Think Tank: How do you change gears from frugality to innovation?

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May 02, 2005 (Computerworld) --

Changing Gears From Frugality to Innovation

A generation of IT leaders has focused on reducing costs, outsourcing and calculating investment metrics. With an uptick in IT budgets, they're supposed to be able to move from the cost-cutting mind-set to more innovative and strategic IT work, but Marc Cecere, an analyst at Forrester Research Inc., says it's not so easy to change gears.

According to Mark Livingston, a vice president at consulting firm A.T. Kearney Inc. in Chicago, "The reality is most IT departments can't effectively explore innovative uses of technology because they are stuck in the daily operational grind."

An A.T. Kearney study found that only 20% of companies' IT spending is allocated for IT innovation—a 30% decrease from 2002. A similar study by Forrester puts the innovation number at 33%, which still means that 67% of the IT budget is tied to ongoing operations and maintenance. Moreover, regulatory compliance and security spending are cutting into the money available for innovation. A.T. Kearney is urging IT leaders to get even stingier with operational IT to free up funds for strategic initiatives.

Helen Pukszta, a senior consultant at Cutter Consortium in Arlington, Mass., has another idea. She says IT departments need a "manager of IT business innovation," who would research, analyze and propose new IT applications that would give the company a competitive advantage. That way, the IT steering committee looks at a broader set of IT investment choices than what's already in the project portfolio.

Best Bits

The most useful parts of recent business and IT management books

THE BOOK: A Whole New Mind: Moving From the Information Age to the Conceptual Age, by Daniel H. Pink (Riverhead Books, 2005).

Pink, a bestselling author who has become the darling of the blogosphere, argues in this book that the era of "left brain" dominance, with its emphasis on logical, linear, computerlike thinking, is on the way out and that we're entering the Conceptual Age, when "right brain" qualities such as inventiveness and design will predominate. What does that mean for IT people? Programmers are out (as in outsourced); innovators and artists are in. Routine work is either done through automation or in Asia.

"The outsourcing of routine software work is putting a new premium on software engineers with high-concept abilities," Pink writes. "After all, before the Indian programmers have something to fabricate, maintain, test or upgrade, that something first must be imagined or invented."

And these creations must then be explained and tailored to customers and users, Pink adds, which requires "aptitudes that can't be reduced to a set of rules on a spec sheet—ingenuity, personal rapport and gut instinct."

Research Roundup

• Retail Web site designers should worry less about alienating dial-up users and use more of the rich media features that appeal to broadband users, says a study by Nielsen/NetRatings, a service of NetRatings Inc. in New York. Why? The study says broadband users make 69% of online retail purchases, and they spend more money than dial-up users do.






• About 60% of consumers are concerned about identity theft, and 6% have switched banks because of the problem, according to a January survey of 1,000 U.S. consumers by IDC's Financial Insights unit.






• The Goldman Sachs Group Inc. in New York asked 100 corporate IT managers in March for their views of Sun Microsystems Inc. One-third of the respondents said "it's already too late" for the vendor, while 27% said Sun is "standing still." On the positive side, 13% said Sun is "moving in the right direction," and 3% said, "Sun is back."

Business Priorities Are you listening to what business executives want out of IT? Here are their most urgent requests: 1. Have applications better fit our business processes. 2. Improve access to relevant information. 3. Provide better systems for communication and collaboration. Base: 200 U.S. business executives; multiple responses allowed Source: Frank Gens, IDC, Framingham, Mass., March 2005

The IT Economy

• Security software remains the highest spending priority among IT managers, according to a survey of 100 IT managers by Goldman Sachs. Business intelligence software is also high on IT shopping lists, with 59% of the respondents saying they plan to purchase BI software in the next 12 months.






• President Bush proposed a 7.1% increase in the fiscal 2006 federal IT budget. But vendors hoping to get rich quick in the government market need to realize that federal IT spending is very uneven, says Gene Leganza, an analyst at Forrester Research. The U.S. Department of Defense and the U.S. Department of Homeland Security are in for big IT budget increases, but many other agencies have tight discretionary budgets. Those budgets are getting even tighter, Leganza says.

Buying Intentions IDC economic research continues to offer a positive, but not spectacular, picture of growth in IT spending in the U.S. over the next 12 months. "While buyer optimism has dropped a hair, the macroeconomic picture has picked up, mostly as a result of improving revenue forecasts for vendors," IDC says. The buyer intent index is based on monthly surveys of 400 to 500 U.S. CIOs and business executives, who are asked about their IT spending expectations for the next 12 months. Results are weighted to be representative of the U.S. market. An index of 1,000 means zero growth. Caveat: Buying intentions don't always lead to real spending. Source: IDC's FutureScan, Framingham, Mass., April 2005

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