At a UK IT conference, a senior IBM analyst provided some clues on what IT services will become in the future which were in short :

  • 70% of 2005 CIO budget was labour
  • Operations labour will be 73% of CIO labour budgets by 2008
  • Application development will decline at –10% CGR to 2008
  • If this trend continues, there will be not development budget left by …2012!

The first one recalled me a discussion I had with a senior consultant in France who defended the view that the best IT performance indicator was staff number. By this time I was not really convinced since I expected that IT value might curb staff importance in the discussion.

If application development declines, IT value pillar may move from functions to service level. If every company is furnished with all functions it needed, differentiation will happen then on the level of service it provides to its users and to its customers.

Decreasing returns may explain decline of application development : more and more companies are equipped, for less and less, it is difficult to find new fields to applications development.

But some fields will remain, for instance, regulatory changes will always generate functions updates, event if this activity will be outsourced to software editors as companies switch to commercial software. Composite application development and maintenance will remain too. It is not really new application development but business process adaptation, for instance to a new sales channel. Anyway, no cost, no value. Then, the true question is to reconciling costs with value.

According to me, composite application platforms are the tools which may support CIO vision as a change agent.

But, if companies are not doing progress in SOA implementation, all business process changes will remain the burden of development teams which won’t tend to decrease terrifically.

The last point is competence. Even if application changes are decreasing, IT Departments need to keep enough competence to be able to maintain applications or at least to manage maintenance. This level of competence may set the floor of development costs decrease. It is especially true during holidays periods when regular users are replaced temporarily by less experienced users. A lot of errors happen then and require competent enough people to fix problems in a reasonably time.

For me, the best driver for IT department staff size is the minimum number of competences required to manage and maintain services and operations. Least is not the best, but less should not be the most. Companies need to retain enough competences to undertake and manage changes. Otherwise, they incur the risk that their IT will be managed by suppliers.

Service operations appear to be a more attractive fount of savings with centralization and automation. Microsoft, HP, Citigroup have already centralised all their worldwide computing facilities into a few data-centers. But it is only a first stage. It opens the road for drastic improvement of automated monitoring and application management. Success of such a move rely on good level of competence and good maturity level. Low labour costs with low competences lead to poor quality. Within an industrial context, good quality save costs.

This landscape may call thoughts for local implementations. If some big companies are acting as leaders, they not represent any majority. What is the suitable company size to undertake the first step of this vision ? Smaller companies will have to rely on outsourcing offerings. Countries markets agility which helps to spread such a technology and offerings is a key factor for national companies.

The same is for commercial software. Software editors are the only means for companies to implement successfully an SOA infrastructure which is the critical factor to move toward composite applications. National markets not well covered by editors may hamper companies changes.

On the other hand, as much companies are able to manage outsourced process or to perform successfully commercial software integration as better outsourcing and software offerings will be available into their country.

In the long term, winning CIOs need to take care of the service management maturity of their organisations and to pay attention to the building of their SOA platforms. They ought to challenge carefully investments in specific development because they may delay the SOA platform. They also ought to find how to demonstrate the payoff of a full-fledged SOA infrastructure (ESB, BPM, MDM,…) which does not seem to be directly linked with business. By now capital become scarce and expensive, so the job of CIO.

Companies which will remain in application development and will not be able to move to service management and change agent, won’t be able to get the savings and the returns in time, will have to struggle harshly with competitors. Those which expect, like in the past, to set a big chunk of capital to propel changes, may be disappointed by the economic outlook.

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