New Normal: Bold IT-Based Business Agility

European business leaders believe their companies are more vulnerable to IT-enabled market disruptions than companies in other parts of the world, according to a new market study by McKinsey & Company.

McKinsey found that 74 percent of European business leaders believed their company was 'very' or 'extremely' exposed to IT-based market disruption. Regardless, only 18 percent of European IT executives believed their companies were 'very effective' at introducing business technology faster and better than their competitors.

According to the McKinsey assessment, European companies need to grasp the opportunity to make bold, transformative moves to ensure their business continues to thrive within the "New Normal" environment of ICT-empowered borderless commerce.

A significant number of businesses have recognized the need to adapt, with 31 percent of European executives saying the development of new products and services in response to changing consumption patterns was a high priority.

'Good Enough' isn't a Winning Strategy
McKinsey believes that the attitude of European business leaders towards IT must shift. Organizations have achieved 'satisfactory' results by attaining some success in improving IT productivity, operational productivity, or innovation.

However, the performance expectation bar is now much higher and "IT must truly excel in all of these dimensions to support a winning company." McKinsey's guidance for European companies includes:

• Align IT and the business, upgrade business skills of IT leaders and close performance gaps.
• Improve governance models to facilitate joint decision making and strategic planning between IT and the business.
• Fundamentally restructure the IT function to dramatically improve productivity.
• Transform the company's operating model and cost structure with IT-enabled business processes.
• Enable transformative moves by promoting a mindset that fosters and rewards experimentation with new ideas.
• Identify opportunities for IT-enabled innovations and be prepared to respond to competitors' disruptive moves.
  

Outlook: Prepare for More of the Same
McKinsey says companies have begun to recognize that the current recession is not simply another turn of the business cycle but a restructuring of the economic order -- and that they need to look beyond relieving short-term cost pressures.

In summary, the current economic environment should be treated as the benchmark conditions for the foreseeable future. Where's the upside opportunity? Become that 'agent' of change.

McKinsey research has shown that downturns are times when industry leadership often changes. Forty-eight percent of global IT companies and 40 percent of U.S. industrial companies that were leaders before the 2000-01 recession did not retain their leadership positions afterward.

Why Early-Adopters Embrace the Cloud

Cloud computing is all about new technology, right? Well, perhaps that depends upon your point of view -- as an application developer, or a business decision maker.

Private Cloud development will grow during the coming year, with 48.9% of developers expecting to deploy applications (via their on-site data center), according to a survey of 500 software developers by Evans Data Corp.

Their survey showed that 29.7% are currently working on applications destined for a private cloud environment, while an additional 19.2% expect to enter development within the next 12 months.

Taking Baby Steps with Cloud Computing
"Software developers are finding many reasons to develop software for the cloud, whether for a private cloud or public cloud," said John Andrews, President and CEO of Evans Data. "Not surprising, while developers want to take advantage of the cloud, our research indicates a strong preference for them to favor a cloud related development environment to simply extend their existing technology know-how."

The survey measured the intentions and adoption patterns of developers. This included Public and Private Cloud development -- types of apps moving first to the Cloud, development dynamics and tools for developing in the Cloud, data centers and virtualization, security, regulations, benefits, and inhibitors.

"Private clouds seem to be appealing for the easier methods of deploying and automating software delivery rather than the elasticity, and different pricing, that drove the initial fervor in public clouds," commented Michael Cote, software industry analyst for Redmonk.

Michael Dortch, acting director of research at Focus, said "Frankly, I'm surprised it's only 48 percent of developers, given that software as a service and other cloud-based elements are the only piece of the current software marketplace showing consistent, significant growth."

The survey results expose the trends. Half of the developers using Amazon public cloud services are adopting them experimentally or for prototyping -- rather than for business critical applications.

Three quarters of developers think that data for applications deployed in the cloud should be backed-up outside the public cloud -- either in traditional on-site storage or in a private cloud.

Fearless Early-Adopters Seek an Advantage
"The buying community is setting themselves up for another cloud spending moment once they decide public clouds are okay and move from private clouds," Cote said. "While security and regulatory concerns are very real, companies would do well to spend time asserting how they might skip some of their computing needs over the public clouds and avoid paying twice for everything."

That said, the primary motivation for business decision makers, that are early-adopters of managed cloud services, can be simply put -- strategic competitive advantage. While their peer group ponders the risks versus rewards, they're already vigorously moving forward.

IT Power Users Will Lead the Way

Have you ever wondered if your company's utilization of Business Technology is in line with the creative market leaders? The Harvard Business Review recently published an interesting commentary by Susan Cramm entitled "How to Support Your IT Innovators."

Ms. Cramm believes that to realize the full potential from business technology, all enterprises need IT-smart business leaders -- up, down, and across the organization.

According to the results of her ongoing survey, however, business leaders apparently don't feel very smart about their IT adoption and application practices.

• Only 11% personally use and fully leverage the capabilities of the technology currently in place.
• 50% agree with the statement that "business leaders don't understand how to use their systems and technologies."
• And, only 25% of business leaders consider themselves "IT-smart."
  

Liberate the Business Technology Innovators
One person she interviewed said "business groups that have somebody on their team who is an IT expert do much better -- in terms of leveraging technology to meet their needs -- than those who do not." While that may not be profound, it's a noteworthy comment.

Tech-savvy business users perform a valuable function for their less-informed peer group. They are able to determine what is truly possible, with current technology. Why? It's because power-users sometimes have better productivity enhancing tools in their home-based office than they do at their place of work.

How can this be possible? Well, IT managers focused on total control of all physical infrastructure are consumed by operational tasks and remedial user support activity. They have little or no time available to research, test and adopt the best-fit productivity tools for their business user needs.

Don’t Assume, Follow the Informed User
Moreover, there's often a major disconnect between what business users say they need, and what their IT team assumes they would apply. Most organizations use only 64 percent of their enterprise systems core functions, according to a recent Accenture survey.

"About half said they don't need all the capabilities, while a fifth explained that they didn't make use of all the functionality due to lack of time to learn how to apply them," said Accenture.

In summary, Ms. Cramm says that you should identify your lead users, give them more of what they really need, free up your IT team's time to study what they are doing (and why), and then decide how to standardize and scale the most promising innovations to benefit the whole enterprise.

Strategic Perspective Impacts IT Investment

While most business leaders globally are planning on keeping their IT budgets flat and there will be no growth in 2009, a recent market study by analyst firm Datamonitor reveals that in some countries, people are much more confident about their future outlook -- with planned IT budget increases exceeding the decreases.

“It is clear there has been a noticeable decline in enterprise confidence. However, the findings are not as negative as might have been expected”, says Daniel Okubo, technology analyst with Datamonitor.

“Despite the rise in the proportion of IT budgets which are remaining flat, there are still a sizable proportion of enterprises which are planning to increase IT expenditure. Technology vendors should be keenly aware that the economic conditions of a country directly impacts enterprise IT budgets.”

Reacting to the Downside
Datamonitor surveyed 520 IT decision makers towards the end of 2008 to gain a better understanding of how business and IT decision makers are reacting to the global economic crisis, and to gauge their confidence levels.

Across all of the 14 countries surveyed in the second half of 2008, there was a rise in the proportion of planned IT budget decreases compared to a similar survey conducted in first half of 2008.

The percentage of IT decision makers who plan to decrease their IT budget significantly in 2009 has risen to 8 percent from 3 percent, over the last 6 months. Apparently, confidence is lowest in the UK, France and Italy.

In these three countries the proportion of respondents planning to decrease their IT budget outweighs those that are planning to increase their IT budget in 2009. Noticeably, there are also a significant proportion of enterprises in the U.S. and Spain that are planning IT budget decreases.

Unsurprisingly all these economies are projected negative GDP growth in 2009.

Thriving on Strategic Anticipation
However, regardless of the bleak outlook for some countries, enterprises in Benelux, Nordics and Australia appear to be much more confident about their future outlook with planned IT budget increases outstripping IT budget decreases.

These economies are expected to be less affected by the economic downturn, with the exception of Iceland, and this is reflected in Datamonitor’s findings. Moreover, rather than invest in new systems and associated software, more forward-looking companies are now choosing a different -- more strategic -- path to meet their IT needs.

Preparing for the Upside
Business and IT decision makers that are evolving to the managed and hosted services model are typically more interested in raising their efficiency and competitiveness, beyond merely cutting IT and networking costs.

While they share their peer group’s concern with the current economic environment, they also are preparing to pre-position their organizations for the eventual recovery. Rather than totally dwell on the negative, they have the foresight to lay the foundation now – enabling them to quickly act upon the upside opportunities.