Credibility crunch

Do you care particularly about the bookkeeping turmoil US-based Worldcom and to a lesser extent Xerox find themselves in? No I didn't think so.

My first reaction was that they're slightly off, caught with your pants down-type stories. It may be a bit of a stretch to find an immediate Australian IT department impact beyond where there's direct involvement of these two via a subsidiary or through local investments. However, I think such scandals have a cumulative impact and it relates to trust in new technology and the credibility of companies which provide it.

While it's your job to be sceptical about any particular technology choice and do reality checks on vendor claims, you have a problem when there's scepticism about the value of IT&T investment in the first place. (Local analyst Chris Morris effectively said, "stuff this idea as IT&T now forms the corporate central nervous system", (CW, July 1, p17). Nevertheless, there's are a lot sceptical MDs, CFOs and boards out there right now. The perception is that much of this lot would rather hold off on new IT spending for a while, that they were railroaded in recent years, and are now saying no or demanding greater proof of benefit. New projects likely to get the go-ahead are those with moderate costs and which can be proven to add value to existing infrastructure. Last week I met with Boston-based Ovum VP Alan Pelz-Sharpe and put to him that the IT spend is currently in the doldrums. He disagreed, claiming the industry was just returning to where it should be - with 5 to 10 per cent growth. I also asked him about the future of IT departments (yes, I know analysts don't know everything), and he picked up the Gartner 'IT lite' line of a couple of years ago. In summary, his view is that IT departments won't exist five to 10 years from now as almost everything will be outsourced. This is already happening, with Pelz-Sharpe citing BP and Glaxo. Local notable examples include Commonwealth Bank and Westpac. Pelz-Sharpe claims that CEOs want more outsourcing, while CIOs think it's a good idea but not right now for their companies. In such a future, the 'fixit and keep it going workers' of IT will still exist, but will be employed by the outsourcers. The in-house IT department would comprise a strategic CIO plus a small number of support staff.

He claimed some of the past bad experiences of outsourcing would be overcome by dominating big players with a 'trusted brand' and the scale and flexibility to offer customisation in their services. Hardware, business applications and communications are now sufficiently reliable to make hosted solutions more feasible, he argued. You may remember how the ASP (applications service provider) model flopped, but hosted applications and other outsourcing modes will eventually dominate, I'm told. My boss suggests that analysts pitching the 'mostly outsourced, limited IT department' line are just angling to sell reports to non-IT line-of-business executives. At least one industry local managing director - Philip Belcher of Storagetek - reckons it's a flawed projection. But rather than just report on what the analysts have to say I want to hear the views of IT managers - what's your take on the future of IT departments and the IT spend? I'll happily reserve half a page (or more) for a guest column on the matter. What's your view? E-mails to david_beynon@idg.com.au.

Editor in chief.

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