation step, they say time must be allocated to review evolving needs and refine security requirements and objectives. After this, high-level security plans can be are developed.

But before developing these plans, organizations must establish security coordination activities that evaluate the security measures at each point along the iterative development effort and make

Security

cIO SUrVIVAL GUIDE I Security

“Yes, we do see an upswing in the trend. Due to employee layoffs, many companies have become more vulnerable.”

Satish DasCSO, Cognizant Technology Solutions

"No, it doesn’t impact us. We have increased security and access

controls. Whether one employee leaves or ten, it wouldn't really matter."

Mahesh Kumar PinnamaneniCIO, Aurobindo Pharma

“Yes. Since we need to protect customers' confidential data, we need to consider innovative measures other than content monitoring and filtering technology. “

Shridhar Rane,Head-Technology, Barclays Bank

Do employees and ex-employees pose a greater security threat this year?

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be deployed and actively used as well as the security risks and sensitive information involved.

If it will be deployed, security must be built in and tested as part of the Sprint. If not, stubbing or deferrals are both viable options. At this point, iterative development begins. The software is developed and typically undergoes low-level testing as well as demos and code walkthroughs with the customer. These test cases and scenarios must exercise security measures, although this does not happen at most organizations.

All security-related functions and features that have been included must be exercised and demonstrated. Increased attention

in terms of testing and code reviews must be given to race conditions, cross-site scripting, information leakage and SQL injection. These four coding problems have proven to be the most common software vulnerabilities in Web apps. Once basic testing has been completed, the software can be moved to a simulated deployment environment.

The software delivered as part of a Sprint is installed into a representative operational environment. The vast majority of the time this is very different from the operational environment, which causes software operational problems and security issues. Deployment in an environment that mimics that of production is required so these problems and issues can be resolved. All the test cases and scenarios used

previously form the basis for regression testing.

Securing eVery Sprint Automated test scripts are replayed to validate proper operation in the new environment. In addition, new test scripts and scenarios are created to fully exercise software from end-to-end as well as to examine and test for security vulnerabilities. Once all of these tests are successful, software moves on to the next stage: acceptance by the customer.

This is when software is demonstrated, evaluated, and is accepted or rejected by a business customer. It must include the examination of security. Just as customers have business acceptance criteria, they should also create security acceptance criteria. However, conditional acceptance is the norm. Often, a

sponsor will only accept a Sprint delivery if a few things are changed. As identified as conditions of acceptance, rework is scheduled. Once rework is done and tested, it is reviewed and demonstrated to business customers to ensure conditional acceptance has been met. Capturing lessons learned is the process of gathering, documenting and analyzing feedback that has been received during a Sprint. This is critical so that subsequent Sprints can benefit from this experience and because capturing security lessons gives team members a chance to reflect on the activities during a Sprint that contributed to security shortcomings.

Putting it all together, all the software developed must be integrated and validated together. Then, it must be validated to ensure proper function. Monitoring and tracking are required in the short term to ensure that all software and systems components are working together and do not create security vulnerabilities. Interactions between systems must be tested from a security standpoint. New security test scenarios must be developed and executed within this step.

Once everything is working together properly and is secure, it is ready to be released into production. Release management (RM) is the relatively new part of all software development methodologies and projects.

RM becomes the liaison between all the business units and IT to guarantee the smooth transition to a new system. Finally, the time has come to move to the next Sprint. The wrap-up step results in a Sprint being officially closed. In addition, this step creates the project artifacts and ensures proper documentation and the backup and archive of the code. This step often requires changes to security monitoring processes and capabilities that are in place at the business. CIO


four coding problems have proven to be the most common software vulnerabilities in Web apps. Once basic testing has been completed, the software can be moved to a simulated

29.8 %The number of companies that were impacted by intellectual property theft in 2008.

Source: cIO India

cIO SUrVIVAL GUIDE I Security

Trendline_Nov11.indd 19 11/16/2011 11:56:19 AM

When Mike Jones started moving his datacenter into a virtual environment 18 months ago, he anticipated a big drop in the number of new servers he would need. And Jones, who is corporate vice president and CIO at Children's Hospital of Wisconsin, got

that prediction right. Virtualization saved his department from buying 30 to 35 new servers.

What he didn't foresee was the reaction he got from his application vendors. They refused to support their products in his new virtual environment.

Like other CIOs, Jones has found himself caught short by the vagaries, entanglements and unforeseen consequences of new technology. These are not your predecessors' pitfalls. Today, when technology is likely to come from outside IT as well as from inside, the trip-ups are more difficult to anticipate than ever.

Here are a few of the newest hazards, along with first takes on how your peers are dealing with them.

No SupportThe vendors' reluctance took Jones by surprise. "One of the things we didn't understand when we got into virtualization is that they're not ready for it," he says. The vendors told him that because their software wasn't tested in the virtual setting, they wouldn't support it. "If something goes wrong, it's not their fault. Isn't that a nice

IT Management

Times change and with it technology.

New-age tools come with a set of

challenges. Here are five state-of-

the-art pitfalls your predecessors never

dreamed of. By Mary K. Pratt

Reader ROI:

Why you should trust ground realities not your instinct

Mistakes your peers made

How you can avoid them

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position to take?" Jones says. "So we're kind of taking a risk."

He decided to move ahead with virtualization anyway, figuring his department "had a better than 50-50 chance of things going right."

If an application has a problem, he can move it back to the original environment and start troubleshooting from there. (So far, Jones says, "everything has run fine.")

Still, this vendor issue has put a kink in the hospital's virtualization plans, Jones says, explaining that some critical applications, particularly those used in clinical care, will not be moved into a virtual environment until he knows the vendors will fully support it.

No MetricSAs vice president of IT at the Georgia Aquarium, Beach Clark delivers solid reports on business results to the other executives at the Atlanta-based organization.

To that end, he uses business intelligence technology to track data for the accounting and finance department and to monitor ticket sales generated by the aquarium's Website and e-mail campaigns.

But Clark is stumped about how to measure the success of the aquarium's use of social networking sites in generating interest and ticket sales. "That was kind of the pitfall," he says. "We got to where we are now, and we don't know how to measure it."

Clark says that his IT staff teamed up with the aquarium's marketing department early last summer to figure out the best ways to use social networking sites such as YouTube. But as the aquarium looks to allocate future money and staff time, he needs to know how effective that work has been.

"We're out there," Clark says. "We have our account on YouTube and an account on Facebook and MySpace, but we're having a hard time measuring the advertising impact. We don't have a good way to measure it against traditional advertising."

Nor, it seems, does anybody else. "I've talked with other CIOs and marketing people, and they're frustrated by it right now too," he says.Clark's team is chipping away at the problem.

He says the aquarium can use traditional tools, such as surveys, to gauge the impact of social networking. It can also look at the number of views on certain Websites. And the social media sites themselves are starting to produce statistics to give organizations such as his a glimpse into their effectiveness.

"Then we can see what kind of impact that stuff is having on us and on our revenue, and we can calculate ROI," he says.

No rooMRobert Rosen knew that his organization's storage needs were growing at a fast clip. In fact, the CIO at the National Institute of Arthritis and Musculoskeletal and Skin Diseases says he expected 30 percent to 50 percent annual growth in storage demand. But it has been closer to 100 percent.

"I planned on it to grow exponentially, but it's growing even faster than expected," he says, noting that one of the organization's

"We would choose technologies that consolidate and optimize our resources — like server virtualization, even though they don't offer instant ROI."

Sanjay AggarwalCTO, Yamaha Motors

"We would look at technologies that fit our budget and can be deployed

quickly because right now, timelines are critical and budgets are tight."

Sudesh AgarwalVP-IT, Lifestyle International

"We will invest in a technology that touches our customers and is measurable in terms of service improvement."

G.Radhakrishna PillaiCIO, Super Religare Laboratories

Apart from ROI, what is your criteria to try a new technology this year?

cIO SUrVIVaL GUIDE I IT Management

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research groups recently received a new machine for genotyping that, in its first month, generated 15TB worth of data.

The staggering growth in storage needs is an unforeseen planning challenge. "You have to figure out what to do with all this data," he says. "They still need five-year-old research, even older data, because they never know when it will be useful."

And then there's the cost. Rosen says he's now looking at where he can trim an already tight budget to pay for additional storage. On top of that, he has to find additional physical space to accommodate the hardware.

No WarNiNgWhen Kathleen King stepped into the role of CIO at Alabama Power in Birmingham a few months ago, she didn't anticipate having to help employees with social networking. But that's what they wanted, she says. And they had good reasons.

People wanted to use Facebook and MySpace at work to collaborate on business projects from various offices throughout several states. And since IT hadn't taken the lead,

employees were trying to figure out how to use those applications on their own.

"It was a bit of a surprise to me how anxious people were to use it," says King, who oversees IT for Alabama Power and also works on some functional capabilities for its parent company, Atlanta-based Southern.

"I didn't realize how much the employee population would run in their own direction with this if we, as an IT organization, didn't move quickly to fulfill their needs."

Although she hadn't anticipated the issue when she first took the job, King moved quickly to address it.

Rather than starting from scratch to customize MySpace or Facebook to meet the

company's needs, she got a head start by taking a completely different path.

She signed up about 100 workers for a pilot program to use a social networking application called My Site. It was designed specifically for business collaboration and was already in use at the parent company.

There is still a lot of work to do, but IT has taken the first step of engaging and directing employees rather than trying to catch up with them. "What we really want are people who are interested enough, savvy and want to take the time to help us get My Site to the level we want it to be," King says.

No MoNeYLike many CIOs, Rosen questioned some of the general economic practices that precipitated this fall's financial meltdown, but he was still surprised by the speed and extent of the fiscal collapse.

You don't need to be a CIO to have been caught short by that pitfall.

This past summer, as companies were firming up their 2009 budgets, CIOs generally expected modest budget increases — averaging 2.9 percent, says Shvetank Shah, executive director of the IT practice at the Corporate Executive Board, a research organization in Washington.

Few anticipated that just a few months later they'd have to rethink everything. Shah says his organization has found that nearly 80 percent of CIOs are re-evaluating their 2009 budgets, with 50 percent expecting cuts of 10 percent or more.

"No one expected the hammer to fall as quickly and as far as it did. Now IT has all of these projects in flight — half-built skyscrapers. What do you do?" Shah says. "They've got to make some hard choices about the projects they're going to fund and which they're going to let go."

Rosen, like others, is scrambling to cope with the effects of the flailing economy on his own $10 million-plus budget (about Rs 5,000 lakh). He's working under the assumption that his upcoming budget will be funded at least at 2008 levels. But even that isn't guaranteed, so Rosen says he's postponing capital purchases and other expenses, even if they had been already planned.

"Things that we thought we'd start doing, we're putting on hold to see how things turn out," he says. "But when that will happen, we're not sure."

CIOs now need to develop new standards for prioritizing, Shah says. They'll have to recalibrate what's considered essential and non-essential spending. They'll have to better articulate the need for endangered IT positions that they know are essential.

And they'll have to swap multi-year planning cycles for quarterly budgeting, breaking up large deployments into smaller bites that can be built in months, not years.

"What we're discovering is that CIOs are often ill-equipped to re-prioritize and to do incremental rollouts," says Andrew Horne, the London-based senior director in the IT practice at the Corporate Executive Board. "But they have no choice." CIO


"It was a bit of a surprise to me how anxious people were to use it," says King, who oversees IT for Alabama Power and also works on some functional capabilities for its parent company, Atlanta-based Southern.

"I didn't realize how much the employee

80%The number of CIOs who are re-evaluating their 2009 budgets.

Source:corporate Executive Board

cIO SUrVIVaL GUIDE I IT Management

Vol/4 | ISSUE/095 0 M a r c H 1 5 , 2 0 0 9 | REAL CIO WORLD

How much is too much? It’s hard to say — especially with datacenters. It’s a subject that has troubled CIOs who have over-provisioned in the face of soaring business demands and need to cut costs at the same time.

More and more frequently, the balancing act brings CIOs to one question: should they build and maintain their own datacenters or let others run it to help manage costs and enable growth?

The current slowdown is pushing more CIOs towards an outsourcing strategy. Only half in jest, one CIO says that in a time of crisis, even God outsourced the building of the Ark to Noah. By turning to managed hosting services, CIOs hope to curb capital and operational costs and help make their organizations more agile to changing market scenarios.

It’s a trend that Forrester’s principal analyst Bill Martorelli is monitoring. “The popularity of managed hosting will likely increase because of current economic pressures,” he says.

Galen Schreck, principal analyst, Forrester Research agrees. “If you needed more office space, would you build an office from ground up or would you look for a larger, more modern office building to lease? A new datacenter represents the same kind of choice, and increasingly it makes more sense to lease datacenter space.”

Infrastructure OutsourcingInfrastructure Outsourcing

With growing pressure on IT

budgets, more CIOs are turning their

datacenters over to managed service

providers to cut cost, manage

scalability and increase governance.

By Gunjan Trivedi

Reader ROI:

The cost advantage of a managed service model

Why it’s great if you’re looking for scalability

The governance and resource benefits

Datacenters: GoinG out,ut,ut,ut,

GrowinG up

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Datacenters: GoinG out,

run Datacenter runThe CIO of Elbee Express, Shirish Gariba, agrees. The Indian logistics and express delivery company that covers most of the country and 200 worldwide locations hosted its apps, including its Web-based track and trace system called eTabs, its mailing ecosystem, and its consignment database at a third-party datacenter.

“I am the only IT person in my organization,” says Gariba. “I’m not a server-hugger. Managing your own datacenter means creating big pools of job roles at the expense of organizational agility — and a continuous stream of cost to maintain both human and technological resources,” says Gariba.

According to Martorelli, hiring a provider also makes sense from a power perspective. “Customers under capital spending constraints will find upgrading their own datacenters for higher power needs hard to justify. With its limited requirement for upfront capital investment, managed hosting can help relieve these concerns,” he says.

Elbee Express’s primary need was round-the-clock availability of its apps and consignment database with adequate power backup and resource management. Gariba was finding it increasingly hard to keep changing his datacenter’s dynamics to meet his organization’s growing needs.

After Gariba chose an on-demand model while outsourcing his IT infrastructure, sudden surges in demand for consignment shipping could be easily managed by renting servers at a fixed rate for brief periods of two to four months. “This enabled us to evaluate whether a surge was one-time or part of a larger trend, giving us time to buy additional in-house servers,” points out Gariba.

Today, Gariba runs a client-server infrastructure where local servers capture data and replicate it to the hosted datacenter. In next couple of months,

he plans to browser-enable core applications and get rid of local servers. “We want to concentrate more on business and business apps and not worry about managing infrastructure,” he says.

Value aDDsThe CTO of India Infoline, Titus Gunaseelan knows exactly what Gariba is talking about. “Since inception, we’ve chosen the infrastructure outsourcing way because our business wanted a ‘no-worry’ scenario. We first hosted our front-end servers running our online trading application and later moved our middleware

these concerns,” he says.Elbee Express’s primary need was round-the-

clock availability of its apps and consignment database with adequate power backup and resource management. Gariba was finding it increasingly hard to keep changing his datacenter’s dynamics to meet his organization’s growing needs.

GrowinG up

cIO SUrVIVaL GUIDE I Infrastructure Outsourcing

"Yes, it helps CIOs manage costs efficiently and enables scalability. This is undoubtedly a boon for an organization, especially during a slowdown."

Alok Kumar, VP & Head Internal IT, TCS

"Not really. If you look at the initial costs involved in setting up help desks and

other monitoring services, outsourcing infrastructure is not a viable option."

Ajay KhannaDGM & Head IT, Eicher Motors

"Yes. It saves costs for organizations facing tough times and it also helps organizations that are not really hit by the recession and are growing fast.

S.Francis Rajan, Head-ICT, BIAL

Is infrastructure outsourcing a good strategy in a slowdown?

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and backend infrastructure as well when we realized that we are unable to cope with the business’ growing demands.”

At India Infoline, an online trading and brokerage firm, Gunaseelan managed a mission-critical, multi-rack server environment that ran online trading apps, which required 24x7 high availability, unbreakable security and superlative performance.

Post its IPO in 2005, India Infoline faced the challenge of implementing and managing multi-platform networks, a distributed computing environment and a help desk supporting trader terminals across the country — all while maintaining focus on the core business of providing financial services.

To mitigate the challenge, Gunaseelan turned to end-to-end IT infrastructure outsourcing with a focus on scalability and manageability, where the service provider provides turnkey management of all infrastructure facets including applications, databases, servers and networks.

Today, his provider selects, implements, and manages all of Indiainfoline.com’s technology resources, trad¬ing applications and processes, nationwide network, mission-critical servers, bandwidth and connectivity and performs vendor evaluation, selection, and management, and help desk services.

Those were the benefits that Anand Rathi Financial Services (ARFS) was looking for. The organization, which offers online broking, trading, distribution, institutional broking and debt raising syndication, knew the criticality of the high availability of its online portal.

Though the front-end servers including its mailing solutions were already hosted, ARFS was outgrowing its datacenter. “As the business demands grew, we found it harder to scale. Since I couldn’t have built a datacenter to meet the rate at which business was growing, we opted for a pay-per-use model. The premise was simple: scalability,” says Bhavesh Shah, CTO, ARFS.

Shah believes that CIOs should look at building a datacenter themselves only if it gives their organizations an edge over their competitors. He says that if he had developed a proprietary application then he would have hosted it in-house. “But if there is something available outside and can be tweaked to

meet your requirements, you should look at an outsourced model. It gives scalability on demand,” he says.

O u t s o u r c i n g h i s infrastructure gave Shah access to two more benefits: governance and superior skill sets. Because service providers need to adhere to SLAs, their processes and governance tend to be very strong. For example, Shah says introducing changes

— switching a router for example — will not be accommodated by the service provider until proper process and authorization takes place — not even if Shah demands it.

More often than not, an in-house IT team will dispense with these formalities and proper documentation to save time. This lack of governance at lower levels could have larger consequences later on.

“And as a non-IT organization, I can’t always get the best resources. Vendors, who provide solutions to multiple clients, can afford experts. I can get these experts at a good price by letting a service provider manage my datacenter,” says Shah.

These benefits, say Martorelli, are beginning to foster new interest in the infrastructure model. “The growing scope and versatility of services will appeal to more buyers. Service providers are boosting the appeal of managed services with offerings based on customer-dedicated infrastructure. And customer interest is picking up,” he says. CIO


cIO SUrVIVaL GUIDE I Infrastructure Outsourcing

Bill Martorelli, Principal Analyst,

Forrester, says outsourcing is now a trend,"The popularity of managed hosting

will increase because of economic pressures."

Early in 2008, before the US financial meltdown in mid-September, CIO Michael Twohig met with the executive leadership at Clean Harbors Environmental Services to discuss the company’s 2009 budget. It was the first of many meetings intended to address what they saw as a troubling

economy.Despite that early and clear-eyed start, Twohig says he’s back to reviewing his 2009

plan, thanks to the steady drumbeat of bad economic news. He says he is assessing the immediate actions he would take should the economy go into a total tailspin.

He’s working off two plans, based on worst- and best-case scenarios. That’s a common practice, except that now, “Plan B has been heightened,” he says. If put into action, it would call for a significant cut in capital expenditures, the bulk of which would be aimed at the development side. “We always try to run a tight ship, but I’m looking at which projects we could literally do without,” says Twohig.

Many CIOs — even those who foresaw a tough 2009 — are in a heightened state of uncertainty regarding this year's spending plans. And like Twohig, many of them are revising their spending plans or at least preparing to be ready to respond to any number of scenarios.

Shvetank Shah, executive director of the IT practice at The Corporate Executive Board, notes that in a survey of 52 IT organizations, 78 percent said they’re re-evaluating

Budgeting

The slowdown isn’t going anywhere,

but you still need money to run IT.

Here’s how you can work the system to

your benefit. By Mary Brandel Reader ROI:

Why understanding the causes of the slowdown can help you get out of it

How to ensure a constant stream of money

The new rules to plan your budget


Budgeting

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their 2009 budget plans, 67 percent are putting non-essential projects on hold, and 57 percent are reducing their use of consultants and contractors.

What stands out, Shah says, is “the speed and extent to which the lights are being switched off.” In mid-August, CIOs were looking at 2.8 percent budget increases, according to his firm’s survey, but four weeks later, budgets were frozen or at least under heavy scrutiny.

Other analyst firms have also revised their IT spending forecasts, sometimes drastically. The consensus is that global IT spending will likely fall somewhere between flat and 4 percent growth. “On a daily basis, people don’t have an idea of the full impact of what’s happening,” says Gartner analyst Kurt Potter.

In September, a few weeks before the financial meltdown, IT executives who responded to Computerworld’s annual Forecast Survey (Computerworld is a sister publication of Computerworld is a sister publication of Computerworld CIO) were registering concern: 79 percent said they were either somewhat or very worried about the economy. And the percentage of respondents who reported that their IT budgets would increase in the next 12 months dropped from 47 percent in 2007’s survey to 28 percent.

With this unusual lack of visibility into next week’s business conditions — much less the rest of the 2009 — IT’s marching orders are shifting to emphasize flexibility, especially as business priorities and resources change. Here's how to manage your budget in 2009.

undeRstand the CRedit CRunChToday’s credit crunch directly affects IT because, for many companies, technology is the No. 1 capital expenditure item, Shah says. That means IT leaders need to pay more attention to financial metrics such as the weighted average cost of capital, or WACC. “What’s different about this crisis is it’s a capex crisis,” because it involves expenditures used to acquire or upgrade physical assets, he says.

WACC measures the rate that a company is expected to pay to finance its assets. The higher the WACC, the higher the ‘hurdle rate’ in a return-on-investment calculation, or the minimum rate of ROI that must be met to undertake a project. So imagine, Shah says, a project that last year would

have yielded $120 on an investment of $100. If interest rates are now 6 percent or 7 percent versus 3 percent or 4 percent last year, the project now has to yield more than $120 to make sense. The only choices are to squeeze out more ROI or decrease investment.

Today, Shah sees hurdle rates increasing by five to seven percentage points, and says CIOs should keep that in mind when choosing which projects to pursue, freeze or abandon. This will be a particularly hard exercise for companies that are midway through multi-year endeavors that consist of interconnected parts. “It’s a skill set CIOs are learning — how to build small chunks of projects and still have a functional flow to preserve the structure of the technology architecture without abandoning it,” he says.

Sometimes capex issues affect IT indirectly. At CPS Energy, CIO Christopher Barron says his budget will likely decrease by 1.5 percent because of plans to build new nuclear reactors and other construction projects. With the cost of capital rising by 20 percent

"For cutting-edge technology in customer service and performance for the next 5 to 10 years, our budget has increased by 60 percent."

K. B. SinghHead - IT, BSES Power

"If the IT industry can offer us solutions that cut costs in the long run, and that can afford us overall reductions, we'd

be open to making investments."

Anil Khopkar,CIO, Bajaj Auto

"For a contact center, IT investment is directly related to opportunities in the market. We anticipate growth and our investments are in line with that."

C. SubramanyaGlobal CTO, Hinduja Global Solutions

How is your budget responding to the slowdown?

cIO SUrVIVaL GUIDE I Budgeting

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or 30 percent, he says, the rest of the company is supporting these initiatives by holding down operational maintenance costs. “We need to trim expenses internally,” he says. IT is also being asked to delay or defer projects, but Barron believes money will be funneled back to IT this year.

CompRess paYBaCk peRiodsAnother metric receiving renewed scrutiny is payback period, Shah says. “It’s not just about ROI, but what ROI can I get in Q1?” he says. “It’s not just whether the CRM system can make the sales force better, stronger, faster, but can it do that by the end of June?” This will change not just what gets funded but also how you think about sequencing projects and which components you’re going to launch first, he says.

Chubb Insurance CIO Jim Knight says his company will intensify its focus on a goal it has pursued in the past few months to break up projects into smaller components with deliverables every six months. “With demand always increasing and supply not increasing, we’re focusing on how to become more agile in terms of

how we provision,” he says.

use ConCRete metRiCsAccording to Twohig, projects that show concrete cost reductions will take precedence over those that provide functional enhancements. “If a project reduces operational head count by 10 people, that’s a pretty clear measurement,” he says. “If I am just enhancing productivity but am unsure how to measure the return, it’s harder to float that kind of project to the top, even though you know it’s good stuff.”

pRepaRe foR Budget fluCtuationsDeep uncertainty is causing some companies to overreact, Potter says, and decisions made now may be changed later. “There’s simply

not enough data on what the future will look like,” he says. IT leaders should seek ways to not just be flexible but to turn on a dime. For instance, in addition to his best- and worst-case scenario plans, Twohig is also prepared to act quickly in the event of a severe downturn. “I’ve looked individual by individual in terms of what people we’d have to do without, based on project priorities,” he says.

Shah says companies are also ditching the usual full-year budget plans and instead are providing funding in quarterly lumps. “Companies are doing scenario planning, which is not new, but it’s coming back in style,” he says. At the close of last year’s fourth-quarter, for example, some enterprises were reserving the right to make decisions as late as the end of December, says Shah.

Barron is preparing for possible fluctuations by using what he calls a “sliding bar” approach. In other words, projects will maintain their ranking on the priority list, but as funding shifts, the bar will be raised or lowered.

leaRn moRe aBout so-Called silVeR BulletsThe credit crunch practically guarantees that CIOs will be pressured to consider new computing models that promise lower capital costs, such as cloud computing, which refers to a variety of techniques in which technology is provided as a service. “I am sensing that the cloud will become to the ‘08-’09 recession what offshoring was to the ‘02 recession — a silver bullet trumpeted by pundits and business media,” Shah says.

But he warns IT leaders to thoroughly investigate the economics of the cloud, including migration, transition and security costs, as well as the solvency of the vendors that offer it. “Capex is not just affecting end users but also technology vendors,” he says.

RuthlesslY CleaR dead woodAs companies ask all departments to look for efficiencies, IT won’t be excluded, says Potter. Gartner is advising IT leaders to look for savings on three fronts until they return their focus to growth strategies.

The first is IT procurement. Potter says it might be possible to renegotiate or re-bid contracts. And some Gartner clients are delaying big purchases, slowing down projects and even slowing the procurement approval process itself, to ensure that a purchase is the right decision and to obtain better deals.

The second category is cost savings within IT. Potter sees a renewed focus on reducing per-unit costs, such as cost per server, per terabyte of storage, per help desk ticket, per programmer or per line of code.

The third focus area is joint business and IT cost savings. This includes evaluating and possibly reducing the application portfolio by a certain percentage and eliminating functionality that the organization thinks is redundant.

No matter what happens in 2009, the IT organizations that rise to the top will be those that cut carefully if they need to reduce costs, focusing on the margins, not the core. That’s why this downturn is so much different from the dot-com bust, Potter says. “IT was seen as the problem in ‘01-’02,” he says. “But this time, IT will be looked at to make up for possible reductions in staff and for revenue growth.” CIO

Brandel is a computerworld contributing writer. Send feedback

on this feature to [email protected]

use ConAccording to Twohig, projects that show concrete cost reductions will take precedence over those that provide functional enhancements. “If a project reduces operational head count by 10

2.3%The amount IT budgets are most likely to grow by according to Gartner. In the worst case, it expects IT budgets to dip by 2.5 percent.

Source: Gartner

cIO SUrVIVaL GUIDE I Budgeting


Close all the stores. Lay off everyone. Liquidate everything.

That's essentially what happened at Circuit City, Linens 'n Things, Sharper Image and several other US retailers during the past several months. With the economy in rougher shape than the clearance rack at a

dollar store, many more retailers across the globe may seriously weigh the merits of this gloomy business strategy in the months to come before things pick up again.

"The reason we're seeing liquidation rather than bankruptcy from so many retailers is because people are hopeless," Dean Baker, co-director of the Center for Economic and Policy Research, recently told Newsweek. "We're still looking at a very bad year in 2009 and probably most of 2010, so it's very difficult to be optimistic about re-organizing and coming out of it stronger."

To be fair, some sectors of the retail industry have been over-supplied for a long time. This is, after all, the United States, a nation that boasted of 2 million retailers before the recession started. That roughly translates to one retailer for every 150 people, according to research from Tony Gao, an assistant professor of marketing at Northeastern University.

So in this environment, a pertinent question arises: can IT best practices and retail-specific technology applications help weather this storm?

Several retail analysts say that IT can make a difference — with many caveats especially regarding cost. "I think IT can help, however, I would sincerely doubt that any

Business Intelligence

Things are so bad for some retailers that

they’d rather hang up a sign and go home,

than try. But a few are turning to business

intelligence. The difference this time?

They are targeting new users and want

faster turnaround. By Thomas Wailgum

Reader ROI:

Why BI needs to be tweaked

The retail industry’s mandate for IT

BI’s new customers

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Vol/4 | ISSUE/096 06 0 m a r c h 1 5 , 2 0 0 9 m a r c h 1 5 , 2 0 0 9 m a r c h 1 5 , 2 0 0 9 m a r c h 1 5 , 2 0 0 9 | REAL CIO WORLD

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retailers are going to be spending too much money to upgrade their systems," says Patricia Edwards, a retail industry expert. "This is an extraordinary time for retailers. It's not about margins, which is what IT has been able to help with in the past. This is about cash flow. This is about survival."

PEnny-PinChing Retailers are well known for their thriftiness when it comes to technology spending, and have a long-held belief that off-the-shelf apps aren't robust enough for their demanding environments. Both of these beliefs may be impediments to IT's ability to accelerate business change right now.

Retailers spend just 2.9 percent of revenue on IT, according to the most recent State of the CIO survey data. Contrast that with the finance and banking category, which spends 7.7 percent of revenue on IT.

Across every industry, however, CEOs and business leaders have made what they want from IT now clear: acquire and retain customers;

manage these relationships; and drive innovative new-market offerings, according to the combined State of the CIO and Forrester Research data (which surveyed 600 top business executives).

How well did IT actually support that mission during the past year? Forty-nine percent of business leaders judged IT's performance as "fair" or "poor." Another 5 percent said IT did not support acquiring or retaining customers at all.

This damning data couldn't be more relevant to retailers' IT shops, as business decision-makers (such as merchandise buyers, forecasters and supply chain managers) try to plan for the latter half of 2009 and 2010. The question they are all asking is: how can retail applications assist decision-making in a recessionary climate when decades' old trends seemingly don't apply?

Edwards points out that the data sets and algorithms employed by markdown-optimization software — which aids retailers in determining when to cut prices and by how much — have to be modified to today's environment. As an example of just how bad this environment is, Kevin Sterneckert, a retail research director at AMR Research, says that on the first day of the new season, one apparel retailer was "offering deep discounts already," he says, "which we had never seen before."

A peak into consumers' mindset further illustrates the dilemma for retailers. According to research from Northeastern's Gao, if

business leaders have made what they want from IT now clear: acquire and retain customers;

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cIO SUrVIVaL GUIDE I Business Intelligence

retailers continue to offer huge discounts as a way to achieve short-term sales wins, over the long-term effect consumers will balk at full-price deals and buy merchandise solely from the "loss leader" categories (those promotional items that are deeply discounted to boost store traffic but reduce retailers' margins).

Sales success in the short term will likely be elusive for retailers "if they're going on previous experiences," Edwards adds. "This is not your father's recession. This is your grandfather's recession."

RETail iT FoCusEs on FivE aREasDespite the economic uncertainty, retailers are not stopping their technology investments, says AMR's Sterneckert. Sterneckert and his AMR colleagues met with over 200 retailers recently and found that retailers are focusing on projects with quick, measurable return. "Projects that are large in scope and cost, with benefits difficult to measure, are lagging," Sterneckert notes.

According to Sterneckert, retailers are spending their time and money mostly on five areas: merchandise assortment and space planning, allocation and optimization; regular price, promotion and markdown optimization; in-store systems such as point

of sale (POS), kiosks and mobile technologies aimed at improving the customer experience; cross-channel merchandising that improves channel visibility and connectivity; and business intelligence (BI) that facilitates action.

"Why these?" notes Sterneckert. "Because they can directly affect the bottom line within 12 months."

Brian Kilcourse, a managing partner at Retail Systems Research and former retail CIO, says IT departments have to break out of the "that's the way things have always been done" mindset. IT needs to work hand in hand with business users to examine operational processes to discover efficiencies, he notes, for example, reducing the number of handoffs between steps in any business practice.

"This isn't necessarily Six Sigma stuff — a lot of it is just common sense and using the current climate to challenge the status quo," Kilcourse says. "For retailers, the objective is to hyper-optimize non-selling functions so that more of the company's labor spend can be focused on selling and services."

Like Sterneckert, Kilcourse points to the lack of ‘action’ in retailers' BI systems, as well as a huge disconnect: transactional systems ‘talk’ to BI systems, but BI systems don't ‘talk’ back. "To the extent that BI results can be turned into actionable information that can be interjected into a business process, gains can be realized," Kilcourse says.

For example, instead of merely tracking a customer's history and areas of interest based on past purchases, a BI system should make real-time suggestions to the person serving that customer at the point-of-service.

"BI is all-too-often consumed by the wrong people — executives, corporate analysts," he says. "Why not make actionable information available right at the point-of-service delivery?"

In the end, all retailers will now have to make difficult decisions — including IT — that weigh short-term gains (and survival) versus long-term investments regarding an unknown future. "Unfortunately, many retailers are under tremendous pressure from investors to deliver short-term sales and financial results," notes Northeastern's Gao, "and don't have the luxury of longer decision-horizons." CIO


cIO SUrVIVaL GUIDE I Business Intelligence

“BI is more important in a slowdown because there is a scarcity of orders, and you need to have all the facts to properly realign your business."

Arvind SaksenaGroup CIO and Head - HR, Consilium Software

“BI is a must. It has definitely provided complete visibility of the business to

management and has pinpointed pain areas where optimization is feasible."

Meheriar PatelGM & Head - IT, HR & Admin, Globus Stores

“BI is hype. We know of a company that lost touch with reality because it used too much BI. It is just a tool to fill the need for strategy in a slowdown.”

M.D. Agrawal, DGM-IS (Refinery), BPCL

Is BI a priority given an organization's need to hold on to customers?

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Writer Nicholas Carr will earn the enmity of even more tech veterans with his newest prediction: cloud computing will put most IT departments out of business. "IT departments will have little left to do once the bulk of business computing shifts out of private datacenters

and into the cloud," Carr writes in his book, The Big Switch: Rewiring the World, from Edison to Google.

An exaggeration? Of course. But there's a kernel of truth beneath the hyperbole. Cloud computing, once a concept as murky as its name suggests, is becoming a legitimate emerging technology and piquing the interest of forward-looking CIOs. Out-of-control costs for power, personnel and hardware, limited space in datacenters, and above all, a desire to simplify, have encouraged significant numbers to move more infrastructure into a third-party provided cloud.

"The concept of cloud computing makes enormous sense, says André Mendes, the CIO of Special Olympics. "It helps the CIO abstract another layer of complexity from the organization and concentrate on providing the higher levels of value." Mendes, who's now moving much of his datacenter outside his enterprise via conventional hosting services, says he expects to move toward the cloud in the next few years.

Why now? Enabling technologies, including nearly ubiquitous bandwidth and widespread server virtualization,

Goodbye big datacenters, hello

applications running in the cloud? Behind

the hype around cloud computing,

CIOs are figuring out when and how to use cloud options wisely.

By Bill Snyder

Reader ROI:

The benefits of cloud computing

How it is different from SaaS

The importance of elasticity in an uncertain economic scenario

Steady Ground in

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plus the lessons learned from the rapid ascent of software as a service (SaaS), are encouraging CIOs to think further outside of the datacenter.

To be sure, it's still the early days of cloud computing. Concerns around security and application latency, to name two of the issues most commonly raised by the IT community, are real. Also, providers have not fully formulated their business and pricing models, which is one reason that some CIOs who did not reap the desired ROI from SaaS now look at cloud computing skeptically. Yet another issue: transparency. Entrusting mission critical applications and data to a third party means that the customer has to know exactly how cloud providers handle key security and architectural issues. How transparent providers will be about those details remains an open question.

a new level of SCalabilityUnlike many ‘next big things’ cloud computing didn't just spring fully-formed from the brain of a Silicon Valley whiz kid. "It's the logical corollary of what happened in computing over the last 30 years. In a sense, it's a return to the past; time-sharing on steroids," says Mendes.

True enough, but it's easier to get analysts and IT insiders to talk about the features and goals of a cloud than it is to pin down an exact definition. Keep in mind, too, that different vendors will spin cloud computing differently. Salesforce.com's vision of the cloud looks much like the SaaS you know today; IBM's vision includes mashups of massive customer data sets on the fly.

"The cloud is basically a combination of grid computing, which was mostly about raw processing power, and software-as-a-service," says analyst Dennis Byron of Research 2.0. "In effect the cloud is network virtualization."

Dennis Quan, CTO of IBM's High Performance On Demand Solutions, says "We've designed the cloud around virtualization. You have a datacenter with many servers and they are all turned into virtual machines."

One difference from the now familiar, multi-tenant SaaS model, in which numerous clients access a provider's application: cloud computing environments also allow the customer to run his own applications on the provider's infrastructure.At the provider level, the goal is to dynamically

assign computing workloads as customer jobs come in, notes William Fellows, an analyst with The 451 Group. That approach helps the vendor maximize its resources and lets the customer ask for more computing power on the fly. That's a key point. A big goal of cloud computing is rapid scalability.

But elasticity is probably a better term, says Barney Pell, founder and CTO of Powerset, a startup building a natural language search engine. By elastic, Pell means the ability to stretch out when needed — and then snap back. His company is attempting to index an enormous chunk of the Web, and that compute-intensive task goes on most of the time. The work involves major spikes by users that would exceed the company's normal computing capacity.

Rather than buy enough infrastructure to meet peak needs, Powerset became an early customer of Amazon's EC2 and S3, Amazon's related storage service. Powerset pays for the resources as it uses them, freeing up significant amounts of cash, Pell says.

a nUnlike many ‘next big things’ cloud computing didn't just spring fully-formed from the brain of a Silicon Valley whiz kid. "It's the logical corollary of what happened in computing over the last 30 years. In a sense, it's a return to the past; time-sharing on steroids," says Mendes.

True enough, but it's easier to get analysts and

the Cloud"Yes, it will cut costs as well as time — after it reaches maturity. We are monitoring developments and will explore adoption at an appropriate time."

Satish PendseCIO, Hindustan Construction Company

“Cloud computing can cut costs if it is effective for common application usage

and if Internet costs are cheaper than the cost of computing hardware."

M. SureshGM-IT, Hyundai Motors

“Definitely. This cutting-edge technology is a smart way of cutting costs. It aids in optimum resource utilization. But right now, virtualization is our key priority."

T.JaganathanDirector–Technology, Ajuba Solutions India

Is cloud computing a smart way forward? What are you doing about it?

cIO SUrVIVaL GUIDE I Cloud Computing

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Pell suggests that IT executives considering cloud services start by closely examining which resources their datacenter uses all the time — and which are only needed during periods of peak demand. What's more, the use of an elastic service gives IT time to establish a baseline, that is, the minimum level of resources needed to run the business at all times.

Similarly, groups or departments within enterprises often have the need to prototype or handle a specific project, but don't have the budget or desire to buy the needed infrastructure. Indeed, IBM itself is using its internal cloud to supply the resources needed for prototyping new applications or services, says Quan. Not every project uses that internal cloud, but more than 100 have, he adds.

The New York Times, for example, used Amazon Web Services (EC2 and S3) to generate PDFs of 11 million articles in the paper's archives in less than 24 hours using 100 instances of EC2, instead of buying hardware for the project, Derek Gottfrid senior software architect for the Times, wrote in his blog.

flexibility up, CoStS downFor some enterprises, cloud computing can help a CIO tackle several problems at once, as was the case for Schumacher Group CIO Doug Menefee. Upon joining the company three years ago, Menefee had to tackle a disaster-planning gap and find new ways for IT to keep

up with rapid business growth.Headquartered two hours west of New

Orleans and 35 miles north of the Gulf of Mexico, Schumacher staffs emergency rooms for 150 hospitals across the US. It only takes a glance at the map to see how close it came to being hit by hurricanes Katrina and Rita. "It was an eye-opener," says Menefee. "We didn't have disaster recovery and business continuity capabilities. Had our headquarters gone down, it would have taken all of the regional offices down with it."

At the same time, Schumacher's IT group was struggling to keep with revenue growth of 20 percent to 30 percent a year — even faster when measured by the number of complex contracts it needed to manage. "We can go out and turn

on five or six hospitals tomorrow. We need the flexibility to move data quickly," Menefee says. But setting up and provisioning new regional offices was taking months.

As Menefee settled into his new job, he realized that running at least some of his applications outside Schumacher's datacenter would solve a number of problems. Menefee decided to combine a custom application built by Apptus, an ISV, with a Salesforce.com CRM application to handle thousands of contracts among his company, the hospitals and the doctors. Those moves, which involved about half of the company's IT infrastructure, avoided the expense of his hiring an additional three to five full-time IT staffers, at a cost of $40,000 to $80,000 (about Rs 20 lakh to Rs 40 lakh) a year, plus a large outlay for additional hardware, he says.

Security, of course, poses an issue. "Single sign-on service and password management were the biggest pain points," he says.

While very upbeat about his experience in the cloud, Menefee says his datacenter isn't going away anytime soon. The company deals with very large image files and charts scanned into the system, which means that latency becomes an issue. So for now, that type of work stays in house. There's also "a beast" of a legacy billing system to deal with that wouldn't fit well into a hosted environment, he says.

Is Schumacher utilizing cloud technology, or is it really SaaS? "There's a lot of gray area around that term [cloud computing]," Menefee says. "But for me, the idea of us using an infrastructure that isn't our own, that is managed outside makes it a cloud. But I'm not looking to be part of a trend. I find a problem and look for a solution."

Control fearSSecurity, latency, service levels and availability are issues that rightly concern IT executives when the talk turns to cloud computing. Vendors will have plenty of work to do in the next few years to resolve them to IT's satisfaction. But there's also a less concrete, but important, issue on the cloud computing table: culture.

"Some people still view this as a loss of control," says Adam Selipsky, Amazon's vice president for product management and developer relations. "They're starting to come to terms with the idea of data leaving their four walls, but we're not there yet."

Indeed, when asked what advice he has for other CIOs considering cloud computing, Schumacher's Menefee says, "Your traditional IT staffer is going to be resistant. Enlist the guys who have experience developing for the Web."

More caveats: although it's not a common issue, some applications call for specific hardware. If that's the case, says Forrester principal analyst James Staten, forget about running the application in the cloud. And database performance in the cloud can still be problematic, says John Engates, CTO of Rackspace, an IT hosting company based in San Antonio, Texas.

On the other side of the ledger, though, CIOs will find benefits from cloud services, including more scalability, faster deployment times, and a simpler datacenter. There's no rush, but while you keep your feet firmly on the ground, it's time to take a peek into the cloud. CIO


Orleans and 35 miles north of the Gulf of Mexico, Schumacher staffs emergency rooms for 150 hospitals across the US. It only takes a glance at the map to see how close it came to being hit by hurricanes Katrina and Rita. "It was an eye-opener," says Menefee. "We didn't have disaster

71%of C-level executives and IT decision makers agree that cloud computing is a real technology option.

Source: avanade

cIO SUrVIVaL GUIDE I Cloud Computing


Networks today must evolve into a robust, services-oriented platform that enriches emerging, innovative, composite applications and yet still manage to balance technology and business processes. In addition to its primary function — that is, data — converged

networks incorporate instant messaging, multimedia e-mail, voice and streaming media, Web and videoconferencing, unified collaboration, and more. Enterprises can finally consolidate resources in a shared environment for higher levels of utilization, lower costs and more efficient management.

Enterprises are no longer saying if, but when. According to industry watchers, the converged network offers compelling benefits that involve increased levels of utilization for the resources in the datacenter while also reducing the equipment and management costs of the network itself (compared to an architecture that is not converged). Consolidation also provides an advantage in power and cooling efficiency in the datacenter where reducing the number of systems in an environment lowers the consumption of electricity and reduces the need for HVAC, both of which provide cost and environmental benefits.

Keep In Touch"The clear advantages of converged networks are improved costs and IT resource productivity," says Ben

Unified Communication

VoIP, IM, streaming video and other

multimedia data running

on converged networks guarantee

lower costs and more efficient management.

By Julie Sartain

Reader ROI:

Why converged networks are a necessity

How it can save money and increase efficiency

Other benefits of converged networks

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Gibson, senior director of mobility solutions at Cisco. Convergence shifts the focus from reactive case management to proactive innovation delivery, he notes. By managing one network and converging data, voice, and video applications over that network, the stress and frustration of managing disparate networks, applications, and protocols subside.

"With video, voice and network technologies starting to blend, it became clear that we could gain efficiencies by merging together our professional resources that were designing and operating those networks and then merging the physical networks together," says Erik Parker, senior infrastructure analyst of wireless and LAN infrastructure design at Toyota Motor Sales.

Toyota Motor Sales deployed a network solution to more than 1,200 different sites, which provides a standards-based network, allowing it to easily supply video, data and voice over the same physical network. Using this configuration, the converged network allowed Toyota to deploy any Internet protocol-based application without having to add any physical hardware and still ensure the reliability and redundancy of the network.

According to Parker, this strategy has allowed Toyota's individual resources to share their expertise in what used to be silos of technology, with other like-minded resources, resulting in a more resilient team of engineers. Once the merging of the physical networks is complete, Toyota's engineers can more easily deploy the plethora of voice, video, media-rich applications and collaboration tools. "Having the proper backbone in place makes it exponentially easier and considerably quicker to start rolling out the more demanding applications that an enterprise requires," says Parker.

The advantages are undeniable and acutely evident in numerous areas, including capital expenditures and operational expenditures savings, notes Gregory Heath, director of solutions marketing at Extreme Networks. Among other advantages, the converged network allows voice calls to take advantage of toll bypass; it saves on the costs of building a separate, circuit-based network alongside

the data network-from PBX to cable plant (wiring); supports multiple advanced features (far beyond circuit phone systems); and reduces the staff needed for IT and telecom.

Bob Mays, director of network and communications at Villanova University, says, "Last year, the university installed an IP-enabled PBX with VoIP capabilities. Now, we can manage both voice and data networks using one platform, which is a better utilization of staff because both the voice and data network teams can troubleshoot the same network. In addition, it positions the university to begin saving on long-distance expenses when outbound calls are going over the Internet."

Villanova is on a second-generation converged network built with a network foundation and IP telephony solutions. The network connects more than 3,000 IP and digital phones, providing flexibility for staff. Staff members use feature-

Toyota Motor Sales deployed a network solution to more than 1,200 different sites, which provides a standards-based network, allowing it to easily supply video, data and voice over the same physical network. Using this configuration, the converged network allowed Toyota to deploy any Internet protocol-based application without having to add any physical hardware and still ensure the

TogeTher"If designed correctly and configured properly, UC will not be a single point of failure and would not negatively impact an organization."

David BriskmanCIO, Ranbaxy

"The anchor application in UC is voice. If the infrastructure solidly supports

voice then all other elements of UC will be supported too."

Avinash AroraDirector-IS, New Holland Fiat (India)

"To prevent network infrastructure from becoming a single point of failure, we need to create adequate fallback options at various levels of the network."

S.C.Mittal, Executive Director-Systems, IFFCO

What impact will dependency on a single network have on reliability?

cIO SUrVIVaL GUIDE I Unified Communication

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rich IP or SIP phones as buildings are updated on a rolling technology upgrade.

Tangled WIresAs with any architecture, there are pros and cons. One possible con of converged networks is the increased complexity of managing multiple traffic types and the service levels for each, compared with a dedicated network model, where sharing is not a consideration. With any architecture that shares resources among multiple functions, the possibility of contention for resources exists. That's why features such as adaptive networking are vital in converged networks, because administrators can set policies and rules for services levels, end to end, through the converged network. This makes management easier while also enforcing the service levels, so users of the network experience the same level of service as if they were on a dedicated infrastructure.

Industry experts have observed that while some organizations could consolidate mainframe and open systems connectivity on

platforms they already have deployed, they choose to keep these applications separated on dedicated network infrastructure for reasons of business rules, oversight and ownership, and/or organizational preference. With disparate networks, organizations can maintain proven operational and organizational ownership and processes that would otherwise need to be reengineered in a new model.

"Another potential disadvantage of a converged network is the dependency on a single infrastructure," adds Heath at Extreme Networks.

"This makes resiliency and reliability vital. In addition, a modular software

operating system is also a key factor because it provides reliability through the separation of processes, hitless software upgrades and the simplicity of the same OS employed across the switching product portfolio, which minimizes human error."

According to Heath, less than 50ms path protection failover is a requirement on voice networks, a condition that may not have been imposed on the network before convergence was introduced. The Ethernet automatic protection switching (EAPS) protocols can meet this need to keep a voice call up and active, even in the event of a fiber cut or interruption. Quality-of-service (QoS) prioritization for data, voice and video also becomes more important.

"It's not a disadvantage," says Mike Babin, assistant director of communications/IT department at Concordia University, "But two areas that still need improvement are teleconferencing and video conferencing. We use the former for teaching and meetings and the latter for classroom training. Both are extremely difficult to support and require an expert

staff on hand to manage and troubleshoot the process. Otherwise, we are quite happy with our converged network."

Concordia University has standard architecture core/distribution access layer network on two campuses with 30 buildings per campus. The two cores on each campus are each 6500-class switches, and 4,000 telephone lines (with only 150 leased from the phone company; the rest are VoIP).

They have a wireless network with about 360 access points (indoors) and 40 or so for outdoors (60 are 802.11, draft-2 compliant). "In terms of the network," says Babin, "We currently have the capacity to support any of the converged apps."

BoIlIng IT doWnAccording to Dennis Drogseth, vice president and analyst at Enterprise Management Associates, the volume of traffic over the networks today is predominantly application traffic-largely Web-based applications, followed by client/server. VoIP is still a relatively small percentage, whereas, for instance, service-oriented architectures (SOA) are rising.

And while voice, streaming media and other technologies appropriately get the concerns of the network community, Web-based applications and Web 2.0, in particular, are increasingly posing a challenge, as the network is becoming virtually a ‘backplane’ for applications.

"Virtualized environments, as the network needs to route between VMs geographically dispersed in support of a single application, are also going to create challenges for network managers," says Drogseth.

"So my point is that the 'converged network' discussion is a bit parochial, focusing on voice, media, and data with voice and media getting the limelight when, in reality, the converged network will still be primarily about managing application traffic effectively in an increasingly virtualized universe." CIO


on dedicated network infrastructure for reasons of business rules, oversight and ownership, and/or organizational preference. With disparate networks, organizations can maintain proven operational and organizational ownership and processes that

56%The number of IT leaders that identified opex reduction as the most important benefit of UC.

Source: cDW

cIO SUrVIVaL GUIDE I Unified Communication


Pundit

I.T. delIvery | What’s the only investment that can lower all other expenses? The biggest opportunity for companies right now is to reduce their total expenses through targeted IT investments and convert them to a variable cost operating model.

Companies have to use IT to move toward a variable cost operating model if they are going to thrive in the present unpredictable economy. Recently, I attended an event hosted by the Chicago Chapter of the Society for Information Management and the keynote speaker, Dr. Howard Rubin, depicted how data clearly shows companies have to adopt a variable cost operating model through skillful use of IT in order to enable business agility and thrive in the next few years.

One slide showed overall revenues and overall operating expenses for companies in the last several years. It showed that company revenues and company opex converged in 2008 wiping out profit margins. So companies began looking at ways to reduce opex and since IT is a large part of opex in most companies, people naturally focus on reducing IT expenses. “Technology spending has collided with current economic conditions as IT organizations have failed to enact agile IT economics and make their value proposition transparent. The pressure is on to cut IT,” he said.

But he went on to point out that there’s a big difference between cutting costs and optimizing costs and a lot of companies have those two confused right now. Companies often lump all IT expenses into a business overhead category when actually a lot of their IT expenditures are for growing revenue and reducing operating expenses, therefore a lot of IT expense are not really overheads.

Current IT financial models in most companies have only a 30-35 percent variable cost. The rest of the IT budget is fixed cost composed of capex related to the cost of purchasing IT infrastructure and the fixed cost of people to run that infrastructure. Traditional cost-cutting strategies involve cutting staff, renegotiating

vendor contracts and delaying new projects, but the cumulative effect of these actions isn’t really that much. Instead, companies would be better off if they lowered the fixed cost of their IT infrastructure. The data shows there’s a big opportunity to reduce IT costs by reducing unneeded capacity through what Dr. Rubin calls the “IT commons”. That could provide companies with a 60 percent or more variability in their IT opex.

The IT commons is being created right now by Google, Amazon, and IT vendors who are building out enormous datacenters and offering their computing power and software

applications on a pay-as-you-go basis. These organizations are offering their customers pricing based on economies of scale that will drive down the total cost of IT services.

Dr. Rubin explained that companies must take advantage of the rapid commoditization of IT services for non strategic, core business functions like running datacenters and standard apps like e-mail, ERP, CRM, etcetera. “Give it up,” he said. If a provider can do it better and more efficiently go with them. He advised companies to engage in transformational IT sourcing activities such as using server virtualization, virtual desktops, cloud computing and SaaS.

Companies engaged in transformational IT activities like these to reduce their IT

opex will see total IT spend versus company revenue go down; even though IT spend versus total company opex actually goes up. This is what it means to optimize IT spending instead of merely cut IT costs. Companies that understand how to optimize their IT spend like this will achieve the agile business models they need. Companies that don’t understand this concept will experience the difficulties inherent in clinging to outmoded behaviors during times of rapid change. And those difficulties can be terminal. CIO

Send feedback on this column to [email protected]

There’s a difference between cutting costs and optimizing costs and many companies are confused between the two.

essenTial technology

The IT Parachute Before cost-cutting reaches terminal velocity, CiOs must find new ways to reduce fixed infrastructure expenses. Here's how. By Michael hugoS

VOl/4 | issUe/097 2 M a r c h 1 5 , 2 0 0 9 | REAL CIO WORLD

ET-Pundit.indd 72 3/14/2009 12:08:34 PM

cio march 15 2009 issue

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