IT innovation 'more important than cost cutting' - Ovum

CIOs and IT managers need to focus less on cost reduction when renewing contracts and more on innovation, according to Ovum analyst Evan Kirchheimer, who was speaking at a BT roundtable on intelligent networks.

However, two senior IT chiefs disputed his claims and argued that although innovation is important; driving down costs is still a priority in these austere times.

“What I find most frustrating as an analyst who specialises in enterprise IT, is how CIOs relentlessly focus on cost reduction in every contract renewal cycle. I think that this chokes both innovation and blue sky thinking,” said Kirchheimer, practice leader of the enterprise team at analyst firm Ovum.

“I think people need to put aside costs and think a bit more about the way the network can enable them to do business in a new way,” he added.

“I don’t know when this is going to change, but I wish I could plant a seed in the head of every CIO and finance director asking them to stop beating up the suppliers. You need to keep them keen, but that shouldn’t be your top goal if you are a CIO”.

Kurt Frary, ICT architecture manager at Norfolk County Council, disagreed with Kirchheimer and argued that in the public sector it is impossible to avoid driving down costs.

“It’s not an option for us to not focus on cost. It would be wrong to say it is an option. I think that anytime we look at any of our major contracts, and our contract with BT for voice and data is one of our biggest, we will be looking for significant cost reductions when it comes to renewal,” said Frary.

Frary did, however, also say that sometimes investments in innovation can drive down costs across the business. He believes that the recent push from the public sector to adopt public cloud services is an example of this.

“Although we have to save money year on year, sometimes you have to spend money on IT to cut costs somewhere else in the business,” said Frary.

“For example, I can see us embracing more and more public cloud services, and to do that we may need a very different network. We may need one with more bandwidth and better web performance,” he added.

“So we may invest more in that central infrastructure, to drive costs down elsewhere, by moving more services into the cloud”.

Norfolk County Council recently revealed that it has been involved in the largest rollout of Google Apps in terms of user numbers. The council deployed Google Apps for Education to 148,000 registered users, which included school staff and children across the region.

Mike Mann, head of technology strategy and planning for financial services provider Standard Life, agreed with Frary that costs are a priority, but argued that there is room to introduce innovation too.

“I think you can do both. You can deliver the facilities that you need for intelligent networks, but you can also take significant costs out at the same time. I don’t think the two are mutually exclusive,” said Mann.

Standard Life has revealed details of a £30 million outsourcing deal with BT, which manages the company’s communications infrastructure for the next five years. Mann said that the deal had saved Standard Life a “significant amount” in costs.

“Don’t get me wrong, there is a pressure to drive down prices, but I think you can do this and still get innovative services,” he said.

The deal with BT covers the delivery and management of a Local Area Network and Wide Area Network, as well as IP telephony, contact centres, contract management, service management and the transition of infrastructure to BT’s IP Connect network.

Copyright © 2012 IDG Communications, Inc.

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