Gartner was generous

There was a mini-tempest last week as Ken McGee of Gartner said IT is now a "non-growth" industry. Nick Carr jumped and said - see I told you so, IT doesn't matter. 

Flat growth, what wimps! One of my CIO clients recently told me he could cut 10% each year for the next few years and not skip a beat. He would use that to fund innovation investments and not have to go with tin-cup to his CFO. He has bought his ticket to New Florence.

Want 10,  20, 30% % savings in IT budgets? Here is a list I presented at Software 2006 of top 10 IT spend items with the most "empty calories"

• Software Vendor Annual Maintenance contracts

• Outsource contracts signed more than 18 months ago

• Software “shelfware”

• Telecom “shelfware” - unused  phone, T1 etc lines

• Lack of offshore shared services  across  client specific development centers

• Telecom “fringe” services – WI-FI hotspot charges, international mobile roaming etc

• Lack of “hardware as a service”

• Everything with cheaper building blocks - x86, open source, global labor - but finished product still pricey

• Staff aligned more with Accenture and EDS thinking than with 37Signals and Google

Delight your CFO and give him 5% back for a change - and still have plenty left for innovation projects. If that is non-growth, bring it on.

No Nick, it's not the end of corporate computing. It's the dawn of a new computing paradigm.

Update: I added a few words to clarify the categories

Further update: I was delighted to read this InfoWorld series of stories about "heroic hacks" - innovations and workarounds from creative IT staff. Every CIO deserves a few - or many - such heroes.

Comments

[Aditya]

Vinnie, can you explain what you mean by "innovation projects"? Do you mean bespoke software development on existing platforms? If so, I'm somewhat sceptical that this can happen without significantly retooling the s/w development organization and infrastructure for exactly the reason you mention - most think more like EDS than a nimble software companies.

[vinnie mirchandani]

Aditya, it is analytics for some, wi-fi for others, web servcies for others, RFID/GPS for others, mobile apps...or even just setting Webex for some. It is small projects using newer technologies to enhance specific business processes...I have a whole separate blog on innovative stuff CIOs are leveraging

www.florence20.typepad.com

[James Taylor]

Can't help but think the fact that almost all new software development results in a pile of maintenance work and a massive TCO is contributing. Why not also build systems that don't add to the maintenance backlog by building agility/changeability into them with technology like business rules?
http://edmblog.fairisaac.com/weblog/2006/03/chchchchanging.html for example.

[viinnie mirchandani]

James, I would certainly pilot any such approach...the key word is pilot. Unfortunately time and again we aim too big, ERP, SOA etc...

[David Scott Lewis]

And the best part: "Staff aligned more with Accenture and EDS thinking than with 37Signals and Google" ...

Cheers,

[Loek]

Vinnie, some interesting points, however to attack those emtpy calories it requires upfront investment. Even empty calories do not disappear overnight without doing anything (ask WeightWatchers!). I think it is extremely important to realize that before you can save money on these subjects, you first need to invest. I.M.O. the new computing paradigm should be: provide business value for money:
http://loekb.blogspot.com/2006/05/do-more-with-less-new-it-mantra.html

[viinnie mirchandani]

Loek, so long as those investments themselves do not cost an arm and a leg. We are still amotizing the costs of large ERP, CRM projects years after they wer finished...

The best solution is if an incumbent vendor slashes its prices...but as we see recently with SAP. It offers s cut rate maitnenance package to Oracle customers, but refuses to even acknowldge its own mature customers need some thing similar.

Keeps negotiators like me in business. And gives startups and other agile vendors a foot in the door...

[Eric]

Interesting points Vinnie. I think you missed a few that we've had success with:

* Insourcing portions of previously outsourced deals that didn't meet SLA's and actually drove higher TCO

* Constant renegotiation of Telco contracts (we've been able to lower every year for last 3 years running)

* Selective migration of low transaction volume mainframe applications to lower cost platforms

* Software as a service for non core applications

* There is still plenty of room for systems consolidation at any sizeable firm -- it's more the intestinal fortitude to embark on these projects, since they are risky, but obviously they cut costs

* Rollout of thin clients for offices using Citrix or Terminal Services, thereby reducing support costs and up front capital/lease costs for equipment & software licenses

Of course, the real issue with many of these costs saving items, is that that savings is partially offset with costs increases in the following areas:

* SOX compliance

* Security/threat prevention

* SAS70 certifications - gaining dramatically increased ground as a pre-req for many supply/demand chain or partner relationships (and it's an ongoing annual cost to keep the certification)

Regardless, I do agree that the costs are there to be pulled out.

[viinnie mirchandani]

Eric, great additional points. I have a whole series of posts railing against compliance costs.

The great news is as you are probably seeing,if you can cut out the empty calories, it is so much easier to go have "dessert" - innovation projects - without getting yelled at!