IT spenders battle wave of uncertainty
Though technology budgets are expected to increase next year, many chief information officers dealing with forced upgrades and job instability say nothing can be set in stone yet.
"The worst evil you can succumb to," he said, is deferring information-technology spending. "That wasn't a problem in 2001, because spending had been so high earlier. If it continues in 2002, you're going to see atrophy, breakage, and then the hatchet will come out."
Chiarello spoke at Morgan Stanley's CIO Outlook 2002 Conference here Tuesday. He also said that more CIOs are at risk of losing their jobs in 2003 than ever before.
Chiarello's advice may be tricky to follow considering the results of his company's survey of 225 CIOs: namely, that global IT budgets are expected to increase 2 percent next year from 2001.
While positive growth is impressive considering the state of the economy, and while the rate will surpass 2001's rate of 1.5 percent, it is still down dramatically from growth rates of 9 percent in 1999 and 12 percent in 2000.
According to the survey, the top three priorities for CIOs are e-commerce initiatives, security software and application integration.
Other priorities include storage hardware, ERP (enterprise resource planning) software, Windows 2000 and XP upgrades for the desktop, CRM (customer relationship management) software, Web site enhancements, content-management software for Web sites, and Windows 2000 and XP upgrades for servers.
According to anecdotal accounts at Tuesday's conference, making software fit for the Web also ranks high on the list, as does anything that gives companies a better view of the supply chain.
"Portal software and B2B software, anything that gives you transparency into demand, you will get an excellent economic return on," said Jack Cooper, CIO of Bristol-Myers Squibb.
On the hardware front, Research In Motion's wireless BlackBerry pagers rank first on the list of wireless devices for which IT departments are developing support and integration. The BlackBerry was followed by Compaq's iPaq device, a sign that the importance of Palm handheld devices is waning.
"BlackBerry today at our company is as important and strongly implemented as laptops were a few years ago," said Tom Shelman, CIO at Northrop Grumman. "Nobody can live without it. If you don't have a BlackBerry, you probably aren't anybody."
As for other areas, Linux development and videoconferencing were anecdotally low on the totem pole. "We're happy with what we've seen coming out of Microsoft," said Ergin Uskup, CIO of United Stationers.
"We already have the Java vs. (Microsoft's) .Net strategy question in front of us. We can't introduce another variable at this point," said John Patterson, CIO of Baltimore Life Insurance Company, referring to Linux.
Audio graphics conferencing is taking over from videoconferencing, several CIOs said, citing the utility of Microsoft's Net meeting program.
"We've found that the talking head is not needed," Shelman said.
But CIOs are not only bracing for a spending squeeze. They are also feeling pinched in other areas.
Several executives said they have been forced to upgrade software before they are ready--even though it is fairly low on their priority list--because IT suppliers are closing down customer support for older products.
"We were unmoved by the business factor," said Richard Ross, CIO of Amerada Hess. It was only when the company knew time was running out for support of its software that it decided to "pull the trigger on the upgrade," he said.
The collapse of whole companies may be even more of a concern.
"We've all gone through the 'sunsetting' of old hardware. What really keeps a CIO up at night is if the vendor is being sunsetted," said John McPartland, CIO of Blue Star Solutions.
This may contribute to the continuing flight to brand names in the IT industry, the CIOs said. "Siebel, SAP, Microsoft and IBM--that's pretty much the vendor base," Patterson said. "Folks you would have entertained a year ago aren't even on the radar screen."
Even among those brand names, competition is tough. Oracle recently disclosed plans for new software and a revamped version of its flagship database management application to pit against IBM and Microsoft. And German software giant SAP recently entered the Web services market, which means it will be competing with IBM, Microsoft and BEA Systems.
These days, projects have to pass a much more stringent test about cost-effectiveness before they get the go-ahead, several executives said.
"Now we ask not how many years, but how many months," McPartland said of the company's assessment of its return on investment. "The money is getting spent, but it's being managed much more closely."
Morgan Stanley hosted its CIO conference in December because that is when CIOs finalize their budgets for 2002. But with economic uncertainty hanging over their heads, CIOs say nothing is final.
"About 50 percent of the budget is dynamic. It will change according to how the year goes," Bristol-Myers' Cooper said.