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Predictions: People & Process Trends – 2014

Jan 20, 2014   //   by admin   //   Blog  //  No Comments

RFG Perspective: The global economic headwinds in 2014, which constrain IT budgets, will force business and IT executives to more closely examine the people and process issues for productivity improvements. Externally IT executives will have to work with non-IT teams to improve and restructure processes to meet the new mobile/social environments that demand more collaborative and interactive real-time information. Simultaneously, IT executives will have to address the data quality and service level concerns that impact business outcomes, productivity and revenues so that there is more confidence in IT. Internally IT executives will need to increase their focus on automation, operations simplicity, and security so that IT can deliver more (again) at lower cost while better protecting the organization from cybercrimes.

As mentioned in the RFG blog “IT and the Global Economy – 2014” the global economic environment may not be as strong as expected, thereby keeping IT budgets contained or shrinking. Therefore, IT executives will need to invest in process improvements to help contain costs, enhance compliance, minimize risks, and improve resource utilization. Below are a few key areas that RFG believes will be the major people and process improvement initiatives that will get the most attention.

Automation/simplicity – Productivity in IT operations is a requirement for data center transformation. To achieve this IT executives will be pushing vendors to deliver more automation tools and easier to use products and services. Over the past decade some IT departments have been able to improve productivity by 10 times but many lag behind. In support of this, staff must switch from a vertical and highly technical model to a horizontal one in which they will manage services layers and relationships. New learning management techniques and systems will be needed to deliver content that can be grasped intuitively. Furthermore, the demand for increased IT services without commensurate budget increases will force IT executives to pursue productivity solutions to satisfy the business side of the house. Thus, automation software, virtualization techniques, and integrated solutions that simplify operations will be attractive initiatives for many IT executives.

Business Process Management (BPM) – BPM will gain more traction as companies continue to slice costs and demand more productivity from staff. Executives will look for BPM solutions that will automate redundant processes, enable them to get to the data they require, and/or allow them to respond to rapid-fire business changes within (and external to) their organizations. In healthcare in particular this will become a major thrust as the industry needs to move toward “pay for outcomes” and away from “pay for service” mentality.

Chargebacks – The movement to cloud computing is creating an environment that is conducive to implementation of chargebacks. The financial losers in this game will continue to resist but the momentum is turning against them. RFG expects more IT executives to be able to implement financially-meaningful chargebacks that enable business executives to better understand what the funds pay for and therefore better allocate IT resources, thereby optimizing expenditures. However, while chargebacks are gaining momentum across all industries, there is still a long way to go, especially for in-house clouds, systems and solutions.

Compliance – Thousands of new regulations took effect on January 1, as happens every year, making compliance even tougher. In 2014 the Affordable Care Act (aka Obamacare) kicked in for some companies but not others; compounding this, the U.S. President and his Health and Human Services (HHS) department keep issuing modifications to the law, which impact compliance and compliance reporting. IT executives will be hard pressed to keep up with compliance requirements globally and to improve users’ support for compliance.

Data quality – A recent study by RFG and Principal Consulting on the negative business outcomes of poor data quality finds a majority of users find data quality suspect. Most respondents believed inaccurate, unreliable, ambiguously defined, and disorganized data were the leading problems to be corrected. This will be partially addressed in 2014 by some users by looking at data confidence levels in association with the type and use of the data. IT must fix this problem if it is to regain trust. But it is not just an IT problem as it is costing companies dearly, in some cases more than 10 percent of revenues. Some IT executives will begin to capture the metrics required to build a business case to fix this while others will implement data quality solutions aimed at fixing select problems that have been determined to be troublesome.

Operations efficiency – This will be an overriding theme for many IT operations units. As has been the case over the years the factors driving improvement will be automation, standardization, and consolidation along with virtualization. However, for this to become mainstream, IT executives will need to know and monitor the key data center metrics, which for many will remain a challenge despite all the tools on the market. Look for minor advances in usage but major double-digit gains for those addressing operations efficiency.

Procurement – With the requirement for agility and the move towards cloud computing, more attention will be paid to the procurement process and supplier relationship management in 2014. Business and IT executives that emphasize a focus on these areas can reduce acquisition costs by double digits and improve flexibility and outcomes.

Security – The use of big data analytics and more collaboration will help improve real-time analysis but security issues will still be evident in 2014. RFG expects the fallout from the Target and probable Obamacare breaches will fuel the fears of identity theft exposures and impair ecommerce growth. Furthermore, electronic health and medical records in the cloud will require considerable security protections to minimize medical ID theft and payment of HIPAA and other penalties by SaaS and other providers. Not all providers will succeed and major breaches will occur.

Staffing – IT executives will do limited hiring again this year and will rely more on cloud services, consulting, and outsourcing services. There will be some shifts on suppliers and resource country-pool usage as advanced cloud offerings, geopolitical changes and economic factors drive IT executives to select alternative solutions.

Standardization –More and more IT executives recognize the need for standardization but advancement will require a continued executive push and involvement. In that this will become political, most new initiatives will be the result of the desire for cloud computing rather than internal leadership.

SLAs – Most IT executives and cloud providers have yet to provide the service levels businesses are demanding. More and better SLAs, especially for cloud platforms, are required. IT executives should push providers (and themselves) for SLAs covering availability, accountability, compliance, performance, resiliency, and security. Companies that address these issues will be the winners in 2014.

Watson – The IBM Watson cognitive system is still at the beginning of the acceptance curve but IBM is opening up Watson for developers to create own applications. 2014 might be a breakout year, starting a new wave of cognitive systems that will transform how people and organizations think, act, and operate.

RFG POV: 2014 will likely be a less daunting year for IT executives but people and process issues will have to be addressed if IT executives hope to achieve their goals for the year. This will require IT to integrate itself with the business and work collaboratively to enhance operations and innovate new, simpler approaches to doing business. Additionally, IT executives will need to invest in process improvements to help contain costs, enhance compliance, minimize risks, and improve resource utilization. IT executives should collaborate with business and financial executives so that IT budgets and plans are integrated with the business and remain so throughout the year.

IT and the Global Economy – 2014

Dec 23, 2013   //   by admin   //   Blog  //  No Comments

RFG Perspective: There will be a number of global economic headwinds in 2014 that will mean slow or no growth around the world. The U.S. could creep up to three percent growth but the Affordable Care Act (Obamacare) implementation has a high probability of reducing growth to the 2013 level or less. This uncertainty will result in IT budgets remaining constrained and making it difficult for IT executives to keep current in technology, meet new business demands, and develop the skills necessary to satisfy corporate requirements.

Third quarter U.S. GDP gives the illusion that the U.S. economy is strengthening but that is hardly the case. The gains were in inventory buildups. Remove that and the economy of the United States mirrors that of many other countries. Europe remains weak and bounces in and out of recession while many of the so-called emerging markets are no longer bounding ahead. The BRIC nations (Brazil, Russia, India, China), whose growth had offset the weakness in the developed nations, are now underperforming. Growth in Brazil, India, and Russia has dropped significantly from the peak while China’s merely slipped into more normal numbers. Now that the U.S. Federal Reserve has begun its taper, these nations could tumble even more. This does not bode well for revenue growth, which, in turn, means tighter IT budgets.

In addition to the Federal Reserve’s actions overhanging the U.S. and global markets, Obamacare may add to the negative effect. The Affordable Care Act (aka Obamacare) is not that affordable and it seems the majority of individuals (and potentially corporations) are finding monthly payments are significantly higher, as are deductibles. This could slow the general economy even more if consumers and corporations are forced to hold back spending to cover basic healthcare costs.

The Bellwethers Struggle

There are three IT bellwethers for growth that we can look at to see how the world economy is fairing and how it is already impacting IT acquisitions. Some may say these companies – Cisco Systems Inc., Hewlett-Packard Co. (HP), and IBM Corp. – are no longer applicable in the new world of cloud computing but that is a false premise. These three firms are all heavily into the cloud and are growing rapidly in cloud/Internet related areas.

Cisco reported single digit revenue growth for 2013 year-over-year with revenues in the Asia Pacific area shrinking by three percent. While that is not bad, CEO John Chambers warned that revenues would decline eight to 10 percent in this quarter – its biggest drop in 13 years. One reason is that it is struggling in the top five emerging markets where revenues declined 21 percent. Brazil was down 25 percent; China, India and Mexico dropped 18 percent; and Russia slid 30 percent.

HP’s fiscal year 2013 showed similar revenue results – down by single digits. It had lower revenues in all regions and printing supplies slip four percent year-over-year. Printing supplies has been one of HP’s internal leading economic indicators, so this news is not good.

IBM’s third quarter revenues came in four percent under the previous year’s quarter, with all geographies down slightly or flat. But its growth markets revenues fell by nine percent and the BRIC revenues declined by 15 percent. There is a pattern here.

The collapse of the revenues in the emerging markets and BRIC nations is less a story of the bellwethers but of the countries’ declining economies. These countries and the U.S. were the engines of growth. Not any longer.

 RFG POV: 2014 has the appearance of being a less daunting year for IT executives than the past few years but economic, geopolitical and governmental disruptions could change all that almost overnight. Businesses may be able to avoid the global minefields that are lurking everywhere but the risk exposure is there. Therefore, it is highly likely that most CEOs and CFOs will want to constrain IT spending – i.e., flat, down or up slightly. Moreover, most budgets are reflections of the prior year’s budget with modifications to address the changing business requirements and economic environment. Therefore, IT executives can expect to have limited options as they work to meet new business demands, keep up with technology, and develop the skills needed to satisfy corporate requirements. It is time to innovate, do more with less again, and/or find self-funding solutions. Additionally, IT executives will need to invest in process improvements to help contain costs, enhance compliance, minimize risks, and improve resource utilization. IT executives should work closely with business and financial executives so that IT budgets and plans are integrated with the business and remain so throughout the year.