Gartner on Emergency IT Cost Cutting

I had a heads up this morning via Shane Schick’s Twitter stream that Gartner was holding a webinar on emergency cost cutting in IT, featuring Kurt Potter, and 20 minutes later I was there.

Gartner’s been talking with a lot of their customers about the impact of the recession, and although most are not in completely dire straits, they are seeing some who are having to deploy emergency measures, and there’s lessons to be learned from the squeezing that is being done.

There are factors in any organization that make it difficult to cut costs:

  • Too much customization and complexity: I see this a lot, and it’s a huge money drain to maintain overly complex and over-engineered systems. If you go for a fully customized system, it’s going to cost about 10x as much to maintain it over the long term as it was to build it in the first place, since you’re rewriting code for every minor change.
  • Costs weren’t aligned to business metrics, so money has been spent on something that may not have had an economic benefit.
  • Difficult to prioritize IT investments properly, so that companies don’t know what to cut first.
  • No institutional knowledge of what happened in the last recession.

An economic recession creates some particular leadership challenges, but also opportunities: it’s a chance to make some difficult changes and cuts that would never be allowed in fatter times for political reasons. In particular, when a project (like a BPM implementation) calculates its ROI through a reduction in headcount, those staff are rarely actually cut: they’re redeployed to other areas, or the group affected just runs a bit heavier that it needs to. In today’s climate, you should be going back to see if you can harvest those promised productivity improvements now.

It’s difficult for companies to cut costs if they’ve never had to do it before: it’s not in their culture, and the executives may have made rash statements about things that they will “never” do, such as laying off staff or cutting out perqs. Surviving in this environment, however, requires some change in culture, and that includes changes to IT culture. Has your IT organization said that they would never use open source, or outsource storage, or consider SaaS? If you’re in a pinch, then you can be sure that they’re looking at it now, at least for some functions; if they’re not even considering options like this, then they’re not that serious about cutting costs.

Potter came out with one pretty obvious slide that showed that companies that have spent proportionately more on IT in the past five years have more room to cut costs. Well, duh. It’s hardly a big surprise that those that have spent like drunken sailors on leave now have a lot more that can be cut, like selling off that corporate jet (Citigroup, are you listening?). For some, however, cutting costs further gets a bit closer to the bone, requiring business restructuring, process improvement and innovation: this is why BPM projects (but not necessarily additional license acquisitions) can get some additional interest at times like this.

There are some cost-cutting measures that Potter suggested that I really don’t agree with, since I think that they’re penny-wise and pound-foolish. First of all, cancelling all IT training. Although this may result in a higher level of voluntary turnover (as much as 40-60%), thereby reducing headcount without having to do pesky, lawsuit-provoking layoffs, it runs the risk of having the people who understand the current systems bail out, leaving behind no one who is trained to maintain them. Personally, I wouldn’t want an untrained DBA playing around with my production database: the combined cost of a longer time to get things done plus the time required for someone who knows what they’re doing to fix it later is likely to be much higher than any training course.

Secondly, he suggests that IT abandon SLA guarantees to the business, become reactive rather than proactive, and train IT staff to say “no” to the business unless the funding for that level of service is guaranteed. In my opinion, this would be a huge hint to the business to start looking at outsourcing some of that IT, particularly through the adoption of SaaS applications. Lots of money being spent on running your in-house Exchange servers, and now IT wants to cut your SLA? A recent Forrester report shows that cloud-based email is a no-brainer over hosting your own email servers up to 15,000 users, and the price leader (Google Apps, which allows you to host your domain email on Google) is more cost-effective far beyond that size, while providing additional tools such as collaboration sites as part of the same package. More complex applications, such as customer relationship management and even business process management, have a number of successful cloud vendors. My advice to businesses: if IT cuts your SLAs, start looking for alternatives to your current IT offerings.

Potter suggested some good areas for savings, too: lengthen replacement cycles on hardware and software, cancel maintenance and warranty contracts, consolidate data centers and storage, and just buy less stuff. There’s risks to all this austerity, too. In addition to more voluntary turnover (which may or may not be desired), your vendors will smell the blood in the water and start tightening up on credit.

Of the webinar participants, over 80% said that it would be at least Q1 2010 before they return to a growth strategy rather than cost-cutting mode, so this is here to stay for a while.

Gartner has more than 300 pieces of published research on cost optimization, although some of the ones quoted (“Communicating the Value of EA to CFOs”) are arguably not really on topic. There’s a whole section on the Gartner site on IT and the economy that includes previously recorded podcasts, upcoming webinars and links to related research.

ChangeCamp

There are few things that will get me out of bed early on a wintry Saturday morning. ChangeCamp is one of them: an unconference dedicated to re-imaging (Canadian) government and citizenship in the age of participation. My friend Mark, who is passionate about government, change and unconferences, is one of the ringleaders here, but there’s an amazing group of people who made all this come together in less than a month. I’ll be doing some wiki gardening, Twittering and live blogging about ChangeCamp today.

Why do we need an unconference about government? Because the usual methods of providing input to government aren’t, in general, working; unconferences shake things up and tend to get the communications lines unclogged. TransitCamp was a start to this, getting citizens involved in generating ideas for public transit and resulting in the ongoing Metronauts community, but also engaging with the TTC and causing some real change. HoHoTO showed how quickly people can come together to become something that’s bigger than themselves, raising over $25k for the Daily Bread Food Bank at a 600-person holiday party that went from inception to reality in 13 days.

And here we are today, pretty near a full house at the MaRS Centre to address the long tail of government.

There’s a couple of modifications to the usual open space format of unconferences: we’re being organized into groups up front to exchange some ideas and define problems, and there’s an opportunity for people who have a specific idea that they want to dive into and start developing something in ChangeLab.

IBM “Resource Action” in progress this week

There have been rumors for a few weeks about impending job cuts at IBM, and they’re coming down this week. I’ve heard from people I know within IBM (mostly the old FileNet organization, where I worked in 2000-01) that it’s hitting the software group pretty hard. If you check the Job Cut Status page on a site created by the Communications Workers of America (a part of AFL-CIO that appears to either represent or be trying to unionize IBMers in the US), you’ll see comments like this:

IBM ECM Labs – Costa Mesa, CA – at least 5 that I know of, at all levels. Rumor has it most if not all of the developers will be replaced by India.

Austin Texas, SWG, 28 people out of 45 cut. young and old, top and bottom performers. Never show me great 4Q numbers again. This company doesn’t care about anything anymore.

Got the call today – Mngr said Sales Ops lost 40% of total group.

By my counts about 800 software engineers are selected in the action. 330 Staff, 280 Advisory, 120 senior, and others.

The cuts in SWG are: 25% in Development and 35% in Marketing/ other.

And, most curiously:

my ibm office site is now blocking the alliance web page.

Caveat: most of these comments are made anonymously, so should be considered to be unsubstantiated rumors.

There are two weird things about this. First of all, IBM is completely silent about it so far, although they will have to issue some sort of press release soon as the news is leaking out all over the place. Second, they just announced healthy profits in the software group, which seems to be the group taking the biggest hit.

Microsoft is also starting the cuts: they announced today that they will be laying off up to 5,000 people in the next 18 months.

Some memes never die

Barton George tagged me on the latest internet meme to tell you seven things about me. Given that less than two years ago, I played along with the “five things you don’t know about me” meme, I figure that I only owe you two more:

  1. I prefer to go barefoot, or at least sock-less, whenever possible. Given that I’ve lived most of my life in Toronto, I can only imagine that this is a flat-out subconscious rejection of winter.
  2. I tried to semi-retire at the age of 41, but it didn’t take. After three months of walkabout in Australia, I couldn’t resist heading home and starting up another business.

I’m supposed to inflict this on tag seven other people with this meme, but I just can’t bring myself to do that. I also don’t forward chain letters, regardless of the dire warnings therein.

International BPM conference 2009

Earlier this year, I went to Milan for the International BPM conference for a look at the academic side of BPM conferences, and was completely won over: in my coverage, I highly recommended that BPM vendors send someone from their architecture/design team to listen in on the BPM research that is being done in the private and university labs, or even submit a paper on their own innovations.

Next year, the conference will be held in Ulm, Germany from September 7th-10th, and Michael zur Muehlen lists all the details. If you’re interested in submitting a paper, the deadline is March 15th.

Bad analyst blogging technique

In a post about collaboration, of all things, a Gartner analyst shows how not to interact with his blog’s readers. If you’re a frequent reader of Jim Sinur’s blog, you know that in most posts he invites conversation with open-ended questions at the end, e.g., “What is your experience with this issue”, presumably to feed ideas into his research on the topic at hand.

In this post, he refers to the increasing number of BPM vendors that are including collaboration features, and his first commenter asks him to list some of those vendors. Jim’s response? “We will be writing research notes on this topic going forward that will identify those vendors that have unique solutions.” In other words, “I’m happy to collect your ideas for free as part of my research, but you have to pay for the results.”

Grown Up Digital

Don Tapscott is definitely enamored of his kids and their generation: in 1999’s Growing Up Digital: The Rise of the Net Generation, he predicted how their generation would reshape society, and in his latest book, Grown Up Digital: How the Net Generation is Changing Your World, he practically deifies them.

I agree with a lot of what he’s saying, such as the ability of the 11-30 age group — the “Net Generation” — to easily consume information from multiple channels, but I think that he’s ignoring some of the research in this area in order to make his point. He quotes a study from the Oxford Future of the Mind Institute that shows that although Net Geners are better at intensive problem-solving than those 10 years their elders, interruptions such as those from text messages and IM makes the differences in ability disappear. Tapscott pooh-poohs this using the rather unscientific counterpoint of his daughter working on an assignment at the family kitchen table with people and dogs around, multiple windows and chat sessions open, and her iPod playing music. He posits that Net Geners appear to have ADD in class (apparently now a common complaint amongst teachers) because they’re bored. I’m just not sure that I buy that; there’s other factors at work here, many of which have little to do with age, and more with work styles.

From a business standpoint, the real value of Grown Up Digital is the chapter on the Net Generation in the workforce, covering how the expectations of those entering the workforce have changed, and how organizations need to change (in some cases) to accommodate this.

One of the key points is that they expect to be able to work when and where they want, and be quickly rewarded through promotion for their achievements. A year ago, when companies were wailing about how the boomers were all retiring and they didn’t have enough new recruits to replace them, this sense of entitlement may have been a realistic expectation for some people in some job markets; in today’s economy, it seems almost laughable. Reuters recently reported that young graduates are having a hard time finding work in Silicon Valley, and that just any college degree isn’t enough to land them their dream job with a gazillion stock options. Not surprisingly, engineering grads aren’t having that problem, neither are people with some amount of practical experience. Earlier this week, Tom Davenport wrote about whether millennials (another name for the Net Generation) can really change the workplace, echoing similar sentiments. Ron Alsop, in his book The Trophy Kids Grow Up: How the Millennial Generation is Shaking Up the Workplace, quotes a teenage blogger: “We don’t want to work more than 40 hours a week, and we want to wear clothes that are comfortable. We want to be able to spice up the dull workday by listening to our iPods. If corporate America doesn’t like that, too bad.” If the economy stays where it is for the next few years, it might be too bad for the Net Generation.

At some point, however, those 200.5k’s are going to turn back into 401k’s, and the boomers are going to retire, at which time the battle for talent will resume. Banning Facebook — a key networking tool for Net Geners — will no longer be acceptable practice, and companies will have to become more open to the collaborative tools and attitudes that the new workers bring. This isn’t just because that’s the only way to gain those workers, it’s because there’s some valid ideas in there for improving the enterprise by breaking the bonds with traditions of time, place and corporate boundaries. There’s also the issue of customization of tools: the Net Generation expect to be able to configure their working environment the way that they want in order to most effectively complete the tasks at hand, not be forced into someone else’s idea of what might make them productive. There is a lot to be learned from this concept in how we build the user experience for enterprise software in general.

I enjoyed Grown Up Digital, but I took it with a large grain of salt: in part, because economic times have changed dramatically in the few short months between writing and publication, and in part because I think that the average Net Gener may not be as wired as Tapscott’s kids.