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Few IT organizations have expertise integrating IT after a merger and acquisition (M&A) activity, yet business success is dependent on IT's successful integration. Without a well thought out and effectively managed plan, IT risks an incomplete integration, business frustration with its capability, loss of critical staff, higher costs, and an unnecessarily complex environment.
Today, organizations spend millions of dollars on technical solutions and process improvements but still feel vulnerable. Security is a function of people, process, and technology working in concert, but often the people aspect of security is ignored. An effective security awareness program goes a long way to address people security and makes organizations look and feel more secure.
Growing IT visibility has triggered a significant interest in IT governance and improved management of IT. During the past few years a number of frameworks have proliferated to help IT organizations improve overall governance, accountability, and service delivery. Many of these frameworks are not mutually exclusive, and a good understanding of their focus, strengths, and weaknesses is essential for all IT managers.
Firms increasingly operate and compete as part of networks of functions and companies -- Forrester calls these Digital Business Networks (DBNs). Organizations participating in DBNs provide one or more of three specialist services: brokerage for orchestration, transformation for value creation, and customer interactions for responding to the ultimate customers' needs.
As they did last year, growth-hungry CEOs are likely to pull the innovation lever to drive profits in 2006. However, inadequate governance models, ineffective invention-to-cash processes, and obsolete technologies won't help firms successfully meet growing innovation demand. Bold CEOs must commit their firms to five New Year's resolutions that will upgrade innovation capabilities for growth in 2006 and beyond -- and learn from best practice examples.
We interviewed Forrester's services analysts as well as executives at major service providers to uncover key trends that will shape the sourcing market in 2006.
Business units in some firms are nurturing IT-enabled business innovations -- seeking new products, services, and business models outside the purview of the IT organization itself. Examples from NASDAQ and Reuters illustrate the reality that some types of IT organizations do not always have a seat at the business innovation table, while other types must work hard to retain their partner role. But IT has a role to play, even when innovation is happening outside its purview.
Not only do different parts of the enterprise maintain different views and definitions of risk -- within the IT department a fragmented approach to defining and managing risk exists. IT risk is more than IT security and includes project risk, architecture risk, vendor supplier risk, customer satisfaction, and more. IT is taking a seat at the enterprise risk management table, which in turn requires that IT develops an IT risk management strategy.
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To Our Management Colleagues (Within And Outside Of IT)
It's definitely looking a bit cloudy out (and not just in Cambridge): Our recently surveyed CIOs and IT decision-making execs are a bit more cautious these days. The Q4 CIO Confidence Poll data showed a drop of 17 points in CIO sentiment about future business climate. See CIO Confidence Poll: Q4 2005.
And inside the world of IT, as you no doubt can see from your own jobs, IT spending plans have pulled back from a year ago -- now projecting a 3.2% growth rate in 2006 versus 3.9% anticipated one year ago. Staffing accounts for 40% of IT budgets. New investments account for 20% of IT budgets, while maintenance and operations spending levels have grown to consume an average of 80% of total spend, from 76% one year ago. Forty percent of responders said they would cut legacy costs in 2006. See North America's 2006 Enterprise IT Spending Outlook.
So our featured document this quarter on managing legacy spend will help you decide what you should do with which legacy application: leaving it as it is, modernizing it, replacing it, or retiring it. It's a must-read for IT and business execs perplexed by how to get control of the beast. See Got Legacy? Four Fates Await Your Applications.
We have also included links to our most recent thinking on a wide range of topics, including the CIO playbook for M&A, insights about innovation and R&D, and IT governance, including management frameworks like COBIT, information security, and enterprise architecture.
And this quarter, capitalizing on the technology underpinnings of Digital Business Architecture, we are introducing Digital Business Networks: a framework for functions and firms to reach the next level of meeting customer needs, enabling them to become part of a network of specialists. Becoming a DBN will depend heavily on IT's ability to reflect and respond to changing processes with changing technology.
All the best -- and I hope we will have a chance to chat at Forrester's IT Forum 2006: GigaWorld in Las Vegas!
Laurie M. Orlov
Vice President, Research Director
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Got Legacy? Four Fates Await Your Applications
Organizations have wasted untold millions on purported one-size-fits-all solutions to their legacy application issues: dump the mainframe, rip and replace, move it all to Unix, and, most recently, outsource it all. As they adopted these solutions, IT managers slashed application maintenance budgets to dangerous levels to fund these efforts. Despite those efforts, today, most organizations are no closer to a permanent solution than when COBOL was the predominant programming language and indexed file access methods were considered revolutionary technology. Several recent trends indicate that IT organizations are ready for a break with the past. Service-oriented architecture is a viable "future state" target, and IT managers are now admitting that they will keep some legacy applications much longer. In combination, these two factors are driving vendors to offer complementary tools and services to enable application reuse, and they are heightening interest in application
portfolio management tools to create application metrics and visibility into IT activity. The stars have finally aligned to enable knowledge-based application rationalization and modernization.
Upcoming Forrester Teleconferences On IT Management
Forrester Teleconferences are live, interactive, hourlong teleconferences incorporating a simultaneous WebEx slide presentation by a Forrester analyst, followed by an open forum for questions and discussion.
Five Steps To Effective Security Awareness
Khalid Kark
March 2, 2006, 11 a.m.-12 p.m. Eastern time
Best Practices For Managing Global R&D Operations
Navi Radjou
March 8, 2006, 1-2 p.m. Eastern time
Planning For M&A Integration Success
Alex Cullen
March 15, 2006, 11 a.m.-12 p.m. Eastern time
The Prescription For Risk And Compliance Myopia
Michael Rasmussen
March 23, 2006, 11 a.m.-12 p.m. Eastern time
Miss A Forrester Teleconference?
Recordings of past Forrester teleconferences are now available for download on Forrester.com.
Upcoming IT Management Research
The IT management team will be publishing a great deal of research during the next few weeks. Here is what we're most excited about:
- Transforming R&D Culture For Dynamic Growth -- Navi Radjou
- Segmenting IT To Match The Business -- Laurie Orlov
- The Forrester Wave™: Governance, Risk, And Compliance Platforms, Q1 2006 -- Michael Rasmussen
- CISO's Playbook For IT Security Metrics -- Khalid Kark
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