by Tim DeGennaro, with Sharyn Leaver

CIOs prioritise software initiatives to reduce costs and eliminate waste in 2010

Feb 28, 2010
IT Leadership

Forrester recently asked over 2,000 North American and European IT software decision-makers for their plans and perceptions on software spending and trends in 2010. The results show that, with over one-third of IT’s entire budget allocated to software (including maintenance, licenses, and custom development), IT organisations expect to still be cutting software services and delaying non-critical initiatives this year. Amid uncertainty around the global economy’s recovery, money and manpower are reallocated to efforts with clear and more immediate returns, and CIOs are becoming (if they’re not already) sticklers for RoI calculations to justify software projects. While a focus on tactical business goals – such as the reduction of business costs – has been typical of IT software priorities identified by Forrester in past survey studies, the overwhelming tendency toward tactical business needs over innovation and flexibility suggests that 2010 will not be the year that many IT shops demonstrate their strategic business value. For example: • Business cost reduction increases in focus for 2010. Cost reduction is the top priority of software decisions in 2010: 87 per cent of respondents indicated that cost reduction was either important or very important – with 60 per cent indicating very important. This is a significant increase over last year, when 75 per cent of IT software decision-makers indicated that this goal was either important or very important, and only 42 per cent indicated very important. • Speed of execution is second only to cost reduction. Nearly 85 per cent of IT software decision-makers indicated that improving the speed of business process execution would be an important or very important software priority in 2010. IT organisations will be looking to purchase, upgrade, or integrate software that drives automated workflow, data capture, and analysis this coming year. • Supporting company growth is a close third. Just over 80 oer cent of IT software decision-makers indicated that supporting company growth was either important or very important. Assuming that companies actually grow in 2010, this priority is in clear alignment with IT’s cost-reduction and productivity goals.

• Innovation takes a hit. In 2008, 69 per cent of respondents indicated that using information technologies to increase innovation was either important or very important for 2009. This year, that number dropped to 60 per cent. Whereas 31 per cent indicated innovation was very important last year, just 23 per cent did so in this year’s survey.

Forrester’s survey also found that the majority of organisations plan to increase their focus on three main software initiatives. These three initiatives align with the aforementioned priorities and include tighter controls over software spend justification, reprioritisation of investments for cost savings, and reduction of waste and duplication. In 2010, IT organisations will: • Prioritise projects that yield cost savings. Although many IT organisations have already been performing this activity over the past year, 64 per cent of IT software decision-makers intend to increase their level of activity in this area. Only two per cent reported that they would begin decreasing focus on this priority. Increase in this activity is significantly higher in enterprises (70 per cent) than in SMBs (59 per cent). • Review the application portfolio to reduce waste and duplication. Nearly 55 per cent of IT organisations will increase their efforts to reduce the application portfolio by identifying waste and duplication. As would be expected, this number is even higher (60 per cent) in enterprises than in SMBs (48 per cent). • Increase RoI justification for software projects. Establishing and increasing RoI justifications has been in the works for many IT organisations for the past several years, and interest will only increase in 2010, as 50 per cent of organisations indicated that they would be increasing their level of activity in this area. Enterprises, especially, will increase their focus on ROI justification, with 55 per cent indicating an increase, in contrast to 45 per cent of SMBs. IT will require Frameworks to drive reprioritisation and justification

Forrester believes that the success of IT’s 2010 efforts will require careful evaluation of existing assets and planned investments. For the most effective, prudent, and efficient decision-making, and to help squeeze in innovative projects, CIOs must adopt frameworks for evaluating the effects of their software decisions. For example, Forrester’s TEI methodology can provide CIOs with a consistent and straightforward approach to measuring the return on software investments. Forrester’s Technology Investment Matrix easily classifies IT investments, serves as a useful communication tool, and verifies priorities and key metrics. Finally, CIOs should look to leverage capability maps to inform application portfolio reduction. As IT cleans out the existing application portfolio, it is important to ensure that business processes remain relatively undisturbed – especially as IT aims to enhance the efficiency of those processes. Capability maps link IT’s applications and assets to the business processes and strategic objectives they support. Adopting capability maps will make it easier to both decide upon and justify the retirement of an application.