IT's Leaner Lifestyle

Meticulous budgeting and economizing technologies have helped sculpt trim new IT outfits. Here's how IT will maintain its slimmer shape in 2011.

Contributing Writer, Computerworld |

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Running for Cloud Cover

Chan is also looking outside of his IT organization for solutions. "I think we spend entirely too much time tinkering with hardware," he says. "Over time, we can outsource most of our IT infrastructure. Instead of buying and building and managing servers, potentially we could engage a cloud provider and rent capacity. We are experimenting in-house with cloud, but there are still a lot of security-related concerns."

Haggen Inc., a 32-store chain of supermarkets in the Pacific Northwest, has already extensively consolidated its data center operations by virtualizing servers. "Now we're looking at storage rationalization and optimization," says CIO Harrison Lewis. "Before, we might just acquire more storage, but now we're looking at Tier 2 and Tier 3 data and moving it off to a private cloud."

A recent internal study showed that 49% of data that Haggen had been storing hadn't been accessed in two years. This has prompted a more rigorous review of all IT assets, with an eye toward distinguishing exactly what offers a competitive advantage and should be kept in-house and what should be outsourced.

"If it's not an area where we need to do a great deal of customization, software-as-a-service makes sense," Lewis says. In 2011, Haggen will be evaluating other SaaS options, including Google's suite of productivity applications. "From everything I've seen so far, it can make sense for us," notes Lewis.

The bottom line, says Forrester Research analyst Bobby Cameron, is that companies will focus on continuing to drive down costs throughout 2011.

"As the IT organization focuses more on process, they're also consolidating IT, moving to shared services, and there is a huge acceleration in their ability to automate services," he says. "The whole concept of preprovisioned environments -- with cloud and virtualization -- takes automation to the nth degree.

"All of these accelerants are going to continue to drive down the cost of delivering IT," adds Cameron, not only in 2011, but for the foreseeable future.

Austerity yields new appreciation for IT

Next year's technology budgets are mostly flat, and cutting costs remains a top priority, but it's not all gloom and doom for IT.

Consider the case of Daniel Chan, CIO at the New York State Office of Temporary and Disability Assistance. His most experienced staffers are retiring at an alarming rate and taking years of institutional knowledge with them. In an effort to mitigate those losses, the agency is re-engineering and automating as many of its processes as possible; it's also using dashboards to better monitor expenditures and manage approval processes in a timely manner. Nonetheless, it's still looking to fill 50 jobs in the next few months.

"Our strategy is to bring in new talent from the outside, with the hope that they will look at things differently as to how we can improve our processes," says Chan. He adds that the move to automation has yielded a big unexpected benefit: "IT is a lot more joined at the hip with really high-level executive management within the government because they're seeing more and more the value that technology can bring to the table."

Other CIOs tell similar stories.

At GAF Materials, CIO Adam Noble says IT received a slight budget increase for 2011, thanks in large part to the ROI generated by investments in new IT systems during the previous two years, most notably a unified communications system for the customer service call center. The system enables customers to place orders via the Internet instead of doing so over the phone. GAF has since launched a pilot to see if chat can be incorporated into the process.

Phone orders now represent the smallest percentage of overall orders. "It has completely flipped from two years ago, when 80% of our orders were taken by phone," Noble says. "We still have customer service people, but now we can use those people for other things, like up-selling." The call center has also reduced costs by 10%. After presenting those results to the company's board, Noble says, "we talked about where IT can make additional investments, and we got a slight uptick of 5% in the budget."

At PHI, top management is now calling on CIO James Quinn to help research and negotiate business matters far outside the realm of hardware, software and services.

"I just met with our CEO, and we were looking at a technology company in the roofing industry that has nothing to do with standard IT," Quinn says. "Because I'm heavily involved in negotiations and I understand how technology can impact the business, I was called in." As he sees it, "IT is almost becoming an extension of the R&D organization. Everyone talks about innovation and they look at my organization."

IT is also in charge of a companywide cost reduction program at PHI. "The initiative is being run by IT, which was chosen to lead it because of our project management experience," Quinn says.

Going forward, "I think IT will continue to be a front-runner in helping companies survive," he says. "What's going on [in the economy] is actually elevating the importance of IT. There's a huge opportunity for IT to come to the forefront of a company and show its worth."

&mdash Julia King

Next: Cloud computing promises savings, delivers speed

Julia King is a Computerworld contributing writer based in Pennsylvania.

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