The Return of Risk and Leverage

2004 will be the year the IT also-rans are exposed while the scrappy visionaries are rewarded.

December 19, 2003

3 Min Read
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IBM Chief Financial Officer John Joyce, in a speech to Wall Street analysts this month, reiterated earlier comments by CEO Sam Palmisano that technology buyers "are starting to take some risks." Well, if they're just starting to take risks now, it may be too late; 2004 will be the year the IT also-rans are exposed while the scrappy visionaries are rewarded. To quote a line oft-repeated in The Shawshank Redemption: "Get busy livin' or get busy dyin'."

Which other business technology trends will emerge in 2004? If risk taking is making a comeback, risk management will emerge as a formal process at more organizations. In terms of assessing business, financial and legal exposure, risk management is already a formal function within the largest companies, especially in highly regulated industries. And in terms of IT, decisions on information security and disaster recovery already require formal risk analyses.

But risk management increasingly will be factored in to the ROI analysis of technology architecture decisions as well. Companies must ask themselves: What are the risks of moving to (and not moving to) Gigabit Ethernet, voice over IP, storage area networking and Wi-Fi? What are the risks of standardizing on one or another CRM, ERP, business intelligence, application integration or supply chain management platform?

Another trend IT pros must anticipate in 2004 is greater pricing power among fewer, more dominant vendors. Gartner, in fact, sees more than half of current tech vendors being acquired or failing by 2005. The standing giants--the likes of Cisco, IBM, SAP and Microsoft--already are grabbing market share, and they'll gain even more pricing leverage as IT budgets loosen next year. But despite this upward pricing pressure, vendors won't have free rein over customers. Open source and other cheapware alternatives will keep the giants on their toes, and customers won't forget the negotiating tactics they refined over the past three years.

While vendors regain some leverage with their customers in 2004, expect IT professionals to regain some leverage with their employers. Hiring plans are still conservative--some 84 percent of the 1,400 CIOs recently surveyed by job-placement firm Robert Half Technology expect to maintain current staffing levels in the first quarter of 2004, while 9 percent plan to add people and 6 percent plan to cut back. But as business picks up next year--the Conference Board forecasts the strongest economic growth in 20 years--expect IT jobs to open up as well. Longer term, the overall labor market is trending toward increasing scarcity, according to the Bureau of Labor Statistics, as baby boomers retire and the economy creates more jobs. The shortage will be particularly acute among IT workers.Some of those jobs will be shipped to offshore outsourcers, but as organizations discover the pitfalls of these relationships, the shift won't be as dramatic as some pundits have predicted. Among 2,300 readers surveyed by Network Computing, only 7 percent said their companies plan to increase offshore outsourcing next year.

Is your organization anticipating similar technology, spending and management trends? What else is on your horizon? Write to me at the e-mail address below.

--Rob Preston, [email protected]

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