Hi, I'm Stacy Smith. I'm the vice president and chiefinformation officer for Intel Corporation. Today, I'm going to talk to youabout the economic situation that faces IT or what they call internally, theabandon all hope for CIOs graph.
So, let me start here, and what I'm going to show you is thevarious economic climate that a company may face. So, what I'm drawing here isthe revenue line. You have a situation where revenue is growing; all theemployees are pretty happy. Revenue starts to flatten out. The employees getsad and revenue starts to decline. This is where you get a new CEO and all theshareholders are mad. So we call this the revenue line. Underneath that, I'mgoing to draw the demand for information technology and so what happens is, ina situation where revenue is increasing, the demand for IT actually increasesby more than the revenue. This is the time where you're adding new salesoffices. You might be adding factories. You're connecting to new customers andso your demand for applications and infrastructure grows.
As revenue starts to flatten out, your demand on ITcontinues to increase. You might be looking at IT as an opportunity to doautomation in the space or to reduce other kinds of costs. For instance, atIntel, when revenue starts to flatten out, we encourage employees not to traveland so what we see is that our phone and network usage goes way up in thecompany and similarly, as demand starts to decrease, you start to look at IT asa way to offset other kinds of spending. So you might put in factory automationto avoid adding new factories or hiring new people and so we'll call this linethe IT demand line. And then the third part of this is the budget, and this isthe part that is abandon all hope for CIOs. So in a situation where the revenueis increasing, if you work for a really forward-thinking company, you're goingto get some increase to your IT budget. But it's always going to be less thanthe amount of revenue increase. As revenue starts to flatten out, typically theinvestment that you're making in IT will decline a little bit and as revenuedrops, the investment that you make in IT could decrease pretty significantly.So we call this IT investments and what you'll notice is, in every one of thesescenarios, the demand for IT increases by more than revenue and the ITinvestment role increase or decrease and create a gap between the demand andthe investment dollars.
So, there's two ways that you can balance this equation. Thefirst way is, you've got to find cost savings. You've got to find creative waysto reduce significantly the cost that you have going on inside your IT shop sothat you can help to create dollars to invest in new capabilities. So someexamples of this at Intel is, we found that, as we take our design engineeringorganization from some proprietary base systems to standards-based Intel,Linux-based servers, we can actually save hundreds of millions of dollars incapital cost. Those are the kinds of things that you have to do in order tofind the dollars to invest in new capabilities. The second thing you have to dois, you have to be able to articulate the business value in the investmentsthat you're making in information technology. We have to be able to competentat a company level with investments in new factories and new products and we haveto show that the investments we're making in IT actually are giving us a biggerreturn in the investments that we make in some of these other areas.
So the morale of the story is, in the way that we can avoidthe abandon all hope graph is, a company has to be able to drive cost down at arate that's faster than the budget cuts and they have to be able to plough newinvestments into creative areas, so they bring strategic competitive advantageto the company.
