In 2007 IT Directors can look forward to a change in the business environment, with more mergers and acquisitions, and more privately held firms, still further software supplier consolidation, and an explosion in ‘software as a service’ offerings.

At the beginning of the year, IT Briefing highlighted change management, governance and sourcing as things for CIOs to address in the year ahead. We said the introduction of the Companies Act would force the IT function to take on increased responsibilities, and we also predicted an increase in the use of IT for business innovation. Better internal marketing of the IT function would be a higher priority in 2006, whilst recruiting the right skills would become a really big concern for many IT Directors.

Many of these issues are still with us as we move forward to the New Year, but the climate is continuing to evolve, and we aren’t talking about global warming here, not yet anyway. There is little doubt that IT Directors have taken on increased responsibilities. The Harvey Nash annual survey of CIOs gives the concrete evidence (see last IT Briefing), and there has been a very positive more towards really using IT for business innovation. Look at the likes of the Royal Mail and British Airways to name but two good examples of companies using IT innovatively to enable their businesses. But the underlying patterns of delivery by suppliers and vendors is beginning to change, as well as some of the fundamental business structures in the economy, and it is these changes that CIOs should be aware of moving forward into the year ahead.

James Governor, founder of leading analyst firm Redmonk, says we should expect big leveraged buyouts in the year ahead with venture capitalists leading the acquisitions and asset stripping. “Software companies will have to look beyond their laurels,” he says. “There is much to gain from avoiding the increasingly rigorous legislation on the table for public companies by taking them private, and from a management perspective there are both threats and opportunities in this.”

For customers it could be a nightmare position, according to Governor, who compares it to the uncertainly surrounding that leading brand Manchester United, when it was taken into private ownership. “A thriving, profitable business instantly became saddled with chronic debt,” he says. There is nothing inherently wrong with being private, but it changes the management outlook when a company becomes privately owned. This environment may change the expectations of the companies as venture funds begin to dominate the landscape, and may cause friction, especially if the new management board then begins chopping up the organisation.”

Governor believes there will also continue to be a lot of merger and acquisition activity, especially in the software space. “Put it this way, if you aren’t already an Oracle customer, by the end of 2007, you will be,” he says.

“Software as a service will start to explode next year. People have learnt that they can have their own infrastructure with no built in service levels, or they can just buy a service level. This will happen across all three spaces, enterprise, medium and small organisations. It won’t just be salesforce.com doing it, and it will effect all sorts of different functions.”

Governor cites online enterprise documentation services and on-line brand management as two of this year’s service success stories. “Documentation is a good example. Just buy the service, and then download printouts when you want them. What could be easier or more cost effective,” he says. “Then there are companies like Magus, which manages brands, and company’s online brand compliance. You can expect to see much more of this.”

Another topic that will increasingly appear in everyone’s inbox is climate change. The tighter green laws coming into play in January, and increasing concerns about global warming will both have an impact on the IT department. Cutting energy use and adhering to the new laws, as well as being a necessity from a business point of view, are now firmly in the corporate social responsibility space, and appears in black and white in many company reports. Of course IT is at the forefront of this. The WEEE (Waste of Electrical and Electronic Equipment) directive is aimed squarely at electronic equipment and computer manufacturers, whilst concerns about the amount of energy used to power data centres and office computers are becoming public everywhere from the Guardian to the Daily Mail. This isn’t going to go away, and could be another argument for going along the on-demand hosted route, as then you won’t have the energy efficiency problem, you host supplier will.

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Keeping and developing key skills in the right areas will keep IT Professionals in great demand. Vista, web development and security will took the list in the year ahead.

2007 will be year of Vista – planning for Vista that is, and for IT Professionals who have the right skills it will become a bean feast, according to James Governor, founder of analyst company Redmonk. “Get up to date on Windows and desktop skills,” he says. “This will take some retraining, but the opportunities will be amazing, with pilot projects beginning, and large enterprise plans for the new operating system and the new Office suite taking shape.”

Microsoft launched the business version of Vista last month, but most analysts think corporate uptake will be slow, mainly because in most cases a lot of background work will need to be done first. This is good news for IT Pros who haven’t already familiarised themselves with beta versions of the operating system as they will have time to get up to speed. (See IT Briefing April 06). In two years time most analysts believe that Vista will probably dominate corporate desktops.

Although the Microsoft product launches are dominating the headlines, IT professionals should also take a close look at the compliance and regulatory arena as there is likely to be a lot more work available here too, according to Governor. “There will be a tightening of the data protection legislation in the UK, which could mean skilled specialists in this arena will be in high demand.” 

For the last two years data protection has been a much stronger requirement in the US than in Europe and the UK, and many in the industry believe this will have to change. “In the US if there is a breach in personal data then companies have an obligation to tell their customers,” states Governor. “In Europe this is not yet a requirement, but given the recent events at Nationwide Building Society where a potential breach was not made public for three months, things are likely to change. Look at for specific legislation over the next 18 months to harmonise legislation with the US. Maybe the UK will pull its finger out and take customer privacy seriously at last, after this latest public breach of security. The laptop stolen from the Nationwide employee will have been incident one too many for the FSA – it may take until 2008, but it is coming so make sure you have the right skills.”

Security sits alongside data protection, and will continue to be an important issue for the IT function, particularly as the mobile workforce grows. So any investment in training in security related technical skills should bring big returns over the year ahead.

The most significant regulatory legislation on the horizon is Mifid – the Markets in Financial Instruments Directive – that is an attempt by Europe to update the regulations around investment banks. The directive was due in April this year, but as few were ready has slipped to November 2007. “As with many of these directives in the financial services space no one had really done very much work,” says Governor. “The firms are all in the ‘dog ate their homework’ phase, so there will be huge opportunities here as companies desperately try to get ready.” Predictions for the cost to the industry of implementing the changes needed to comply are around £1bn, so there should be plenty of work to go around.

Another vertical market that will be on the look out for hot IT Professionals next year is retail. Many of the larger retailers are about to begin significant projects, or are in the midst of integration and consolidation programmes. Many are ramping up their e-commerce offerings, CRM systems, use of business intelligence tools and supply chains, so demand for skills in these areas is likely to increase over the next twelve months. Web development, database and CRM skills are especially popular at the moment, so IT professionals would do well to make sure they are skilled up in these areas.

Governor adds: “From a hiring perspective, if you are in the compliance, web or the security space there are brilliant prospects for you in the year ahead.”

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Vista arrives at last

Microsoft finally launched its latest operating system Vista for business users last month. It is two years late, but according to beta users is well worth the wait. Analysts have predicted that large-scale moves to Vista will begin in about a year’s time. The company says the operating system will be much more secure than previous versions and comes in six versions, from low entry, simple versions to full blown enterprise. It has also launched the latest releases of its Office and Exchange software.

IBM speeds up upgrades

Making the most of the Vista launch, IBM announced provisioning software that helps speed up deployment for Vista customers. It reduces the time it takes to manually deploy or upgrade a computer, including an operating system deployment, to less than a minute. Tivoli Provisioning Manager for OS Deployment, helps organisations automatically install or upgrade operating systems on thousands of servers, laptops and desktops simultaneously. Instead of physically installing the operating system with installation disks at every location, IBM customers can install operating systems from a centralized "dashboard" in a matter of minutes.

Partnerships answer skills shortage

An overwhelming proportion of IT managers have expressed strong concern over a perceived shortage of skilled IT workers in the UK, according to HP’s sixth annual Pressure Point Index (PPI) survey of 200 UK IT managers. The company believes this strengthens the case for UK businesses to work with trusted partners to bridge the skills gap. The survey results found nearly half of those surveyed worrying that they carry too great a workload and have difficulty managing their work-life balance. Also 39% of managers worry about how they personally can make an impact on their company’s performance and, today, just under a third worry about their job security.

IT departments feel that their businesses are not fully capitalising on what IT brings. Indeed, many IT managers feel that they are more connected to their firm’s overall business strategy, with 63 percent expressing commitment to aligning IT with their company’s overall business strategy.

Downloads hit £16bn in UK

UK PCs are storing over £16bn worth of music, movies and software, according to a recent study by Orange.  British people store over £350 of downloads on their hard discs, comprising £180 per computer of music downloads, £110 of software and £50 of films. People in the North of Scotland are the biggest downloaders, and one in 20 of all UK downloaders store the equivalent of £500 worth of music content on their PCs.

Energy costs growing fast

As public perceptions about climate change continue to make the headlines Gartner has warned of energy and cooling problems ahead for many organisations. It says many are increasingly deploying more computing power, but, by 2008, 50% of current data centres will have insufficient power and cooling capacity to meet the demands of high-density equipment. The advent of high-density equipment like blade servers, many data centres have maxed out their power and cooling capacity. The electrical cost to cool the data centre can equal or exceed the power to energise the equipment. The heat produced by this high density requires new solutions in power and cooling management, specialty-cooling solutions, data centre design and layout, and processor efficiency, the analyst has warned. Energy costs will emerge as the second highest operating cost in 70% of worldwide data centres by 2009, it says, however, innovation during the next three years will emerge to substantially mitigate the power/cooling issue.

Bracknell HQ for HP

HP has closed its Reading, surrey site, moving the office and staff who were there to the HP office in Bracknell, which will become the new HQ for HP in the UK. The relocation is part of the HP Workplace Transformation Program (HPWT). HP plans to utilise a significant proportion of the savings associated with closing Reading to upgrade their Bracknell site through enhanced technology infrastructure, improved productivity and a common HP look and feel. The changes will help HP to create a flatter, less complex, organisation that is easier for customers to do business with, and will also achieve improved operational efficiencies by providing a flexible state-of-the-art working environment for employees, HP says.

Big blue buys Vallent

IBM has agreed to acquire privately held Vallent, a leading supplier of network performance monitoring and service management software for wireless service providers worldwide. Vallent's software helps service providers manage the performance of their network infrastructure through monitoring and reporting problem areas such as dropped calls and traffic bottlenecks. It also helps operators improve wireless service quality and identify network problems before they impact a customer's experience. The company says the combination of Vallent's software and IBM's management capabilities will enable service providers to deliver and manage end-to-end high services across wireline, wireless, IP and converged fixed/mobile network infrastructures.

E-commerce cash up to £5m a month

Online cash transactions through Ukash have climbed to over £5m a month, only seven months after the system went fully live in the UK. The e-commerce cash payment operator is selling around 200,000 cash vouchers a month, with an average transaction value of £26, and is seeing 31% month on month growth. The vouchers are being used to buy goods and services online from more than 300 merchants, including Ladbrokes, Skype, EMI and Cyberdog fashion.

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