MIS100 2008: Critical issues, common concerns

When it comes to sectors dominating this year#8217;s MIS100 organisations, there were few surprises. Government, health and education comprise more than half of the list, as they have since MIS100 started tracking the country#8217;s top users of ICT in the past 11 years. If at all, the variances that emerge from this annual report have been about the challenges faced by the heads of the ICT departments of these organisations, and their decisions about investments in technology and systems.

This year, the range of business challenges and ICT investments to address were more extensive than in the past two years. To top it all there were recurring themes, like the merger of software companies that some CIOs consider an inevitable issue they just have to grapple with. And for the third year, recruitment and retention of skilled staff is a key management issue facing ICT departments.

CIOs are also tasked to implement a raft of business projects with large ICT components. Virtualisation, consolidation, service oriented architecture, unified communications and business continuity are the most cited projects or investment targets by enterprises in both government and private sectors.

The result? CIOs, more than ever, are managing a complex set of activities to achieve business targets.

One CIO describes the task ahead: #8220;Technically, the challenge is maintaining an effective balance between infrastructure maintenance and operation, replacement of legacy environments, as well as bringing in entirely new systems. Organisationally there is a huge challenge around change management.#8221;

John Brand, research director of analyst firm Hydrasight, confirms this full-on agenda for CIOs in the coming 12 months.

CIOs in competitive industries will increasingly look to optimise technology support through greater emphasis on decentralisation of application development, delivery and support, he says. #8220;They will however, be increasingly challenged to understand and implement the #8216;centrally governed, remotely deployed#8217; model now required to keep up with changing business demands. This will require a strong focus on technology portfolio management, as shared infrastructure allows individual lines of business to become more flexible while maintaining an appropriate level of centralised control over data.

#8220;Successful delivery of both internally and externally-sourced technology solutions, will be required to meet increasingly aggressive business unit timeframes. Where CIOs have previously focused on managing cost and complexity, the pressure will return on delivering functionally-rich, highly-reliable and high-performing applications/information systems for various lines of business #8212; independent of where they are sourced. Both speed of delivery and speed of response will once again overtake cost, as the main business driver for the majority of Asia Pacific economies.#8221;

Moreover, Brand points out IT executives will face ever-increasing scrutiny, not only from large-scale IT project failures in the media but also on issues of environmental sustainability and social obligation.

Corporate social responsibility like green ICT, work/life balance and support for the community, as well as changing workforce demographics, will force CIOs to consider new technology deployments including Web 2.0 and social networking, he says.

The significant numbers

We take a closer look at the working environment of the CIOs in this year#8217;s MIS100.

The total number of screens of all MIS100 companies is 403,959, a huge jump from 376,514 in 2007. For the second year now, the New Zealand Defence Force reports the highest number of screens at 17,500. The average number of screens continues to grow annually. This year, the average number of screens for those in the top 25 was 9104, a jump from 8517 the previous year. This trend is exhibited all the way through the organisations in the next three quartiles (see graph A)

More than half of the biggest IT users are from the public sector. Notably, education has been dominating the list for the past 11 years. This year, there are 21 education organisations in the sector. Three universities #8212; Auckland, Otago and Massey are in the top 10.(see graph B)

Nineteen organisations are from the government and defence. Health and community services, the third largest sector, comprise 12 per cent of the total. Manufacturing organisations slipped by two points and wholesale and retail trade gained one more point, with the inclusion of Bunnings, which in 2007 was in the #8216;bubbling under#8217; category. This refers to organisations just outside the top 100. It#8217;s the same with transport and warehousing, as Mainfreight joins this year#8217;s list. In the regional distribution, Auckland (with 40 organisations) leads the list, as it did last year. This is followed by Wellington with 35 organisations. Christchurch has eight organisations this year, an increase of one per cent from 2007. Palmerston North and Dunedin remain constant this year, with three and five each respectively (see graph C).

Reporting lines and transitions

MIS100 tracks the reporting lines of the CIOs. This year, 34 CIOs say they report to the chief executive or managing director, a move up from 29 in 2007. Meanwhile, 18 heads of ICT report to the chief financial officer or the chief finance executive in the organisation, down from 25 the previous year. All the other CIOs report to a range of titles including commercial director, head of corporate services and executive director.

As in past years, MIS100 tracks the changes in ICT leadership. Four of the top 10 organisations have new CIOs: Chris Barendregt of Fonterra, Peter Thomas of the NZ Defence, Peter Lawrence of ANZ (in an acting capacity), and Greg Patchell of Telecom New Zealand. Other new CIOs in the list include Mark Marshall of the Christchurch

Polytechnic Institute of Technology, replacing Kevin Adamson who is now with the University of Waikato. Peter Winquist, former CIO of AsureQuality, is the new IT director of Unitec. Allan Dornan is the new CIO of IAG after James Dring moved back to the Australian office. Damian Swaffield, formerly of SkyCity, is now general manager technology at TVNZ. Alan Hesketh, formerly of Progressive Enterprises, has moved to the Ministry of Health as deputy director general of health, corporate and information.

Some of the shifts occurred after a major reorganisation of the structure of the IS department as in the case of Barendregt, who reports to Greg James, now director procurement IS and business processes. James previously held the dual role of chief information officer and general manager global business processes.

Vector restructured its ICT function, Andries van der Westhuizen is appointed general manager IT with the departure of CIO Hanno Schupp. Peter Thomas of Defence replaced Derek Locke, now CFO of FX Networks, and brings to Defence more than 20 years of general and executive management experience in the financial services industry.

As well, organisations in the MIS100 undergo changes in ranks. This year, the newcomers to the list include the North Shore City Council, Mainfreight and Bunnings.

Some new names on the list are a result of corporate rebranding #8212; such as Stella Travel Services, formerly known as Gullivers Travel Group. Southern Alliance is the shared service organisation for the Southland and Otago District Health Boards. Silver Fern Farms is the new name of PPCS and the shift is part of a strategy to refocus the organisation #8212; a meat marketing and processing company exporting its products to six countries #8212; as a fully integrated marketing company.

Notable shifts in terms of ranking in the MIS100 include that of Lion Nathan, number 38 this year, up from 65 in 2007. PGG Wrightson moved up from 49 to 40 and Datacom went from 53 to 44. Goodman Fielder, ranked number 93 in 2007, is 54 this year. Freightways moved up from 89 last year to 69 this year.

IT staff and the end users

ICT teams continue to grow in number and this is true for both government and private enterprises. Zeroing in on sectors, health and community services had a 56 per cent rise in ICT staff in the past year; finance and insurance, and government and defence had 19 per cent and 15 per cent more staff respectively.

The MIS100 uses the number of employees as an indication of the number of users and IT head has to support. That is why we used EFTS numbers instead of employees for the education sector. This year#8217;s MIS100 organisations employ a total of 17,315 ICT staff, with an average of 173 per site (see graph D). This is an increase from the 2007 count of 16,241 staff with an average of 121 IT staff per site. Had we included the number of outsourced staff, this number would no doubt be significantly higher of course.

Overall, each IT staff member supports on average of 23 screens (it was 31 in 2007). For those in the top 25, this figure is higher, at 27, but is highest, at 36 per IT person, for those in the 76 to 100 list (see graph E)

Help wanted

As CIOs list their goals and strategies for the upcoming 12 months, they expressed concern about the ongoing shortage of skilled ICT staff. Some CIOs implied this shortage could affect the schedule of implementation of these projects, as well as ICT capability.

The 2006 MIS100 report first touched on this issue, as CIOs then said finding quality staff was a business challenge.

Peter Rosewarne of NZ Customs does not see the problem easing soon. He says unavailability of IT #8216;talent#8217; in the market place is a concern and like many public organisations NZ Customs Service will face #8220;real challenges#8221; attracting and recruiting IT staff over the coming 12 to 18 months.

At the New Zealand Defence Force, the problem is exacerbated by the fact that most of its ICT operations, implementation and development work happens in-house #8212; and with smaller ICT remuneration compared with industry standards. #8220;Remuneration is a big area of focus both for military and civilian NZDF staff going forward,#8221; says Defence CIO Peter Thomas. He says while NZDF outsources few ICT functions, in the future this may need to change. #8220;We will need to work more closely with the industry in future to achieve our operational outputs. To enable this we will need to build long-term relationships with many of our key suppliers. There will be benefit for both industry and NZDF in this approach.#8221;

For Steve Sorsby, head of IT at the Universal College of Learning, ensuring the IT team is involved in the implementation and training of large-scale projects is one way to maintain interest and retain staff. The predicted economic downturn is expected to make staff recruitment that much harder. Organisations that can access staff from their offshore offices have an advantage, but are not immune from the problem. An example is IBM, and IT manager Doug Stuart says it is increasingly tapping its global workforce for this. EDS is another organisation with access to a global workforce, but Chris Mitchell, vice president, says recruitment and retention is a challenge. EDS will continue to invest in staff development and recruitment.

#8220;We have a range of programmes, including a talent management programme driven by the senior leadership team,#8221; says Mitchell.

#8220;There#8217;s no abatement to the skills shortage and there are a lot of big transformational changes. We are also looking at the generational aspect; keeping Gen Y and so on. We have also launched a Maori internship in New Zealand,#8221; says Mitchell.

Mergers and other business challenges

An issue a number of heads of ICT in this year#8217;s MIS100 are vocal about is the impact of the ongoing merger of software providers, particularly the global providers.

There are mixed reactions to the mergers. #8220;Each merger needs to be considered on its own merits,#8221; says one CIO who adds that the mergers have had no impact so far on the services provided to them. #8220;Whilst there may be an impact in the future, the majority of mergers are likely to make economic sense and should provide additional benefits to their clients.#8221; Another CIO points out the mergers may limit competition, but it also means more investments can be made in software applications. Smaller ERP applications may also find it easier to find IT expertise in the market. Another CIO adds that he supports the mergers, provided that legacy systems are not abandoned and future roadmaps are made clear.

One CIO says in some cases the mergers may reduce #8220;competitive tension#8221;, which can have unexpected positive outcomes. When its CRM system was bought by Oracle, he claims the latter paid more attention to them. #8220;The market cake is small in New Zealand and if it is cut too many ways it becomes tasteless. But if you end up having a big enough slice, then merged vendors will pay attention to you and we can drive value out of that.#8221;

A concern is having a reduction in choice and in some cases, this means having only one main player in the market. This is said to be already happening in an application that is very critical to one sector and an affected CIO finds this trend #8220;disturbing#8221;.

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