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CIO White Paper




From fear to value: CIO strategies for propelling
business through the economic crisis




March 2009
March 2009


From fear to value: CIO strategies for
propelling business through the
economic crisis
  As executives working at the nexus of business and technology, CIOs are uniquely quali-
  fied to help their organizations leverage available technology to meet challenges pre-
  sented by the current economic crisis and to exploit new opportunities that will arise. For
  CIOs, the imperative is to address issues from two perspectives—the outward view of
  employing IT to capitalize on business opportunities and support business change, and
  the inward view of their own IT operations.


IBM predicts that, during the current economic crisis, the         industries. Finally, CIOs can help their companies act with
business world can expect major disruptive and transfor-           speed. Companies must act quickly to implement and
mative change. CIOs can help their companies survive the           manage change, reduce risk and take advantage of gov-
crisis and position their organizations for future growth.         ernment economic-stimulus investments.

From chaos, the CIO drives opportunity                             The CIO’s perspective: using IT to propel business
During this crisis, significant opportunities will arise for cor-   transformation

porations that move swiftly to disrupt the competition,            CEOs want IT to continue providing quality, reliable IT serv-

restructure operations and position themselves for future          ices. However, CEOs also want CIOs to lead innovation

gain. IBM believes that, in order to excel, companies must         and promote change by employing technology to drive the

focus on the value in their operations, exploit opportunities      kinds of business transformation that supports corporate

and act quickly to seize competitive advantage.                    objectives, enables new business models and exploits new
                                                                   opportunities.

Reducing costs and increasing returns are key to improv-
                                                                   Focusing on value within the IT organization
ing value. To focus on cost reduction, CIOs can help their
                                                                   As the recession deepens, CIOs are beginning to rethink
companies improve internal efficiencies, deploy resources
                                                                   IT, determining how to reengineer their operations to con-
for the highest return, bolster core competencies, redefine
                                                                   centrate on the same business imperatives as the C-suite
relationships and get more from existing investments. To
increase returns, CIOs can aid their organizations in gain-
ing share, building differentiating capabilities and reshaping
and other lines of business: the need to focus on value,         Leading through example
exploit new opportunities and act with speed. The actions        IBM’s in-depth experience in IT transformation has been
spurred by these considerations help all parts of the busi-      gleaned from our own metamorphosis. Through massive
ness, including IT, do more with less, focus on the core         consolidation efforts, we have merged 155 data centers
capabilities that provide competitive differentiation and        down to 5 and more than 16,000 applications into less
realign relationships for maximum value. Increasingly, CIOs      than 4,500. Leveraging this experience with your own
are being asked to take IT dollars and redirect them to          expertise and vision can help your company survive—and
activities that will lower operational costs throughout the      perhaps even thrive—in this time of financial crisis.
business, improving margins even while revenues fall.
More and more CIOs are beginning to realize this same            For more information

formula—integrated automation to improve efficiency—             To learn how IBM is working with organizations around the

works equally well within their own organizations.               world to help them prosper during the current economic
                                                                 crisis, please contact your IBM marketing representative or

CIOs can also take immediate steps to increase the utiliza-      IBM Business Partner.

tion and performance of existing IT investments. Server
and storage consolidation and desktop virtualization are         For IBM insights and perspectives on the issues that mat-

critical steps toward regaining control of spiraling IT costs:   ter most to the chief information officer, visit the following

they can help significantly lower the expenses associated         Web site:

with power and cooling. Taking advantage of network con-
vergence can help CIOs do more with less. The result of          ibm.com/cio

these and other strategies can be increased resource uti-
lization and a more resilient IT environment. This in turn
can free up resources to support business application
expansion and improve ROI.
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Introduction
            Contents
                                      Pundits and analysts say that the current economic crisis is likely to last longer
4    Introduction                     than past recessions. Business is no stranger to slowdowns and downturns. In
5    The CIO as change catalyst       the last 30 years, the United States alone has experienced three recessions
6    From chaos, the CIO drives
                                      (1981, 1990 and 2001). However, the world seems to agree that this recession is
     opportunity
                                      different from those of recent memory.
10   The CIO’s perspective: using
     IT to propel business
     transformation                   According to the Foote Research Group, the world is facing a “perfect storm” of
14   Focusing on value within the     economic calamities.1 Home values are depreciating and credit is drying up.
     IT organization                  Stock markets are diving while the unemployment rate is skyrocketing. The
19   Leading through example
                                      demand for consumer goods is shrinking as price sensitivity takes hold. Banks
19   For more information
                                      across the globe are failing after writing off, as of December 2008, $733 billion in
                                      loans. All this takes its toll on business, disrupting relationships with partners, with
                                      customers and throughout the supply chain.


                                      No industry seems to be exempt from the turmoil. And, in case anyone doubted
                                      the globalization of economies, no geographic region has escaped unscathed.
                                      While the slowdown in emerging economies (China and India) has thus far been
                                      less severe,2 the economies of Eastern Europe, Western Europe, the United
                                      States, Asia-Pacific, the Middle East and Latin America have all contracted.


                                      Is there a single overarching solution? No one seems to know. Banks are so
                                      reluctant to lend that traditional macroeconomic tools, such as interest rate cuts,
                                      will likely be insufficient to stimulate lending. A reality of the global economy is
                                      also coming to light: with more than 60 percent of the world output now traded
                                      internationally, we rise, and fall, as one. Just look at world stock markets, which
                                      seemed to crash in unison. While economic stimulus plans are being deployed by
                                      the governments of the United States, Japan, China and a number of European
                                      countries, their impact is as yet unknown.




                                                          4
From fear to value: CIO strategies for propelling business through the economic crisis




                                      No one is suggesting that the global economy is improving. All indications are
  For CIOs, the imperative is to
                                      that this crisis will likely be long and severe. Restoring confidence in the eco-
    address the economic crisis
                                      nomic system may prove significantly more difficult than in past downturns.
from two perspectives—that of
  the company as a whole, and         IBM predicts that, as a result of this recession, the business world can expect

that of their own IT operations.      disruptive and transformative change. Industries will restructure, with firms failing
                                      or being sold off virtually overnight. New regulatory environments will arise. Your
                                      company may already be cutting staff, outsourcing departments and delaying or
                                      canceling non-revenue-generating projects. Your IT budget is probably flat. It may
                                      even be shrinking.


                                      The CIO as change catalyst
                                      This all adds up to an interesting paradox: it’s a great time to be a CIO.


                                      As the executive working at the nexus of business and technology, CIOs are
                                      uniquely qualified to help their companies leverage available tools to meet current
                                      economic challenges and to exploit the opportunities that will arise during this
                                      crisis—and opportunity will arise for those businesses bold enough to disrupt
                                      competition and restructure their industries. CIOs can help transform their com-
                                      panies by better capitalizing on the value of information assets. They can help
                                      manage and mitigate business risk through better, more timely information. They
                                      can improve service management. They can lower enterprisewide operational
                                      costs—including IT’s—through automation.


                                      This paper will examine the opportunities to leverage IT for business gain during
                                      this crisis, describe how CIOs can help propel business advantage, and appraise
                                      the near-future state of IT.




                                                           5
From fear to value: CIO strategies for propelling business through the economic crisis




                                      From chaos, the CIO drives opportunity
                                      During this long and severe recession, significant opportunities will arise for those
                                      corporations that move swiftly and decisively to disrupt the competition, restruc-
                                      ture operations and position themselves for future gain. While no one can predict
                                      when economic recovery will occur, one thing is certain: it will occur. IBM believes
                                      that, in order to excel, companies must focus on the value in their operations,
                                      exploit opportunities and act quickly to seize advantage. For CIOs, the imperative
                                      is to address these issues from two perspectives—the outward view of employing
                                      IT to enable opportunities and business change, and the inward view of their own
                                      IT operations.


                                      Focusing on value
                                      Focusing on value entails cutting discretionary spending, deploying resources for
                                      the highest return, bolstering core competencies and redefining relationships.
                                      Cash flow is central to survival and strategic flexibility, which means businesses
                                      and business units need to do more with less. Corporations must conserve capi-
                                      tal and cut spending where it produces minimal return. Funds must then be rede-
                                      ployed to activities, products and markets that generate growth, improve margins
                                      and truly differentiate one business from another.


                                      In addition, businesses must determine how to get more from existing invest-
                                      ments. While improving time-to-value is critical, companies must also realize that
                                      return for as long as possible. (The longer companies can derive value from their
                                      investments, the better.) Finding new ways to use existing equipment and other
                                      tangible assets is well worth the effort—especially when the budget for new capi-
                                      tal expenditures has disappeared. Cutting energy waste and improving resource
                                      efficiency rank as important corporate social responsibilities. They also help the
                                      organization save money.




                                                         6
From fear to value: CIO strategies for propelling business through the economic crisis




                                      At no time has focusing on core competencies been more important than it is
  IT has a long history of event
                                      today. Across business units, product lines, portfolios and geographies, there is
  monitoring and management,
                                      no latitude for poor performance or effort wasted on nondifferentiating activities.
   of turning real-time data into
   actionable information. CIOs       Companies need to enforce and enhance their differentiators on the one hand,

 need to apply this skill to other    close down or divest underperformers on the other. Establishing value nets with
       parts of their businesses,     companies in which core competencies are not your own becomes even more
  thereby improving the quality       important in difficult economies. A key strategy that the CIO can drive is to out-
     and timeliness of business       source noncore activities—from human resources and back-office operations to
                      information.    manufacturing and fulfillment—or consolidate them internally as shared services
                                      to maximize return.


                                      Relationships are at the heart of any business. But to succeed in this economy,
                                      businesses will have to reexamine relationships with suppliers, partners and cus-
                                      tomers. They must weed out weak suppliers and unprofitable customers and
                                      renegotiate remaining relationships to align with the realities of the current econ-
                                      omy. They also must bolster business partnerships to mitigate risk and to man-
                                      age volatility in both supply and demand.


                                      Exploiting opportunities
                                      The severity of this economic downturn will create opportunities for companies
                                      to gain share, build capabilities and reshape industries to their advantage.
                                      Businesses can capture share by disrupting weak competition. Reaching out to
                                      and understanding the needs of customers who may consider shifting from com-
                                      petitors will be an important element of this strategy. In addition, organizations
                                      should consider retooling their portfolios to serve frugal customers and offering
                                      flexible pricing to defend or gain share in their core businesses. And companies
                                      that operate in mature markets can grow even in down times by focusing efforts
                                      on growth markets that offer more expansion opportunities.




                                                         7
From fear to value: CIO strategies for propelling business through the economic crisis




                                      This crisis, like all economic crises, will one day end. Savvy companies under-
                                      stand this. To prepare for brighter days, they concentrate on building future capa-
                                      bilities. This entails keeping and motivating top performers, recruiting new talent
                                      (now available at a lower price than during the boom years) and leveraging the
                                      global workforce. Recent years have shown how long it takes to build the struc-
                                      tures, capabilities, processes and systems to seize growth market opportunities.
                                      Now is the time to invest for the mid-term.


                                      Companies that wish to survive must also be willing to change the industries in
                                      which they operate by pursuing innovative, new business models. At the same
                                      time, they must establish strategic alliances that position themselves to win in a
                                      globally integrated economy.


                                      All of these activities can benefit from innovative uses of technology. Increased
                                      use of collaboration tools can improve communication with customers and sup-
                                      pliers. Technology can be leveraged to provide better, and more timely informa-
                                      tion to help companies act with speed. Better information can also help mitigate
                                      many business risks.


                                      Acting with speed
                                      The unpredictability of this environment favors the fast and the agile. Strategies
                                      will differ, but in this economic climate, companies must be willing to act quickly
                                      to implement and manage change, curtail risk and position themselves to take
                                      advantage of government stimulus packages.




                                                         8
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Smart companies work to determine how to manage change rather than
CIOs must adapt the strategies
                                      simply react to it. They identify and empower high-ranking executives to act as
   used by their C-suite peers:
                                      change leaders. These leaders set clear goals and measure corporate actions in
 manage change, manage risk
               and act quickly.       terms of those goals. With accurate information needed for decisive action, they
                                      establish the company’s vision for its future and align around an agreed-upon
                                      course of action.


                                      Bold movements like these entail risk—but risk can be managed. Companies
                                      must: apply analytics to improve decision making and to create greater predictive
                                      capability; establish risk management governance plans and processes; and inte-
                                      grate and rationalize business information to make the most sound business
                                      decisions possible.


                                      Finally, in countries where stimulus packages are being deployed, business lead-
                                      ers must act quickly to take advantage of these investments. Business leaders
                                      must be able to quickly grasp the mechanics of these funding programs.


                                      All of these strategies share a common element—they require timely and accu-
                                      rate information. Understanding what needs to be monitored, and how to monitor
                                      it, is a vital part of improving the business decision making process. IT has a
                                      long history of event monitoring and management, of turning real-time data into
                                      actionable information. CIOs need to apply this skill to other parts of their busi-
                                      nesses, thereby improving the quality and timeliness of business information.


                                      These aren’t activities for other business executives. These are activities for all
                                      business executives, including CIOs.




                                                          9
From fear to value: CIO strategies for propelling business through the economic crisis




                                      The CIO’s perspective: using IT to propel business
                                      transformation
                                      Today, CEOs, CFOs and CIOs alike see the roles of IT as evolving. As Figure 1
                                      shows, even in these pressing economic times, the cost of IT is no longer the
                                      leading factor by which IT is judged. First and foremost, a recent IBM study of
                                      large companies located around the world found that CEOs expect IT to continue
                                      providing quality, reliable IT services. Consistently meeting existing service level
                                      agreements provides CIOs the credibility to participate in more innovative activi-
                                      ties. When that requirement is met, CEOs are increasingly looking to CIOs to be
                                      innovation leaders and change agents by employing IT to drive the kinds of busi-
                                      ness transformations that support corporate objectives and make new business
                                      models and opportunities possible.3




                                      Figure 1. Despite economic pressures, large enterprises surveyed by IBM are unlikely to perceive the
                                      leading role of IT as providing technological services at the lowest possible price.




                                                            10
From fear to value: CIO strategies for propelling business through the economic crisis




                                      This means that as business executives with a deep understanding of technol-
     Applying experience gained
                                      ogy’s transformative powers, CIOs are uniquely qualified to help their businesses
 from managing IT outsourcing
                                      focus on value, exploit opportunities and act with speed. For example, because
      contracts, CIOs can take a
    leadership role in identifying    of their experience with IT outsourcing, CIOs can help companies explore other

 and executing opportunities to       business process outsourcing for noncore functions as a way to reduce business
    reduce operating costs with       operations costs. These solutions combine processes, people and technology in
 business process outsourcing.        outsourced delivery models for activities such as customer relationship manage-
                                      ment, finance and administration, human resources, procurement and supply
                                      chain management. The most effective solutions will combine process transfor-
                                      mation with lower-cost labor models to deliver the greatest business value. CIOs
                                      should stand at the center of these changes, helping to link these value nets
                                      together with technology that provides accurate, timely information.


                                      Enabling collaboration and boosting productivity
                                      CIOs are also instrumental in helping tomorrow’s leading businesses create more
                                      adaptable and responsive organizations. By supporting social networks and real-
                                      time Web 2.0 collaboration, they are enabling closer ties with partners and cus-
                                      tomers and supporting today’s highly dispersed workforce. This workforce needs
                                      instant, anytime access to people and information, business-grade social soft-
                                      ware and better team-based decision making.


                                      What’s more, collaboration and mobility technologies boost employee productivity
                                      and make it possible for companies to reduce the costs of office space and other
                                      facilities’ overhead. New applications are being developed to accommodate the
                                      corporate need to manage mobile and remote workforces and to drive com-
                                      merce, aiding in global integration. Mobility initiatives can also help businesses
                                      rapidly modify processes to capture opportunities. In doing so, they can help your
                                      company focus on value, exploit opportunities and act with speed.




                                                        11
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Driving the information agenda
                                      CIOs can help other business leaders focus on value by driving an enterprise
                                      information agenda that clearly defines and prioritizes information objectives
                                      based upon business objectives and strategy. And they can develop innovative
                                      approaches to creating and deploying an agile enterprise information infrastruc-
                                      ture that supports strategy and leverages existing assets. The objective is to
                                      provide the business with access to the trusted information that is needed to
                                      evaluate performance, make informed decisions and respond quickly to new
                                      requirements. Savvy CIOs will also employ advanced business service and portfo-
                                      lio management strategies to prioritize IT investments in order to create a catalog
                                      of IT-enabled business services that support the most critical business needs.


                                      For companies pursuing a merger and acquisition strategy, the CIO will be a criti-
                                      cal element in helping to exploit opportunities by speeding the intensely compli-
                                      cated process of fully integrating an acquired company’s IT infrastructure into the
                                      enterprise. This can be greatly facilitated by bringing to bear enterprise architec-
                                      ture standards along with tough decision making in order to rationalize people,
                                      processes and technology. It also requires innovative use of strategies such as
                                      service-oriented architecture (SOA) to quickly integrate systems and information.


                                      CIOs today must consider how to help reduce business risk while improving
                                      stakeholder access to information. Business resilience is the discipline that pro-
                                      vides an organization with the capability to ensure availability of information, serv-
                                      ice and support for its customers, employees and business partners not only
                                      during normal daily business operations but also during unexpected conditions.
                                      CIOs must also play a central role in addressing a variety of security issues that
                                      exacerbate business risk, including identity management, application security,
                                      wireless security and privacy. Internal as well as external security violations can
                                      disrupt the business, damage the brand or trigger regulatory audits.




                                                        12
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Creating a flexible architecture
                                      Finally, CIOs know that, in the current economic climate, they must act with
                                      speed. This requires a flexible, dynamic and scalable IT infrastructure, one
                                      that supports rapid business expansion or contraction. While standardization
                                      may appear to reduce flexibility since it provides fewer options, it actually
                                      increases agility by decreasing the time it takes to make IT platform decisions.
                                      Open standards help to increase interoperability while reducing the cost of propri-
                                      etary solutions.


                                      Done properly, server consolidation coupled with server and storage virtualization
                                      can bring value to companies and help them act with speed by providing faster
                                      and more dynamic provisioning of capabilities. Server consolidation and virtualiza-
                                      tion can also increase utilization rates, helping improve the return on investment
                                      of IT resources. Cloud computing, which extends existing virtualization capabili-
                                      ties, offers a potentially cost-efficient model for provisioning processes, applica-
                                      tions and services while allowing the IT organization to be more responsive to the
                                      needs of the business.


                                      As members of the business executive team, CIOs lead and manage change,
                                      manage risk and enable corporate transparency. They manage a vital component
                                      of the information-driven enterprises of the 21st century and can model the new
                                      competencies that are needed in all business units. They are learning how to
                                      communicate that IT is a valuable asset, not a cost center. They are drawing
                                      other members of the executive suite into the IT arena to show the business mer-
                                      its of each IT project—from driving revenues to managing risk. CIOs communi-
                                      cate the real business risks of deferring infrastructure investments and reducing
                                      service levels. And they are learning that there are immediate and concrete steps
                                      that they can take to help businesses survive the current economic crisis and
                                      position themselves for future growth.




                                                         13
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Focusing on value within the IT organization
                                      To this point, IT leaders have embraced a number of different strategies to help
                                      their companies cope with uncertain economic times. They have negotiated bet-
                                      ter prices from vendors. They have rearchitected IT systems to get more out of
                                      less. They have applied automation to boost the productivity of business opera-
                                      tions and their own IT staffs.


                                      But as the recession deepens around the globe, CIOs are beginning to rethink IT,
                                      determining how to reengineer their operations to focus on the same business
                                      imperatives as the C-suite and the other lines of business: the need to focus on
                                      value, exploit opportunities and act with speed. The actions spurred by these
                                      considerations help IT, like business as a whole, do more with less, focus on the
                                      core capabilities that provide competitive differentiation and realign relationships
                                      for maximum value. They look for partners, rather than vendors. They work to
                                      build future capabilities.


                                      It will come as no surprise that the current economic environment presents signifi-
                                      cant challenges to CIOs. Despite mounting pressure to cut costs, user expecta-
                                      tions of IT show no signs of abating. There’s much work to be done in IT and not
                                      always enough money or staff to do it. Like every other business function, IT will
                                      have to drive value by doing more with less.




                                                         14
From fear to value: CIO strategies for propelling business through the economic crisis




                                      According to the IBM Market Insights Service Management in an Uncertain
                                      Economy Study, only 5 percent of all large corporations expect to see a signifi-
                                      cant increase in IT budgets for 2009 (see Figure 2). CEOs’ and CFOs’ mission to
                                      reduce capital costs is often leading to IT project cancellation or deferment.
                                      Staffing cuts will be situational. Acquired or merged companies may see layoffs
                                      of up to 10 percent, while companies facing bankruptcy may release 20 to
                                      30 percent of their IT staffs.4 The more successful CIOs will be those
                                      whose portfolio management disciplines allow them to quickly re-allocate their
                                      resources to their most critical IT projects.




                                      Figure 2. About 86 percent of the large companies surveyed by IBM expect IT 2009 budgets to remain
                                      flat or change only slightly.




                                                           15
From fear to value: CIO strategies for propelling business through the economic crisis




                                      But the news isn’t all bad for IT. Companies that survived the economic turmoil of
                                      2001 already run much leaner IT operations, having spent the past eight years
                                      focusing on value by lowering costs and reducing waste. And many respondents
                                      to the Service Management study reported flat 2009 budgets, not drastically
                                      reduced budgets. What are CIOs doing with their money? Increasingly, they’re
                                      being asked to take IT dollars and redirect them to activities that will lower opera-
                                      tional costs throughout the business, improving margins even while revenues fall.


                                      More and more CIOs are beginning to realize the formula that has worked for
                                      years across other business units—integrated automation to improve efficiency—
                                      works equally well within their own organizations. Traditionally, automation within
                                      the IT organization has been implemented with a disaggregated set of tools. By
                                      approaching automation of the IT organization with the same thought process
                                      applied to any other business unit, CIOs can realize the same kinds of returns.


                                      As experts in the art of the possible, CIOs can take immediate steps to increase
                                      the utilization and performance of existing IT investments—reducing operating
                                      and maintenance costs to free up the funds for new initiatives. Server consolida-
                                      tion should be an important part of any infrastructure optimization plan.
                                      Consolidation should not be viewed as a project, but as an important part of the
                                      capacity planning process. Inefficiency and waste exist in practically every IT envi-
                                      ronment. After years of growth, server rooms and data centers are bulging with
                                      underutilized equipment. The accumulation of equipment leaves companies
                                      strapped with high energy costs and escalating management requirements.




                                                        16
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Consolidation is a critical step toward regaining control. Companies can often
                                      consolidate the workloads of up to 20 servers onto just one machine and reduce
                                      server operational costs by up to 70 percent.


                                       Real-world companies benefit from consolidation and
                                       virtualization
                                       To understand how virtualization and consolidation work in the real world, con-
                                       sider the following:


                                       G    IBM helped a global electronics company redefine its IT infrastructure with
                                            virtualization technology. The electronics company reduced its server
                                            count by 80 percent. Centralized server management was also enabled.
                                            These activities saved the company US$322,000 in annual server support
                                            costs and set the stage for total cost reduction of approximately
                                            43 percent over three years.
                                       G    When a global automobile manufacturer wanted to optimize and virtualize
                                            its servers in order to reduce data center space, software licensing
                                            costs and operations and maintenance expenditures, it turned to IBM.
                                            IBM helped the client consolidate its 76 servers down to only 6, while also
                                            reducing complexity and total cost of ownership.
                                       G    Server consolidation helped a German manufacturer reduce costs and
                                            increase performance and security. The IBM team reduced the number of
                                            data center servers in operation from 40 to 3.



                                      Desktop virtualization is also a promising source of cost savings. By hosting
                                      virtual desktops in the data center, companies can reduce endpoint device man-
                                      agement requirements and enable users to access their applications and data
                                      from practically anywhere, boosting productivity throughout the enterprise.
                                      Virtualization can also reduce application license fees and energy costs enough to
                                      provide an investment payback of up to 40 percent in just one year.




                                                        17
From fear to value: CIO strategies for propelling business through the economic crisis




                                      Today, most companies pay more than they need to for voice and data communi-
                                      cations. Not only do they maintain separate networks for voice and data, they
                                      often pay for calls by the minute. Taking advantage of network convergence
                                      (combining voice, data and video traffic onto an IP network) can help CIOs do
                                      more with less plus drive value and exploit opportunities. Converging communica-
                                      tions technologies can cut telephony costs up to 20 percent. Aggressive man-
                                      agement of those technologies can save still more.


                                      A unified platform also simplifies management and supports a number of solu-
                                      tions that are quickly becoming essential for the modern workplace—including
                                      IP telephony, unified messaging, IP-based call center operations and real-time
                                      collaboration. Thus, in addition to immediate cost savings, the converged network
                                      can fuel ongoing return on investment in the form of efficiency and productivity
                                      gains. It can also help corporations respond to rapid change by eliminating time-
                                      consuming debates about which technology to employ in a particular solution.


                                      Application management presents CIOs with another opportunity to lower costs.
                                      By standardizing business processes and consolidating noncore functions onto
                                      fewer application platforms, rationalizing legacy portfolios and employing SOA to
                                      leverage existing assets and investments, CIOs can reduce the cost of application
                                      management by anywhere from 20 to 50 percent.


                                      Implementing consolidation, virtualization, convergence and application strategies
                                      benefits your company. These approaches lead to increased resource utilization
                                      and a more resilient IT environment, while freeing up resources to support busi-
                                      ness application expansion and improve return on investment. With power and
                                      cooling costs typically representing about 40 percent of data center expenses,
                                      consolidation and virtualization alone can slash expenses and demonstrate a
                                      company’s commitment to the environment.




                                                        18
From fear to value: CIO strategies for propelling business through the economic crisis




 IBM and unified                         Leading through example
 communications
                                        IBM’s in-depth experience in IT transformation has been gleaned from our
 IBM’s internal collaboration and       own metamorphosis. Over the last 5 years, IBM’s own IT investments have deliv-
 unified communications initiatives
                                        ered a cumulative benefit yield of US$4.1 billion. Through massive consolidation
 have saved the company an esti-
 mated US$16.5 million per year in      efforts, we have merged 155 data centers down to five and more than
 reduced phone costs from the use       16,000 applications to fewer than 4,500. As a result of this, we have achieved
 of instant messaging and               substantial savings in energy, software and system support costs.
 US$97 million per year in travel
 costs from the use of Web confer-
 encing. In addition to cost savings,   Through Project Big Green, the IBM environmental initiative, we have
 these programs have helped             virtualized our server landscape, reducing energy use by 80 percent and
 IBM improve customer satisfaction      reducing future floor space requirements by 85 percent. We are committed to
 and employee productivity. Flexible
                                        doubling our computing power by 2010 without increasing energy consumption.
 unified communications options
 (instant messaging, Web conferenc-     Our cloud-enabled on demand IT delivery solution provides self-service to
 ing and VoIP) give users the free-     3,000 IBM researchers working in eight countries. It also serves up real-time inte-
 dom to choose the mode by which        gration of information and business services. This experience, coupled with your
 they communicate.
                                        own expertise and vision, can help your company survive—or even thrive—in this
                                        financial crisis, and position yourself for success when the economy improves.

                                        For more information
                                        To learn how IBM is working with organizations around the world to help them
                                        prosper during the current economic crisis, please contact your IBM marketing
                                        representative or IBM Business Partner.


                                        For IBM insights and perspectives on the issues that matter most to the chief
                                        information officer, visit the following Web site:


                                        ibm.com/cio




                                                           19
© Copyright IBM Corporation 2009
       IBM Global Services
       New Orchard Road
       Armonk, NY 10589
       U.S.A.
       Produced in the United States of America
       March 2009
       All Rights Reserved
       IBM, the IBM logo and ibm.com are trademarks
       or registered trademarks of International
       Business Machines Corporation in the
       United States, other countries, or both. If these
       and other IBM trademarked terms are marked
       on their first occurrence in this information with
       a trademark symbol (® or ™), these symbols
       indicate U.S. registered or common law
       trademarks owned by IBM at the time this
       information was published. Such trademarks
       may also be registered or common law
       trademarks in other countries. A current list of
       IBM trademarks is available on the Web at
       “Copyright and trademark information” at
       ibm.com/legal/copytrade.shtml.
       Other product, company or service names may
       be trademarks or service marks of others.
       References in this publication to IBM products
       and services do not imply that IBM intends to
       make them available in all countries in which
       IBM operates.
1, 2
       Economic Meltdown: Impact on IT Spending
       and Service Demand. Foote Partners LLC,
       2008.
3, 4
       Service Management in an Uncertain Economy.
       IBM Market Insights, 2009.




       CIW03057-USEN-00

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Whitepaper: From fear to value; CIO strategies for propelling business through the economic crisis

  • 1. CIO White Paper From fear to value: CIO strategies for propelling business through the economic crisis March 2009
  • 2. March 2009 From fear to value: CIO strategies for propelling business through the economic crisis As executives working at the nexus of business and technology, CIOs are uniquely quali- fied to help their organizations leverage available technology to meet challenges pre- sented by the current economic crisis and to exploit new opportunities that will arise. For CIOs, the imperative is to address issues from two perspectives—the outward view of employing IT to capitalize on business opportunities and support business change, and the inward view of their own IT operations. IBM predicts that, during the current economic crisis, the industries. Finally, CIOs can help their companies act with business world can expect major disruptive and transfor- speed. Companies must act quickly to implement and mative change. CIOs can help their companies survive the manage change, reduce risk and take advantage of gov- crisis and position their organizations for future growth. ernment economic-stimulus investments. From chaos, the CIO drives opportunity The CIO’s perspective: using IT to propel business During this crisis, significant opportunities will arise for cor- transformation porations that move swiftly to disrupt the competition, CEOs want IT to continue providing quality, reliable IT serv- restructure operations and position themselves for future ices. However, CEOs also want CIOs to lead innovation gain. IBM believes that, in order to excel, companies must and promote change by employing technology to drive the focus on the value in their operations, exploit opportunities kinds of business transformation that supports corporate and act quickly to seize competitive advantage. objectives, enables new business models and exploits new opportunities. Reducing costs and increasing returns are key to improv- Focusing on value within the IT organization ing value. To focus on cost reduction, CIOs can help their As the recession deepens, CIOs are beginning to rethink companies improve internal efficiencies, deploy resources IT, determining how to reengineer their operations to con- for the highest return, bolster core competencies, redefine centrate on the same business imperatives as the C-suite relationships and get more from existing investments. To increase returns, CIOs can aid their organizations in gain- ing share, building differentiating capabilities and reshaping
  • 3. and other lines of business: the need to focus on value, Leading through example exploit new opportunities and act with speed. The actions IBM’s in-depth experience in IT transformation has been spurred by these considerations help all parts of the busi- gleaned from our own metamorphosis. Through massive ness, including IT, do more with less, focus on the core consolidation efforts, we have merged 155 data centers capabilities that provide competitive differentiation and down to 5 and more than 16,000 applications into less realign relationships for maximum value. Increasingly, CIOs than 4,500. Leveraging this experience with your own are being asked to take IT dollars and redirect them to expertise and vision can help your company survive—and activities that will lower operational costs throughout the perhaps even thrive—in this time of financial crisis. business, improving margins even while revenues fall. More and more CIOs are beginning to realize this same For more information formula—integrated automation to improve efficiency— To learn how IBM is working with organizations around the works equally well within their own organizations. world to help them prosper during the current economic crisis, please contact your IBM marketing representative or CIOs can also take immediate steps to increase the utiliza- IBM Business Partner. tion and performance of existing IT investments. Server and storage consolidation and desktop virtualization are For IBM insights and perspectives on the issues that mat- critical steps toward regaining control of spiraling IT costs: ter most to the chief information officer, visit the following they can help significantly lower the expenses associated Web site: with power and cooling. Taking advantage of network con- vergence can help CIOs do more with less. The result of ibm.com/cio these and other strategies can be increased resource uti- lization and a more resilient IT environment. This in turn can free up resources to support business application expansion and improve ROI.
  • 4. From fear to value: CIO strategies for propelling business through the economic crisis Introduction Contents Pundits and analysts say that the current economic crisis is likely to last longer 4 Introduction than past recessions. Business is no stranger to slowdowns and downturns. In 5 The CIO as change catalyst the last 30 years, the United States alone has experienced three recessions 6 From chaos, the CIO drives (1981, 1990 and 2001). However, the world seems to agree that this recession is opportunity different from those of recent memory. 10 The CIO’s perspective: using IT to propel business transformation According to the Foote Research Group, the world is facing a “perfect storm” of 14 Focusing on value within the economic calamities.1 Home values are depreciating and credit is drying up. IT organization Stock markets are diving while the unemployment rate is skyrocketing. The 19 Leading through example demand for consumer goods is shrinking as price sensitivity takes hold. Banks 19 For more information across the globe are failing after writing off, as of December 2008, $733 billion in loans. All this takes its toll on business, disrupting relationships with partners, with customers and throughout the supply chain. No industry seems to be exempt from the turmoil. And, in case anyone doubted the globalization of economies, no geographic region has escaped unscathed. While the slowdown in emerging economies (China and India) has thus far been less severe,2 the economies of Eastern Europe, Western Europe, the United States, Asia-Pacific, the Middle East and Latin America have all contracted. Is there a single overarching solution? No one seems to know. Banks are so reluctant to lend that traditional macroeconomic tools, such as interest rate cuts, will likely be insufficient to stimulate lending. A reality of the global economy is also coming to light: with more than 60 percent of the world output now traded internationally, we rise, and fall, as one. Just look at world stock markets, which seemed to crash in unison. While economic stimulus plans are being deployed by the governments of the United States, Japan, China and a number of European countries, their impact is as yet unknown. 4
  • 5. From fear to value: CIO strategies for propelling business through the economic crisis No one is suggesting that the global economy is improving. All indications are For CIOs, the imperative is to that this crisis will likely be long and severe. Restoring confidence in the eco- address the economic crisis nomic system may prove significantly more difficult than in past downturns. from two perspectives—that of the company as a whole, and IBM predicts that, as a result of this recession, the business world can expect that of their own IT operations. disruptive and transformative change. Industries will restructure, with firms failing or being sold off virtually overnight. New regulatory environments will arise. Your company may already be cutting staff, outsourcing departments and delaying or canceling non-revenue-generating projects. Your IT budget is probably flat. It may even be shrinking. The CIO as change catalyst This all adds up to an interesting paradox: it’s a great time to be a CIO. As the executive working at the nexus of business and technology, CIOs are uniquely qualified to help their companies leverage available tools to meet current economic challenges and to exploit the opportunities that will arise during this crisis—and opportunity will arise for those businesses bold enough to disrupt competition and restructure their industries. CIOs can help transform their com- panies by better capitalizing on the value of information assets. They can help manage and mitigate business risk through better, more timely information. They can improve service management. They can lower enterprisewide operational costs—including IT’s—through automation. This paper will examine the opportunities to leverage IT for business gain during this crisis, describe how CIOs can help propel business advantage, and appraise the near-future state of IT. 5
  • 6. From fear to value: CIO strategies for propelling business through the economic crisis From chaos, the CIO drives opportunity During this long and severe recession, significant opportunities will arise for those corporations that move swiftly and decisively to disrupt the competition, restruc- ture operations and position themselves for future gain. While no one can predict when economic recovery will occur, one thing is certain: it will occur. IBM believes that, in order to excel, companies must focus on the value in their operations, exploit opportunities and act quickly to seize advantage. For CIOs, the imperative is to address these issues from two perspectives—the outward view of employing IT to enable opportunities and business change, and the inward view of their own IT operations. Focusing on value Focusing on value entails cutting discretionary spending, deploying resources for the highest return, bolstering core competencies and redefining relationships. Cash flow is central to survival and strategic flexibility, which means businesses and business units need to do more with less. Corporations must conserve capi- tal and cut spending where it produces minimal return. Funds must then be rede- ployed to activities, products and markets that generate growth, improve margins and truly differentiate one business from another. In addition, businesses must determine how to get more from existing invest- ments. While improving time-to-value is critical, companies must also realize that return for as long as possible. (The longer companies can derive value from their investments, the better.) Finding new ways to use existing equipment and other tangible assets is well worth the effort—especially when the budget for new capi- tal expenditures has disappeared. Cutting energy waste and improving resource efficiency rank as important corporate social responsibilities. They also help the organization save money. 6
  • 7. From fear to value: CIO strategies for propelling business through the economic crisis At no time has focusing on core competencies been more important than it is IT has a long history of event today. Across business units, product lines, portfolios and geographies, there is monitoring and management, no latitude for poor performance or effort wasted on nondifferentiating activities. of turning real-time data into actionable information. CIOs Companies need to enforce and enhance their differentiators on the one hand, need to apply this skill to other close down or divest underperformers on the other. Establishing value nets with parts of their businesses, companies in which core competencies are not your own becomes even more thereby improving the quality important in difficult economies. A key strategy that the CIO can drive is to out- and timeliness of business source noncore activities—from human resources and back-office operations to information. manufacturing and fulfillment—or consolidate them internally as shared services to maximize return. Relationships are at the heart of any business. But to succeed in this economy, businesses will have to reexamine relationships with suppliers, partners and cus- tomers. They must weed out weak suppliers and unprofitable customers and renegotiate remaining relationships to align with the realities of the current econ- omy. They also must bolster business partnerships to mitigate risk and to man- age volatility in both supply and demand. Exploiting opportunities The severity of this economic downturn will create opportunities for companies to gain share, build capabilities and reshape industries to their advantage. Businesses can capture share by disrupting weak competition. Reaching out to and understanding the needs of customers who may consider shifting from com- petitors will be an important element of this strategy. In addition, organizations should consider retooling their portfolios to serve frugal customers and offering flexible pricing to defend or gain share in their core businesses. And companies that operate in mature markets can grow even in down times by focusing efforts on growth markets that offer more expansion opportunities. 7
  • 8. From fear to value: CIO strategies for propelling business through the economic crisis This crisis, like all economic crises, will one day end. Savvy companies under- stand this. To prepare for brighter days, they concentrate on building future capa- bilities. This entails keeping and motivating top performers, recruiting new talent (now available at a lower price than during the boom years) and leveraging the global workforce. Recent years have shown how long it takes to build the struc- tures, capabilities, processes and systems to seize growth market opportunities. Now is the time to invest for the mid-term. Companies that wish to survive must also be willing to change the industries in which they operate by pursuing innovative, new business models. At the same time, they must establish strategic alliances that position themselves to win in a globally integrated economy. All of these activities can benefit from innovative uses of technology. Increased use of collaboration tools can improve communication with customers and sup- pliers. Technology can be leveraged to provide better, and more timely informa- tion to help companies act with speed. Better information can also help mitigate many business risks. Acting with speed The unpredictability of this environment favors the fast and the agile. Strategies will differ, but in this economic climate, companies must be willing to act quickly to implement and manage change, curtail risk and position themselves to take advantage of government stimulus packages. 8
  • 9. From fear to value: CIO strategies for propelling business through the economic crisis Smart companies work to determine how to manage change rather than CIOs must adapt the strategies simply react to it. They identify and empower high-ranking executives to act as used by their C-suite peers: change leaders. These leaders set clear goals and measure corporate actions in manage change, manage risk and act quickly. terms of those goals. With accurate information needed for decisive action, they establish the company’s vision for its future and align around an agreed-upon course of action. Bold movements like these entail risk—but risk can be managed. Companies must: apply analytics to improve decision making and to create greater predictive capability; establish risk management governance plans and processes; and inte- grate and rationalize business information to make the most sound business decisions possible. Finally, in countries where stimulus packages are being deployed, business lead- ers must act quickly to take advantage of these investments. Business leaders must be able to quickly grasp the mechanics of these funding programs. All of these strategies share a common element—they require timely and accu- rate information. Understanding what needs to be monitored, and how to monitor it, is a vital part of improving the business decision making process. IT has a long history of event monitoring and management, of turning real-time data into actionable information. CIOs need to apply this skill to other parts of their busi- nesses, thereby improving the quality and timeliness of business information. These aren’t activities for other business executives. These are activities for all business executives, including CIOs. 9
  • 10. From fear to value: CIO strategies for propelling business through the economic crisis The CIO’s perspective: using IT to propel business transformation Today, CEOs, CFOs and CIOs alike see the roles of IT as evolving. As Figure 1 shows, even in these pressing economic times, the cost of IT is no longer the leading factor by which IT is judged. First and foremost, a recent IBM study of large companies located around the world found that CEOs expect IT to continue providing quality, reliable IT services. Consistently meeting existing service level agreements provides CIOs the credibility to participate in more innovative activi- ties. When that requirement is met, CEOs are increasingly looking to CIOs to be innovation leaders and change agents by employing IT to drive the kinds of busi- ness transformations that support corporate objectives and make new business models and opportunities possible.3 Figure 1. Despite economic pressures, large enterprises surveyed by IBM are unlikely to perceive the leading role of IT as providing technological services at the lowest possible price. 10
  • 11. From fear to value: CIO strategies for propelling business through the economic crisis This means that as business executives with a deep understanding of technol- Applying experience gained ogy’s transformative powers, CIOs are uniquely qualified to help their businesses from managing IT outsourcing focus on value, exploit opportunities and act with speed. For example, because contracts, CIOs can take a leadership role in identifying of their experience with IT outsourcing, CIOs can help companies explore other and executing opportunities to business process outsourcing for noncore functions as a way to reduce business reduce operating costs with operations costs. These solutions combine processes, people and technology in business process outsourcing. outsourced delivery models for activities such as customer relationship manage- ment, finance and administration, human resources, procurement and supply chain management. The most effective solutions will combine process transfor- mation with lower-cost labor models to deliver the greatest business value. CIOs should stand at the center of these changes, helping to link these value nets together with technology that provides accurate, timely information. Enabling collaboration and boosting productivity CIOs are also instrumental in helping tomorrow’s leading businesses create more adaptable and responsive organizations. By supporting social networks and real- time Web 2.0 collaboration, they are enabling closer ties with partners and cus- tomers and supporting today’s highly dispersed workforce. This workforce needs instant, anytime access to people and information, business-grade social soft- ware and better team-based decision making. What’s more, collaboration and mobility technologies boost employee productivity and make it possible for companies to reduce the costs of office space and other facilities’ overhead. New applications are being developed to accommodate the corporate need to manage mobile and remote workforces and to drive com- merce, aiding in global integration. Mobility initiatives can also help businesses rapidly modify processes to capture opportunities. In doing so, they can help your company focus on value, exploit opportunities and act with speed. 11
  • 12. From fear to value: CIO strategies for propelling business through the economic crisis Driving the information agenda CIOs can help other business leaders focus on value by driving an enterprise information agenda that clearly defines and prioritizes information objectives based upon business objectives and strategy. And they can develop innovative approaches to creating and deploying an agile enterprise information infrastruc- ture that supports strategy and leverages existing assets. The objective is to provide the business with access to the trusted information that is needed to evaluate performance, make informed decisions and respond quickly to new requirements. Savvy CIOs will also employ advanced business service and portfo- lio management strategies to prioritize IT investments in order to create a catalog of IT-enabled business services that support the most critical business needs. For companies pursuing a merger and acquisition strategy, the CIO will be a criti- cal element in helping to exploit opportunities by speeding the intensely compli- cated process of fully integrating an acquired company’s IT infrastructure into the enterprise. This can be greatly facilitated by bringing to bear enterprise architec- ture standards along with tough decision making in order to rationalize people, processes and technology. It also requires innovative use of strategies such as service-oriented architecture (SOA) to quickly integrate systems and information. CIOs today must consider how to help reduce business risk while improving stakeholder access to information. Business resilience is the discipline that pro- vides an organization with the capability to ensure availability of information, serv- ice and support for its customers, employees and business partners not only during normal daily business operations but also during unexpected conditions. CIOs must also play a central role in addressing a variety of security issues that exacerbate business risk, including identity management, application security, wireless security and privacy. Internal as well as external security violations can disrupt the business, damage the brand or trigger regulatory audits. 12
  • 13. From fear to value: CIO strategies for propelling business through the economic crisis Creating a flexible architecture Finally, CIOs know that, in the current economic climate, they must act with speed. This requires a flexible, dynamic and scalable IT infrastructure, one that supports rapid business expansion or contraction. While standardization may appear to reduce flexibility since it provides fewer options, it actually increases agility by decreasing the time it takes to make IT platform decisions. Open standards help to increase interoperability while reducing the cost of propri- etary solutions. Done properly, server consolidation coupled with server and storage virtualization can bring value to companies and help them act with speed by providing faster and more dynamic provisioning of capabilities. Server consolidation and virtualiza- tion can also increase utilization rates, helping improve the return on investment of IT resources. Cloud computing, which extends existing virtualization capabili- ties, offers a potentially cost-efficient model for provisioning processes, applica- tions and services while allowing the IT organization to be more responsive to the needs of the business. As members of the business executive team, CIOs lead and manage change, manage risk and enable corporate transparency. They manage a vital component of the information-driven enterprises of the 21st century and can model the new competencies that are needed in all business units. They are learning how to communicate that IT is a valuable asset, not a cost center. They are drawing other members of the executive suite into the IT arena to show the business mer- its of each IT project—from driving revenues to managing risk. CIOs communi- cate the real business risks of deferring infrastructure investments and reducing service levels. And they are learning that there are immediate and concrete steps that they can take to help businesses survive the current economic crisis and position themselves for future growth. 13
  • 14. From fear to value: CIO strategies for propelling business through the economic crisis Focusing on value within the IT organization To this point, IT leaders have embraced a number of different strategies to help their companies cope with uncertain economic times. They have negotiated bet- ter prices from vendors. They have rearchitected IT systems to get more out of less. They have applied automation to boost the productivity of business opera- tions and their own IT staffs. But as the recession deepens around the globe, CIOs are beginning to rethink IT, determining how to reengineer their operations to focus on the same business imperatives as the C-suite and the other lines of business: the need to focus on value, exploit opportunities and act with speed. The actions spurred by these considerations help IT, like business as a whole, do more with less, focus on the core capabilities that provide competitive differentiation and realign relationships for maximum value. They look for partners, rather than vendors. They work to build future capabilities. It will come as no surprise that the current economic environment presents signifi- cant challenges to CIOs. Despite mounting pressure to cut costs, user expecta- tions of IT show no signs of abating. There’s much work to be done in IT and not always enough money or staff to do it. Like every other business function, IT will have to drive value by doing more with less. 14
  • 15. From fear to value: CIO strategies for propelling business through the economic crisis According to the IBM Market Insights Service Management in an Uncertain Economy Study, only 5 percent of all large corporations expect to see a signifi- cant increase in IT budgets for 2009 (see Figure 2). CEOs’ and CFOs’ mission to reduce capital costs is often leading to IT project cancellation or deferment. Staffing cuts will be situational. Acquired or merged companies may see layoffs of up to 10 percent, while companies facing bankruptcy may release 20 to 30 percent of their IT staffs.4 The more successful CIOs will be those whose portfolio management disciplines allow them to quickly re-allocate their resources to their most critical IT projects. Figure 2. About 86 percent of the large companies surveyed by IBM expect IT 2009 budgets to remain flat or change only slightly. 15
  • 16. From fear to value: CIO strategies for propelling business through the economic crisis But the news isn’t all bad for IT. Companies that survived the economic turmoil of 2001 already run much leaner IT operations, having spent the past eight years focusing on value by lowering costs and reducing waste. And many respondents to the Service Management study reported flat 2009 budgets, not drastically reduced budgets. What are CIOs doing with their money? Increasingly, they’re being asked to take IT dollars and redirect them to activities that will lower opera- tional costs throughout the business, improving margins even while revenues fall. More and more CIOs are beginning to realize the formula that has worked for years across other business units—integrated automation to improve efficiency— works equally well within their own organizations. Traditionally, automation within the IT organization has been implemented with a disaggregated set of tools. By approaching automation of the IT organization with the same thought process applied to any other business unit, CIOs can realize the same kinds of returns. As experts in the art of the possible, CIOs can take immediate steps to increase the utilization and performance of existing IT investments—reducing operating and maintenance costs to free up the funds for new initiatives. Server consolida- tion should be an important part of any infrastructure optimization plan. Consolidation should not be viewed as a project, but as an important part of the capacity planning process. Inefficiency and waste exist in practically every IT envi- ronment. After years of growth, server rooms and data centers are bulging with underutilized equipment. The accumulation of equipment leaves companies strapped with high energy costs and escalating management requirements. 16
  • 17. From fear to value: CIO strategies for propelling business through the economic crisis Consolidation is a critical step toward regaining control. Companies can often consolidate the workloads of up to 20 servers onto just one machine and reduce server operational costs by up to 70 percent. Real-world companies benefit from consolidation and virtualization To understand how virtualization and consolidation work in the real world, con- sider the following: G IBM helped a global electronics company redefine its IT infrastructure with virtualization technology. The electronics company reduced its server count by 80 percent. Centralized server management was also enabled. These activities saved the company US$322,000 in annual server support costs and set the stage for total cost reduction of approximately 43 percent over three years. G When a global automobile manufacturer wanted to optimize and virtualize its servers in order to reduce data center space, software licensing costs and operations and maintenance expenditures, it turned to IBM. IBM helped the client consolidate its 76 servers down to only 6, while also reducing complexity and total cost of ownership. G Server consolidation helped a German manufacturer reduce costs and increase performance and security. The IBM team reduced the number of data center servers in operation from 40 to 3. Desktop virtualization is also a promising source of cost savings. By hosting virtual desktops in the data center, companies can reduce endpoint device man- agement requirements and enable users to access their applications and data from practically anywhere, boosting productivity throughout the enterprise. Virtualization can also reduce application license fees and energy costs enough to provide an investment payback of up to 40 percent in just one year. 17
  • 18. From fear to value: CIO strategies for propelling business through the economic crisis Today, most companies pay more than they need to for voice and data communi- cations. Not only do they maintain separate networks for voice and data, they often pay for calls by the minute. Taking advantage of network convergence (combining voice, data and video traffic onto an IP network) can help CIOs do more with less plus drive value and exploit opportunities. Converging communica- tions technologies can cut telephony costs up to 20 percent. Aggressive man- agement of those technologies can save still more. A unified platform also simplifies management and supports a number of solu- tions that are quickly becoming essential for the modern workplace—including IP telephony, unified messaging, IP-based call center operations and real-time collaboration. Thus, in addition to immediate cost savings, the converged network can fuel ongoing return on investment in the form of efficiency and productivity gains. It can also help corporations respond to rapid change by eliminating time- consuming debates about which technology to employ in a particular solution. Application management presents CIOs with another opportunity to lower costs. By standardizing business processes and consolidating noncore functions onto fewer application platforms, rationalizing legacy portfolios and employing SOA to leverage existing assets and investments, CIOs can reduce the cost of application management by anywhere from 20 to 50 percent. Implementing consolidation, virtualization, convergence and application strategies benefits your company. These approaches lead to increased resource utilization and a more resilient IT environment, while freeing up resources to support busi- ness application expansion and improve return on investment. With power and cooling costs typically representing about 40 percent of data center expenses, consolidation and virtualization alone can slash expenses and demonstrate a company’s commitment to the environment. 18
  • 19. From fear to value: CIO strategies for propelling business through the economic crisis IBM and unified Leading through example communications IBM’s in-depth experience in IT transformation has been gleaned from our IBM’s internal collaboration and own metamorphosis. Over the last 5 years, IBM’s own IT investments have deliv- unified communications initiatives ered a cumulative benefit yield of US$4.1 billion. Through massive consolidation have saved the company an esti- mated US$16.5 million per year in efforts, we have merged 155 data centers down to five and more than reduced phone costs from the use 16,000 applications to fewer than 4,500. As a result of this, we have achieved of instant messaging and substantial savings in energy, software and system support costs. US$97 million per year in travel costs from the use of Web confer- encing. In addition to cost savings, Through Project Big Green, the IBM environmental initiative, we have these programs have helped virtualized our server landscape, reducing energy use by 80 percent and IBM improve customer satisfaction reducing future floor space requirements by 85 percent. We are committed to and employee productivity. Flexible doubling our computing power by 2010 without increasing energy consumption. unified communications options (instant messaging, Web conferenc- Our cloud-enabled on demand IT delivery solution provides self-service to ing and VoIP) give users the free- 3,000 IBM researchers working in eight countries. It also serves up real-time inte- dom to choose the mode by which gration of information and business services. This experience, coupled with your they communicate. own expertise and vision, can help your company survive—or even thrive—in this financial crisis, and position yourself for success when the economy improves. For more information To learn how IBM is working with organizations around the world to help them prosper during the current economic crisis, please contact your IBM marketing representative or IBM Business Partner. For IBM insights and perspectives on the issues that matter most to the chief information officer, visit the following Web site: ibm.com/cio 19
  • 20. © Copyright IBM Corporation 2009 IBM Global Services New Orchard Road Armonk, NY 10589 U.S.A. Produced in the United States of America March 2009 All Rights Reserved IBM, the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. If these and other IBM trademarked terms are marked on their first occurrence in this information with a trademark symbol (® or ™), these symbols indicate U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at ibm.com/legal/copytrade.shtml. Other product, company or service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates. 1, 2 Economic Meltdown: Impact on IT Spending and Service Demand. Foote Partners LLC, 2008. 3, 4 Service Management in an Uncertain Economy. IBM Market Insights, 2009. CIW03057-USEN-00