If you don’t get the reference to a nuclear winter, one of the less than desirable side effects of a nuclear bomb is that the climactic disturbance would darken the skies and kill off any remaining crops for years after. Some commentators have been applying this grim analogy to the long slump in IT budget growth following the ignominy of the dot-com implosion.
But is the long squeeze over? One metric we might use to evaluate this claim is the financial performance of the leading IT suppliers.
As the second quarter ended many of these results were very positive indeed. BT saw sales up 3 per cent but more significantly, numbers year-on-year were up 18 per cent in ‘new wave’ services – internet and non-telco work – the tenth quarter sales have continually improved. Across the pond, major IT vendors like Apple, Google, Intel, SAP and Microsoft all reported healthy increases in sales and profits.
Meanwhile Intellect, the trade body for the UK IT software services community, just released a survey of its membership suggesting a majority (63 per cent) felt ‘more confident’ about the general business outlook than they did six months back, citing public sector spending plans and government policies as creating a healthy investment atmosphere. These IT firms are telling the world they are ‘bullish’ about the outlook for the next six months, forecasting increases in sales volumes and values, as well as profitability.
All encouraging, especially if one’s pension fund is tied up in some of this activity. Someone is buying serious enterprise stuff, just like today’s consumers seem to be. (Apple said it had its second highest quarterly sales and earnings in the company’s history, doubtless on the wave of the iPod revolution.)
Attitudes to IT
However, this being the real world something has to go and slightly spoil the picture. Just as all this ebullience was abounding, a survey – small but sadly representative – of business’ attitudes towards IT also saw the light of day. Over half of UK IT investment doesn’t make money for the majority of businesses, according to research by thin-client specialist firm Citrix.
The conclusion – which you may disagree with – is that most (85 per cent) firms channel over 50 per cent of all their IT pounds into non-revenue generating activities such as compliance. Only 16 per cent of the larger UK businesses contacted say they spend more of their IT budget on revenue-generating projects. For 6 per cent of organisations, it claims, a massive 80 per cent of IT budget is swallowed up by compliance. This would seem to suggest that the expenditure may be going to suppliers’ pockets but is it benefiting the organisations writing the cheques?
The picture is complex. We also need to add in at this point an interesting piece of analysis from the National Computing Centre, which found a very welcome eight in 10 organisations (of 250 UK firms surveyed) now have formal IT representation in the boardroom compared with six in 10 five years ago.
So IT is growing in size again and, even if it may not be that plugged into the bottom line, is still seen as vital. Good news? Maybe not for the CIO readership. This data suggested that the number of CIOs at the top table level actually fell – from 27 to 21 per cent in the period in question. One has to conclude that what’s happening is there are more board level directors with IT as one of their responsibilities – finance directors primarily.
Put all this together and some disturbing pictures emerge. The IT leader is losing influence, possibly – one survey does not make a seismic shift, at the same time as technology itself becomes more accepted into the business mix.
But it’s being accepted as a ‘must have’ because you need to meet your compliance targets. We used to talk about aligning IT with business. What if the users don’t see that as an issue – that IT is for operational, not strategic, value? That is one alignment not many CIOs would welcome.
We used to talk about aligning IT with business. What if the users don’t see that as an issue – that IT is for operational, not strategic, value?