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Under pressure

News Analysis
May 12, 20035 mins
BudgetingData Center

Challenged with delivering competitive infrastructures at little cost, CIOs outline their top concerns.

Andy Crowder, CIO of Central Florida Investments, says he is in a better position than his peers to ride out the depressed economy. He’s always had to justify his investments to his company president, which has let Crowder keep a tight lid on IT spending.

The Orlando company is a holding entity for Westgate Resorts, which manages 1,200 U.S. time-share properties. CFI has boosted its number of time-share properties by 30% to 40% in the past two years, and it increased its IT staff by 17% in 2002 to the current roster of 123 employees.

Crowder is taking advantage of the downturn and gets more for his bucks, while many of his peers are having their purses snapped shut. “The down economy allows us to acquire technolog at lower cost,” he says.

Just as Crowder has had to justify investments, his peers at other firms are now under increased pressure to do the same, according to the findings of Gartner Executive Programs’ (EXP) 2003 CIO Agenda.

The 620 CIOs who participated in the annual survey say IT budgets are flat. CIOs must manage the concurrent business demands of lower cost, higher levels of security and better risk management. The upshot? CIOs must innovate their existing infrastructures to accomplish these goals.

Organizations can’t afford to sit back and wait for economic recovery – CIOs must deliver IT infrastructures that are secure and let their organizations remain competitive with little additional investment.

“CIOs are taking a hard look at maintenance contracts and the value of external system integrators, and are having to cut some projects that are not producing ROI,” says Ellen Kitzis, group vice president at Gartner EXP.

Some of this is being played out at the University of North Carolina Health Care System in Chapel Hill.

J.P. Kichak, vice president and CIO of the healthcare facility, says his IT budget will be flat for UNC’s fiscal year 2004. For fiscal 2003, his budget fell 18% compared with a 13% increase for fiscal 2002.

Money that is earmarked for buying new assets is being reduced by $2 million to $3 million for fiscal 2004.IT usually juggles between 30 and 40 IT projects each year, but some will be cut, Kichak says.

UNC will continue with IT projects that help it become more efficient, capture lost revenue, consolidate systems and cut costs. Those initiatives include a call distribution system of accounts receivable and its flagship Clinical Information System (CIS) project with IBM. But the implementation times of some projects have been pushed back.

“It makes our job more difficult if we have to stretch implementation time, which delays ROI,” Kichak says. “Also, it makes it difficult to restart projects when the economic situation improves – it’s difficult to get people motivated to work on the project again.”

One project that has had its implementation time stretched by four months is the delivery of Version 3 of CIS, a Web-based infrastructure that lets remote clinicians access patient medical records from any browser through a secure Internet connection or via an intranet for on-campus staffers. UNC has operated CIS in a thin-client architecture for four years, and the organization saves between $350,000 and $400,000 per year in software licenses and staff time compared with managing its previous fat-client architecture.

In addition to worries about funding new projects, Gartner says many CIOs are concerned about the cost of ongoing maintenance to recently installed applications. These need to be paid from this year’s flat budgets, which suggests that there’ll be no money left for new initiatives.

Kichak echoes that sentiment. “I’m concerned that if the budget continues to be flat for the longer term, our infrastructure will get out of date, and we will be playing catch-up. I’m concerned that there is not enough funds to continue with adding new functionality to the infrastructure as well as to maintain it,” he says. He aims to avoid this by upgrading the part of the infrastructure that will be affected by the new services and applications, as those are added.

In terms of the CIO’s own role in the organization, the executives Gartner polled say that providing guidance and coaching to board directors is now a top priority. Whereas providing guidance for the board and demonstrating business value of IT were ranked Nos. 2 and 3, respectively, by CIOs in 2002, these are the top two priorities for IT executives this year. “Effective CIOs are investing time and energy into ensuring that top-level decision-making involves business colleagues at all levels,” the report says.

CFI’s Crowder says his priority is to ensure that his IT workforce keeps focused on the end goal of the business and not just the task at hand. The basis of that, he says, is frequent communications with the business people and to ensure that they are involved with the IT projects. This is particularly important, as Crowder’s team has to understand the business as part of its current project to build an ERP infrastructure from scratch – which it embarked on 16 months ago – as there is no such application specifically for the time-share property market.

The report also suggests that the average length of time a CIO retains his position in an organization has increased from 18 months three years ago to 36 months this year. “Some CIOs were measured on the success of one project or on fixing ERP projects that may have failed because of external business issues,” Gartner’s Kitzis says. “Now businesses recognize that time is needed to learn the success of the project and the importance of building stability [of staffing] in the organization.”