What s In Store for Today and Tomorrow?

51 What s In Store for Today and Tomorrow? CIOINSIGHT RESEARCH 72% OF CIOS CITE IMPROVED CUSTOMER SERVICE AS THIS YEAR S TOP BUSINESS PRIORITY 72% SAY SPENDING ON IT OUTSOURCING WILL DOUBLE OR MORE IN FIVE YEARS 59% EXPECT ANOTHER TERRORIST ATTACK ON THE SCALE OF SEPT. 11 WITHIN FIVE YEARS W 18% SAY THAT IN FIVE YEARS THEIR COMPANIES WILL NO LONGER EMPLOY A CIO hy is it important to think about the future? Because only by doing so do we have any chance of preparing ourselves for what might come our way. In this month s CIO Insight survey, we asked the more than 750 respondents to think carefully about the future of information technology, in both the short and the long term. The results, divided into two sections, suggest that, by and large, CIOs are an optimistic bunch. In the short term, within the next 12 months or so, they expect to be responding to a renewed emphasis on revenue-producing strategies on the part of the business units they serve, even as they maintain their efforts to rationalize their own internal processes in a continuing effort to cut costs. Looking out five years from now, they see a business environment that is not radically different from the world they work in today. The real-time enterprise, they say, is on the way, and it will bring with it much greater managerial and technological flexibility. But the march toward a global economy will be slow, and technology will not have made the world much more secure. It is, in essence, a conservative vision of the future, one that we are, in a sense, already prepared for. Will the world really be so unchanged?

52 Customer service is the watchword for 2004. Perhaps 2004 BUSINESS PRIORITIES it s a sign of the recovery, but for the first time in several years, cutting costs is not our respondents top business priority. Instead, companies, particularly smaller ones, are turning to the concerns of their customers. Then comes the real-time enterprise, followed by supply-chain integration. Dare we say that the strategic CIO is back in business? Cost-cutting remains the top priority at 70% of companies that are less successful at meeting strategic goals Which business priorities will have the greatest impact on your IT organization in 2004 (please select up to three): Delivering significantly greater service to customers Cutting costs Being able to make decisions and implement processes in real time total 71.8% 60.8 41.3 under 1,000 employees 74.7% 54.4 44.2 N=734 over 1,000 employees 69.2% 66.4 38.7 Tightly integrating our processes with those of our suppliers, customers and partners 34.7 34.0 35.4 Coming up with innovative new products 30.2 36.6 24.6 Selling and operating globally 16.8 15.1 18.2 Improving quality through a Six Sigma or other quality program 16.6 12.2 20.5 Having a distributed workforce 15.0 16.6 13.6 Top IT strategies suggest that cutting costs is still very much 2004 IT STRATEGIES on the minds of most IT organizations. Consolidating infrastructure, improving and measuring performance, and centers of excellence all these top IT strategies suggest a continuing effort on the part of respondents to rationalize their operations to better support business strategies. Surprisingly, new efforts to build proprietary technologies ranked high, especially among smaller companies. Is it now cheaper to build than to buy? Which of the following IT strategies will your IT department pursue most actively in 2004 (please select up to three): total under 1,000 employees N=721 over 1,000 employees Standardizing and consolidating our IT infrastructure 72.4% 68.9% 75.5% Performance measurement (benchmarking, scorecards, etc.) 54.8 53.6 55.8 Fully 58% of retail companies point to developing proprietary applications as their top IT strategy. Improving performance through centers of excellence, project offices or communities of practice In-house development of proprietary applications for competitive advantage Centralizing the management of the IT organization 41.6 38.6 23.6 36.8 51.2 18.9 45.7 27.6 27.6 Outsourcing of IT functions and projects 21.8 15.6 27.1 Virtual teams 15.8 18.3 13.7 Decentralizing the management of the IT organization 4.0 4.8 3.4

53 This year s top technological imperatives put a 2004 CRITICAL TECHNOLOGIES premium on the intelligent use of IT. CIOs are looking to consolidate the gains already made in the areas of CRM and business intelligence, with Web services and data warehousing serving as the underpinning. That s in keeping with the renewed focus on improving customer service and on profiting from customer and market intelligence. It s a critical move in a world of tougher competition. CIOINSIGHT RESEARCH Which of the following technologies and technology strategies will make the most significant contribution to carrying out your company s business strategy in 2004 (please select up to three): N=721 total under 1,000 employees over 1,000 employees Web services CRM (customer relationship management) Business intelligence 27.6% 27.3 26.6 31.8% 31.8 25.5 24.0% 23.4 27.6 Just 16% of healthcare companies point to CRM as a critical technology for 2004. Data warehousing and mining 22.9 19.9 25.5 Collaboration 19.4 20.2 18.8 Disaster recovery/business continuity 19.4 16.6 21.9 Knowledge management 19.0 18.7 19.3 Security/digital identity management 18.0 15.1 20.6 Wireless networking/mobility 16.5 16.9 16.1 Corporate portal 15.8 16.1 ERP (enterprise resource planning) Supply-chain management 12.5 9.8 14.8 Content management 12.2 14.2 10.4 Storage systems 12.1 11.6 12.5 Engineering/product development 11.0 12.5 9.6 Sales force automation 8.7 9.5 8.1 Digital asset management 5.7 5.3 6.0 How the survey was done: CIO Insight editors designed the 2004 Future of IT Survey together with Equation Research, LLC (www.equationresearch.com), an Estes Park, Colo.-based supplier of custom research services. IT executives gathered from Ziff Davis Media publication lists were invited to participate in the study by e-mail. The questions were posted on a password-protected Web site, and 751 qualified respondents (400 from companies with 1,000 employees or more, and 351 from companies with between 50 and 999 employees) replied during the two-week period from November 6 to November 20, 2003. Of the respondents, 57 percent were CIOs or CTOs, the rest held titles of vice president of IT or higher.

54 The technology future is bright. True to their nature as technologists, the 2009 TECHNOLOGY majority of respondents expect to witness significant technological change in the next five years. Technologies such as RFID, Web services, portals, mobile commerce and knowledge management will be firmly in place, greasing the wheels of such critical business processes as supply chains, pricing strategies, customer service and employee collaboration. Indeed, all indications are that we are well on the way to achieving many of the technical requirements of the real-time enterprise. But CIOs are less sure of the likelihood that utility computing models and the technologies required will penetrate the corporate computing environment to any great extent. The consensus appears to be that change is on the way, but it will be beneficial, rather than truly disruptive. Wal-Mart and at least one other major retail chain will have started attaching RFID tags to individual products on store shelves. 93% Corporate portals will evolve to the point where they allow customers access to individualized data in real time. 89% Web services technology will be the dominant technology in the U.S. for application integration. 86% Mobile commerce will comprise 10% or more of all retail sales in the U.S. 77% Microsoft s market share in desktop operating systems will remain above 90%. 70% Improved supply-chain processes and technologies will speed up average inventory turnover of U.S. corporations by 50%. 70% Knowledge-sharing technologies will improve to the point where they will deliver a clear return on investment. 63% Improvements in Web-based customer service will double the customer satisfaction ratings at the majority of U.S. corporations. 60% More than 33% of U.S. corporations will be receiving the majority of their computing needs through an outsourced utility computing model. 53% Open-source software will become the dominant software for business applications and servers. 48% Software delivered to businesses will be priced according to an on-demand model, lowering costs by 50% or more. 47% The arrival of autonomous, self-healing computing technologies will reduce IT operations staff by at least 25%. 39% The goal of a single view of every customer will have been reached by at least 75% of U.S. corporations. 28%

55 The management of information technology in the corporation is 2009 MANAGEMENT due for a shake-up. Keeping in step with the technological changes on the way, IT s role in the corporation is both widening and becoming more diffuse, in the view of a majority of respondents. Clearly, technology will not become any less important to every corporation s strategic mission, but defining and carrying out the role will be inexorably merged with the business constituents from whom IT has so long been separated. More and more of IT s commodity tasks will be outsourced, and application management and business process change will devolve into the business units. That leaves the highest levels of corporate strategy, which, in keeping with IT s growing importance, will be monitored much more closely by the board of directors. Yet pinning a clear business value on IT will remain elusive. And despite the changes on the horizon for corporate IT, there s one thing CIOs are sure about: The CIO is here to stay. CIOINSIGHT RESEARCH Technologies promoting collaborative work will increase productivity at your company by more than 10%. 77% Spending on IT outsourcing by U.S. companies will double or more. 72% Ongoing vendor consolidation will result in at least 50% fewer IT vendors in most product categories. 69% Service-oriented software, allowing business users to customize their own applications, will become standard throughout U.S. corporations. 65% The boards of directors at more than 50% of U.S. corporations will include an information technology committee. 65% IT s role in helping develop corporate strategy will be absorbed into individual business units at more than 50% of U.S. corporations. 60% The ongoing standardization of technology platforms, applications and middleware will lower IT costs by 33%. 55% The number of IT employees at my company who are female will increase by 25% or more. 53% Return on IT assets will double through the proliferation of shared IT services in U.S. corporations. 48% Companies will develop a standard, broadly accepted way to measure the value of IT, including such intangibles as intellectual capital. 44% The SEC will require all public companies to file complete financial data on a weekly basis. 23% Your company will no longer employ a CIO. 18%

56 Technology will do little to offset increasing business and 2009 RISK MANAGEMENT security risks. CIOs believe they re up against a future of considerable risk, and their sense of their ability to combat it appears limited. The majority of respondents are anticipating further terrorist attacks on American soil, and a sharp rise in the number and significance of security breaches in the form of both viruses and malicious efforts to breach network firewalls at U.S. corporations. Meanwhile, legislated, non-technological efforts to protect personal privacy, while on the increase, will do little to slow the increase of identity theft, and corporations will remain vulnerable to their own efforts to profit from the personal data they collect. Nor will technology come to the rescue of the entertainment business, which will remain vulnerable to piracy unless it develops successful new business models for distributing its wares. Corporate e-mail will continue to be plagued by spam. % Digital signatures will be considered just as legally valid as written signatures are now. 88% A faster, more secure Internet will be widely available to U.S. corporations. 77% At least one major U.S. company will go out of business due to a scandal involving customer or patient privacy. 75% The number of virus and worm attacks that inflict significant damage on U.S. corporations will quadruple. 72% The incidence of identity theft resulting in substantial financial losses will increase by a factor of 10. 68% The U.S. will have passed privacy laws closely resembling the stringent laws currently in effect in the European Union. 66% More than 75% of U.S. corporations will have established a C-level position for financial and IT risk management. 66% A major security breach will affect 50% or more of all Internet-connected corporate servers. 59% Another terrorist attack on U.S. soil on the scale of the World Trade Center disaster will have occurred. 59% More than 50% of the U.S. population will have submitted to fingerprinting, retinal scans, or some other biometric identification procedure. 44% Hollywood and the music industry will develop technologies that effectively eliminate piracy of movies and music in the U.S. 43%

58 The more things change, the more they stay the same. Despite the 2009 THE ECONOMY significant changes on the way in management, technology and risk management, respondents aren t expecting a great deal of change in the overall environment in which they do business. It s likely, they say, that inflation will remain low, that continued productivity increases will not have a serious adverse effect on unemployment, and that while competition will remain fierce, corporate profits will not weaken as a result. And while they expect strong growth in developing economies, they re unconvinced that globalization will affect their own sources of revenue. It s a conservative scenario is it an inevitable response to all the uncertainty in other areas? And like any vision of the future, it s risky if you re planning on it. Can we really expect so little change in the business environment? Growth in spending on healthcare in the U.S. will continue to outpace inflation. 6 The trend toward deregulation of industry sectors in the U.S. will continue. 81% By 2008, U.S. economic growth will exceed 4% annually for at least four consecutive quarters, compared with 2002 s 2.4%. 67% More than 95% of U.S. households with computers will possess broadband connections to the Internet. 64% China s GDP, about $5.7 trillion in 2002, will exceed that of the U.S. (about $10 trillion in 2002). 60% The NASDAQ Composite Index will close above 5000. 54% The average rate for a mortgage loan will reach 10% or more. 47% Increased competition among U.S. companies will erode average profit margins by 50%. 45% Amazon.com will still not have been profitable on a net earnings basis for four consecutive quarters. 43% The price of gasoline in the U.S. will rise to $4 a gallon or more. 40% The share of your company s revenues that are generated outside the U.S. will increase by a third or more. 38% Continued increases in productivity will drive the U.S. unemployment rate above 10%. 34%