Cost cutting will be sacrificed for growth - Gartner

Companies are ready to stop analysing their own business and start using IT to drive growth, according to Gartner's chief

"2004 will be the year that the majority of companies make the turn from protecting profitability to driving growth." That's the latest prediction from Gartner chief executive Michael Fleisher as he kicked off the annual Symposium/ITxpo 2003.

Fleisher told the audience of 6,000 IT professionals that the days of cost cutting and control are not over, but are fading as the main preoccupation of IT and business executives. He cited indications of increased IT spending to distinguish his optimistic forecast from wishful thinking.

"Cost cutting will remain important, but it will no longer be your chief executive's number one priority. Innovation to support growth will emerge as your chief executive's number one priority," Fleisher said. Gartner predicted IT spending would increase about 5 percent per year through 2005 and take off in 2006.

If innovation means getting more leverage out of existing IT investments and taking practical steps toward new platforms like Web services and virtualising infrastructure resources, then I agree with Fleisher's assessment. It's not a return to the unbridled IT spending of the 1990's on whiteboard concepts, but involves looking for strategic opportunities to apply technology or process innovations to drive efficiencies and profitability. In other words, the ROI must be demonstrable and within a reasonable timeframe.

On the cost-control side, Fleisher mentioned the usual suspects -- outsourcing non-strategic functions, standardising infrastructure components and cutting down the number of vendors and technologies -- as key ongoing trends. However, any desire to control costs without considering the big picture is a dead end. The goal of creating a more a standards-based infrastructure, for example, should be undertaken to pave the way for the next generation of computing, not just for cutting costs. And, Fleisher noted that cost cutting and innovation will be parallel paths taken by leading enterprises, but that there will be more of an emphasis on innovating than on cost cutting in the next few years.

In a session focusing on the future of IT, Gartner analysts Carl Claunch and Al Lill drilled down on the technologies that would drive a massive resurgence in innovation during the next decade. They predicted that the next generation of computing, built around service-oriented software architecture and always-on communications, would reach fruition in the 2006 to 2009 timeframe.

Claunch predicted that 2006 would be a pivotal year for infrastructure, with improved solutions for blade management, mixed workload efficiency, distributed performance management, dynamic virtual partitioning beginning to mature. However, he doesn't expect utility computing with self-healing systems, policy-based management, commercial grids and distributed workload management to mature until between 2009 and 2014. As a result of virtualising resources and creating more autonomic capabilities, as well as the ongoing march of Moore's Law, the human cost to support an infrastructure is expected to decline significantly.

Predictably, Lill forecast that wireless networks will have a profound impact, based on the pervasiveness of wireless in hardware devices and secure wireless maturing around 2006. Combined with low-cost, low-power-consuming computing devices and displays, wireless will enable the always-on connectivity that creates demand for new kinds of corporate and consumer applications. Wireless technology, such as RFID (Radio Frequency Identification), will dramatically improve the efficiency of transportation, logistics, distribution, and retail operations, Fleisher said.

Lill also noted that wired broadband would reach critical mass -- half of those in the US who are connected to the Internet -- by 2006.

Of course, applications are key to delivering innovation, and a massive shift in software architecture is underway, according to Claunch. He predicted a dramatic shift toward service-oriented design architecture beginning in 2006. "Unlike prior object-oriented programming environments, where some amount of internal knowledge was needed to ensure correct use of an object, the Web service interface is a black curtain," Claunch said. Web services and the service-oriented architecture are built for more streamlined software development and reusability, and the composite applications can consume services on the fly as needed at execution time. Web services standards for transactions, business process management, security and other domains will greatly ease the cost and complexity of integrating disparate systems. In one of the great technology understatements, Claunch said: "Interoperability is cheaper than integration."

The next wave of technology -- the confluence of pervasive wireless, real-time infrastructure, service-oriented architecture and low power-consumption mobile devices -- will be a catalyst that could transform or kill entire industries and spawn new ones. "What's happening in the music industry is nothing compared to what will happen to the pharmaceutical, publishing, media, advertising, retail, transport and financial services industries," Lill said.

Based on where we are today, you can clearly see the origins of the predictions generated by Gartner's prognosticators. The vast majority of enterprises will move incrementally toward leveraging the confluence of technologies, in part driven by the large vendors who will have more power to set the agenda as the economic climate for IT investment improves and consolidation continues to thin out the ranks of companies in any product category.

Claiming that the confluence of those technologies around 2006 will result in massive breakthroughs, systemic industry mutations and disruptive innovations akin to the Internet (which had a gestation period of a few decades) in the mid-1990's is a stretch. But, companies should look closely at the various technologies and emerging products to determine how any combination of them can help you stay ahead of the curve -- or risk getting run over by more nimble competitors.