VCU : Tech Tuesday 9.22.2009
DISCUSSION: WHAT DO THE CURRENT ECONOMIC CONDITIONS MEAN TO IT PROFESSIONALS? Rajiv Perera, Arman Latif, Viren Kapadia, Mindy Meredith
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ECONOMIC STATE Increase in consumer confidence in nearly 2 years. • Wall Street: Best 6 months since 1933. • Hopeful, but tentative. • Month-to-month economic uncertainty. • Employment continues to lag. • Concern of backsliding to double-dip recession •
Remain financially cautious over the next 12 months • Continue cost cutting (90%) • Reduction is capital investment (63%) •
McKinsey Quarterly: Economic Conditions Snapshot, August 2009
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FEEDBACK - INDUSTRY INDUSTRY/MARKET WHICH YOU BELIEVE IS RECESSION-PROOF?
• HealthCare • Federal Governments. • Government Integrators • Security • Anyone who sells better in down market -- like Wal-Mart, Dollar Store. INDUSTRY/MARKET YOU BELIEVE WILL MAKE SIGNIFICANT INVESTMENTS IN I.T. IN THE NEAR FUTURE?
• HealthCare / Medical IT, Device / Implant. • Federal & State Governments. • Mobile Computing, • Security • Compliance • Insurance • Post-integration opportunities at the big banks (ie. BAC/Merrill, JPMC/Bear, Assured Guaranty, etc.)
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FEEDBACK - I.T. INVESTMENT IS NEW INVESTMENTS IN I.T. INFRASTRUCTURE OR APPLICATION DEVELOPMENT PROJECTS?
• More cautious with big investments. Must yield significant ROI of IT
Spending. • Modest to No investments (just run the shop). • IT decisions are taking longer and projects are being put on hold. • Continue to extend the life of “Legacy systems”. • End of life product platforms are making large wholesale product exchanges. • Deferring routine investments till its inevitable or business critical.
IS NEW INVESTMENTS IN I.T. INFRASTRUCTURE TO LEVERAGE ‘BUYERS MARKET’ AND/OR RETIRE LEGACY EQUIPMENTS?
• Opportunities following mergers / acquisitions. • Staying away from “bleeding-edge”. • It’s a buyers market, if they can find the money! • End of life and non supported infrastructure. • Mostly to retire legacy equipments. • Not taking advantage of the buyers market. LPKGROUP
FEEDBACK - PEOPLE IS THERE AN INCREASE IN I.T. HIRING TO LEVERAGE THE AVAILABLE TALENT POOL AT REASONABLE SALARIES?
• Increase contractor hiring. Very little FTE hiring. • Salaries will remain static for at least an additional 12 -18 months. • Yes, contractors who work at onsite, from domestic IT consulting companies and off shoring companies are being converted to full time employees to reduce the cost per IT resource. • Offshore vendors are used only for offshore resources. Full time employees are expected to manage offshore from onsite (US).
ARE YOU LEVERAGING VENDOR MANAGED SERVICES (AND REDUCING INTERNAL I.T. STAFF)?
• Growing trend vendor management services. • Reduction in internal IT staff. • New service offering by vendors (networks, data center, etc.). • Over staffed? • Looking long term to maintaining a quality staff and thus are asking the staff to do more. • Transition costs are major hurdle. • SMB are starting to use offshore services more, many for the first time.
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FEEDBACK - CONTRACTS ARE CONTRACTS BEING RENEGOTIATED TO REDUCE SPEND?
• Renegotiated owing to reduction in employees and downturn. • Not negotiating lower rates, but reducing overall IT spending. • Asking for credits/reduction in billing, to redeploying the saving back into IT. • Renegotiating with existing providers but are not changing providers. • Some vendors agree to absorb both the transition cost and provide lower pricing.
ARE SERVICE OFFERINGS TO INTERNAL CUSTOMERS BEING REDUCED?
• Yes but quietly. They are not announcing the impact but it is happening. • Not necessarily, business critical changes are being serviced, but the number
of resources (employee + contractor) remains unchanged – “getting more from the same spend” • At State and County cross the board reduction in people and services.
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FEEDBACK - FUTURE WILL THINGS GO BACK TO THE WAY IT WAS (BE THE OPTIMIST)?
• Things will surely get better than today, but may not be the same again • All pendulums swing back so yes. I think though the world is a different place and will take years to readjust. • The market will return but it will probably be two years before we see the economic opportunities in IT that existed prior to this recession. • The landscape has changed, I don’t think it is resilient to go back to the way it was.
WHAT HAS CHANGED IN I.T. AND THE WAY YOU DO BUSINESS?
• Expectations have increased, they want more for less money. • Competition is all time high. • Personal relationships play a greater role. • Never be too far from a solution that involves real savings. • Greater focus on quality • Contracts have more added benefits (free). Margins are extremely small.
Vendors are adopting each other’s strategy (recession) much faster than earlier. • Negotiating power for clients has increased significantly as differentiation between vendors have narrowed.
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DISRUPTIVE EVENT •
Leveraging Open Source?
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Leveraging the cloud?
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Google Apps - greater adoption?
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Non-traditional App development?
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Big investments in ERP?
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Changing support models for computers/devices?
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Application services - (like SalesForce)?
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WHAT DOES THIS MEAN TO US IN I.T?
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APPENDIX
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What We Do? We help companies identify and realize cost savings opportunities and effectively manage and measure supplier relationships. Our Service: We focus on spend analysis, benchmarking, contract management, and negotiations. We work with our clients to minimize costs without reducing services. Your Benefit: On average a 10% to 20% savings and a better understanding of your spend. LPKGROUP