CIO Strategies for the Economic Recovery

by Yashpaul Singh Dogra, June 2010

The economic downturn of 2008 to 2009 left many chief information officers (CIOs) scrambling to adjust to the new economic reality. Chief executive officers (CEOs) and Chief Financial Officers (CFOs) expected a proportionate reduction in operating budgets to compensate and maintain margins. While cost reduction and efficiency is always on the mind of a CIO, the need to tactically reduce cost and investment became a top priority. The metric most CIOs were held accountable for became the amount of IT dollars spent as a ratio of expected revenue. In the aftermath, many organizations prioritized maintenance and cut projects with large capital expenditure. Experimentation with innovations such as cloud computing gave way to more practical investments, yielding improved utilization of existing assets.

At the end of 2009, many companies that experienced a dramatic contraction in revenue saw the bottom of the trough. As the budgeting cycle started for 2010, businesses positioned for growth. In a convergence of efforts, cloud technology, virtualization and data centers became the focal points for CIOs. Today, successful execution of a cohesive IT strategy is pivotal for winning in the new economic reality.

Oracle Insight conducted a survey to ascertain leading CIOs’ IT strategies, and operational goals and challenges, for 2010 and beyond. The survey, taken by over 600 CIOs, IT executives and operational managers, focused on the technology and data center aspects of the IT factory — specifically, infrastructure as a service (IaaS) and platform as a service (PaaS). The results are enlightening and provide insight into the near-term outlook.

CIO Priorities
The main priority of nearly 60 percent of CIOs is to support projects that drive growth, reflecting the upturn in the economic outlook for most companies. Reducing cost, at the top of CIO priorities in 2009, is now a secondary objective. This shift in focus signals that CIOs are positioning companies for the rebound with renewed IT investment. While CIOs are reducing the technology deficit, they continue to judiciously maximize the IT dollar.

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In the economic downturn, CIOs reduced cost to match the reset revenue outlook. Nearly 90 percent of the CIOs surveyed were in the midst of consolidation, standardization and virtualization activities that had immediate impacted the bottom line. Now, with a renewed opportunity for investment, CIOs are using a more structured, services-oriented approach of "plan, design, and operate" in their IT departments. In a confluence of efforts, CIOs are using technology to develop a utility model for computing while shifting the focus to that of service orientation. Over 70 percent are using Information Technology Infrastructure Library (ITIL), and nearly a third using it as a centerpiece to drive the service-based transformation.

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Virtualization will continue to be a key technology enabler. The adoption of virtualization in 2009 increased dramatically with the expectation of improving utilization. This resulted in the reduction of data centers’ server sprawl. The adoption of a virtualized server infrastructure meant the existing server life could be extended, and new servers would only be needed to service real computing demand. Additional benefits of reduced power and space further spurred consolidation. The trend will continue as 82 percent of CIOs see virtualization as a key technology to manage computing capacity expansion, and, more importantly, a stepping stone to utility and cloud computing.

CIOs have also restarted initiatives towards cloud computing as a way to manage variations in computing capacity. Over a third are adopting core technology enablers for cloud computing. CIOs’ initial forays into virtualization are leading them to consider private clouds for internal development, as well as public clouds to manage peak loads and non-critical applications.

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