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Hello again Inner Circle readers,
In last month's column, I emphasized the importance of getting out of the office and into the field to talk with customers, partners and stakeholders. I've been doing a fair amount of that myself in recent months and thought it might be interesting to share some highlights of what I'm hearing. I'd be interested to know whether these notions resonate with you — and what you're hearing from your own stakeholders.
For me, these visits have multiple objectives. Part of the goal is to educate others about what Sun is doing, but the more interesting part is to talk with my peers and customers to learn about their challenges and how they're dealing with them. I never fail to learn things that I can put to use back at Sun.
I typically start these meetings by discussing the challenges we have within IT at Sun. After testing certain initiatives and challenges hundreds of times around the world, I know that every CIO is facing the same issues. Priorities might change, but the challenges are pretty common. This exchange builds an ongoing dialogue at the CIO level that opens the doors of engagement and communication, giving these CIOs a communication channel beyond sales. It's always very educational, and many of these relationships and conversations go on for months or years.
CIOs grapple with how to meet budget challenges
Certain trends emerge in these conversations. Without a doubt, the key trend today is the budget challenge facing CIOs with the recession. People are struggling with how to reduce IT budgets and the challenges seem even more difficult than they were eight years ago when the dot com bubble imploded. Back then, people looked to outsourcing to cut costs. Today, it's a little less obvious. People aren't as eager to outsource to India where prices have risen and corruption along the lines of Satyam have occurred. People instead are looking to diversify their sourcing strategy — spreading work to other regions — and even pulling some work back on-shore where it has a high impact to customer satisfaction.
One company I spoke with outsourced a sizeable portion of its work to a South American location thinking it would save significantly over sending it to India. And it did. It saved 25 % in salary costs. But what they failed to verify before sending their business down there, was that South America suffers from the lack of basic infrastructure. So they sent their IT work down there, but the call center would go off the air because the network wasn't available.
You have to think carefully and consider a multi-sourcing strategy — and perhaps a multi-geography strategy — to protect against all the political turmoil in the world.
So you have to think carefully and consider a multi-sourcing strategy — and perhaps a multi-geography strategy — to protect against all the political turmoil in the world. You have to weigh the balance of the maturity of a market like India with the cost savings in a market like South America or Eastern Europe. This time around, solving the budget challenge is more complicated. I expect people will combine headcount reductions with outsourcing and project deferrals.
New round of compliance issues
Another trend, following the Wall Street demise, is concern that CIOs will face yet another round of compliance issues along the lines of Sarbanes-Oxley. Many CIOs are concerned they'll spend increasing amounts of time and energy doing compliance work and I believe these concerns are valid. In the U.S. we tend to see more regulations, and that, coupled with the problems on Wall Street, make this look pretty likely. Again, with the collapse of Satyam in India, I can't help but think regulation may hit outside the U.S. as well. At the end of the day, whether it be financial scrutiny or something else, it all ends up back in IT because we've got the keys to the kingdom.
Keep employee communiations flowing
And a final trend, which I think is a focus of smart CIOs, is a concentration on people. In almost every scenario, unless you're going out of business, the truth is that you'll reduce costs through a combination of the things I described. But you're still going to have a sizeable dependency on company-badged employees. With all the uncertainties the recession is causing people, it's critical to hold communications and all-hands meetings as well as face-to-face meetings with folks in every time zone so that they can see you, talk to you, and get some reassurance. I know budgets are tight, travel is expensive, and you can use high-quality video conferencing. But nothing replaces face-to-face discussions with employees — and nowadays those are more important than ever.
The upside is that the recovery will be global as well. It might start in the
U.S., it might start in Europe, but it will spread across the world.
Misunderstanding about what IT does continues
After meeting literally hundreds of customers around the world, it's clear to me — most CIOs have the same complaint which is “my boss doesn't understand what I do.” Even in the most sophisticated, largest corporations in the world, there is a basic lack of understanding of what IT spends its time doing. So, many CIOs feel frustrated, not because they're pulled in multiple directions; that's part of the job. But they're accused of not doing enough to drive new business, when what is most important is that they keep the lights on.
What's clear with this recession is that it is truly global. It may have started in the U.S., but the interconnectedness of all our economies means that anything starting in the U.S. trickles to Asia, India, and Europe. It's no longer possible to shelter ourselves from the effects of something across the world. The upside is that the recovery will be global as well. It might start in the U.S., it might start in Europe, but it will spread across the world. Let's all hope it comes sooner rather than later.
Until next time,
Bob Worrall
CIO, Sun Microsystems
cio@sun.com
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