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2006 Information Technology Trends for CIOs

  Article published in DM Direct Newsletter
February 17, 2006 Issue
  By Scott Gnau and Ron Swift

We've read the predictions of analysts and the consensus is that information technology (IT) budgets will grow moderately in 2006. However, which trends from among many will affect specific market spaces? Which will affect the CIO's capacity to positively influence business performance?

Based on a number of highly visible implementations and cases, the central driver of IT-enabled business performance in 2006 will be advanced analytics in an integrated information environment. We expect to see many more companies migrate to an enterprise data warehouse (EDW), which demonstrably provides uniquely correct and detailed answers to any question, any time, anywhere.

Imagine the advantage for the decision-maker who can get an accurate, actionable answer to any complex business question from his BlackBerry, linked to the company's EDW in real time. Will this be you in 2006? The demand for "anywhere, anytime business intelligence" has never been greater. Executives will ask more what-if questions - and they'll expect predictive intelligence on demand - because the need for business insight is leading to an ever-greater requirement for business foresight. With EDW-driven predictive analytics, you really can be the first to know what - in detail - is most likely to happen next. The value of that information can be incalculable.

Dell, Wal-Mart and other EDW users know the business value of an EDW, and they are growing them annually by multiple terabytes. Watch what happens in 2006 and we will revisit this in early 2007 for a reality check. Yet this is only one of many trends we foresee in 2006. Our extended outlook for the year ahead follows.

ERP Improves, but Advanced Analytics Rule

The growth that the enterprise resource planning (ERP) world has experienced is over. ERP vendors will buy applications to fill those gaps in their capability roadmaps and look to consolidation. Yet this will only lead to further maturity in ERP. Usage patterns and performance requirements for the ERP stack will change. Plus, there are new packages to install, different skills to acquire and more. Organizations will require ERP and non-ERP data for full value.

Again, with the prolific growth of data volume and complexity, plus these added applications, the company's data infrastructure will become a pain point. Thus the growing need for scalable, integrated information environments.

Tom Davenport, Babson College scholar and author, has energetically promoted the exploitation of advanced analytics as the single most important business differentiator in the years ahead. He has said that increasingly, analytics will have a primary rather than supporting role in competitive strategies. He has said that businesses will "compete on analytics." We agree.

Davenport states that analytics-based competition is primarily based on process optimization, doing business better than anybody else by having a better understanding of the business, the customer, the competition and the forces that shape it all. This comes with advanced analysis of detailed information.

Look Closely at Compliance Applications

Expect an explosion of new applications that will help organizations to respond to new regulatory standards. CIOs must devote resources to understand the internal privacy and data security needs of constituents - and select vendors that propose effective solutions. You'll have to choose point solutions for specific compliance requirements or look at compliance applications for reporting from a larger store of critical corporate data.

The Quest for Bulletproof Data Security Continues

Data security is no longer just an IT issue - it has become an executive-level priority. In a recent survey of 1,300 CIOs representing $57 billion in IT spending, security scored the highest in terms of technology priorities. Explosive growth in data volume and complexity, with terabytes of sensitive consumer information, sparks security concerns. Executives operate in a global environment with multiple office locations, sometimes involving thousands of employees, customers and suppliers, plus a large virtual workforce. CIOs will take strong measures to protect their enormous data assets.

Requirement for Service-Oriented Architectures

This is a "break and fix" strategy, not an "add-on effort" like adding a new application. Most current organizations don't have the foundation to implement a service-oriented architecture (SOA), which requires a well-designed architecture as well as deep data integration. In fact, data integration will be a key differentiator here. And please note: without common product taxonomies, integration of disparate data will fail. Additionally, these applications could also spawn large amounts of data traffic across the enterprise, creating cost and management issues.

CIOs are at risk here, because if not done properly, business systems could collapse under their own weight. Systems must scale, and again, include analytics.

Getting Value from Open Source

Contrary to misconceptions, deployment of open source operating systems isn't completely about cost savings. Purchasing an open source operating system and deploying it comes with a price tag. CIOs must discover how they can achieve value from deployment. Open source provides real-time innovation across a worldwide group of developers and will allow for quick adoption of new technologies. At the same time, in this collaborative scenario, it will become critical to manage new versions and releases for a large enterprise. In this way, costs will shift from pure licensing to a mix of inexpensive licensing and more expensive support infrastructures.

Improve Business Processes through IT

Business process owners will increasingly depend upon IT to refine and improve their efficiencies and effectiveness. IDC analysts report that "automating the business process set makes more sense than building discrete integration (and analytical) software into every separate application." We also predict that rules-driven, event-triggered, exception-based reporting will go mainstream. Process owners will adopt event detection to optimize a variety of business processes.

Real-Time IT Must Drive Decisions and Results

CIOs will be challenged to present a return on investment (ROI) model that addresses business value - not just IT value. Moreover, IT will further align with functions across the entire value chain. CIOs will be evermore accountable to contribute to the organization's bottom line. In 2006, the CIO becomes the new best friend of the CFO.

At the core of this will be the near-real time EDW. Intelligence must come to decision-makers in a dynamic context that's unforgiving of data latency, which becomes decision-making latency, which becomes tactical execution latency, which in turn becomes a cycle of missed opportunities for the business. Lost minutes can lose millions. Advanced analytics in near-real time on an EDW will certainly become perhaps the single most important driver of success in 2006 and the foreseeable future.


For more information on related topics visit the following related portals...
Analytics, Business Process Management (BPM), Compliance, Disaster Recovery/High Availability, DW Basics, Open Source and Security.

Scott Gnau is vice president and general manager of Teradata Research and Development.

Ronald S. Swift is vice president of Cross-Industry Marketing Solutions for Teradata, a division of NCR, and an internationally known consultant, author, visionary and strategist in the areas of analytical marketing, customer management systems, enterprise data warehousing, financial management, demand and supply chain support, and electronic commerce. Swift is the author of the book, Accelerating Customer Relationships (2000), and is currently working on another book on the subjects of increasing customer value and the new economics through analysis of integrated customer, supply and financial information. He also is a popular lecturer at major conferences, universities, symposiums, executive forums and leading business schools. Contact him at ron.swift@ncr.com.

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