Overcoming Barriers to Innovation - Chief Wine Officer Event, Feb 2013


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This presentation introduces some of the current economic and industry challenges facing a number of sectors, not least Financial Services, and offers some suggestions on smart investment choices for IT innovation. As presented at the Scotland Chief Wine Officer event, February 2013.

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  • All the time, and especially in financial services, recent economic conditions and high profile industry problems have caused a backlash from government and regulatory bodies. It will be important that any new offerings from FS IT work quickly as well as complying with all new legislative requirements.IT Spending 2012 – the National Audit Office “disregarded £38 million of the savings, saying that there was not clear evidence for their existence”Source: ZDNET -http://www.zdnet.com/uk/316m-cut-from-public-sector-it-spending-maybe-sort-of-7000010191/ (23JAN13)
  • £316m cut from UK public sector IT spending in 2012
  • What do we mean by IT Debt? IT Debt is defined as the cost of clearing the backlog of maintenance to bring the corporate applications portfolio up to date.46% of them admitted that they do not know the value of their IT debt. This lack of knowledge creates a hidden balance sheet liability for those organizations as well as a growing business risk. In 2010, Gartner estimated global IT debt to total $500 billion rising to $1 trillion by 2015. Their report recommended that CIOs and IT leaders produce an annual assessment of the application portfolio to quantify and plan the reduction of their IT debt. Two years on, 44% of IT decision makers confirm that they still don’t have a structured process for measuring and managing their IT debt, or don’t know if they have one, and 45% of those without a process are not planning to implement one. There is an acknowledgement that application modernization needs to happen but the real cost is poorly understood.
  • Meanwhile, the next generation of technology is changing the face of corporate and end-user computing, and how technology is used in corporate life. The analysts and press are extolling the virtues of technology such as cloud, mobile and social media as new corporate opportunities. Many CIOs see these as in their top 3 priorities for the next few years...
  • Contradicting these beliefs, The Standish Group’s independent report Modernization: Clearing a Pathway to Success, delivers an objective comparison of the cost, risk and return on investment associated with rewriting, buying a COTS package, and modernizing a particular application. The study found that application modernization had the highest likelihood (53%) of being completed on time, on budget and with critical features included. This compares to a 30% success rate for replacing the application with a COTS package and just 4% success when re-writing the application from scratch using the latest tools and techniques.
  • We leave this introduction to today’s IT challenges with an audience question.
  • An independent survey was undertaken by Vanson Bourne in April 2012. It covered 590 IT decision makers in nine countries including UK , France, Germany, USA, Brazil, Australia , New Zealand, Hong Kong and Singapore. The respondents were from mainframe organizations with 501+ employees, covering multiple industry sectors. They were asked how they assessed their mainframe applications and whether they understood what their IT debt looked like.
  • Overcoming Barriers to Innovation - Chief Wine Officer Event, Feb 2013

    1. 1. Disruptive technologyCWO Scotland IT ReceptionBalmoral Hotel, Edinburgh, 27th February 2013Smart IT: Achieving Innovation and Growth InnovationDerek Britton, Micro Focus Backlog
    2. 2. Agenda• Current perspectives• Industry pressures• The IT scorecard• Barriers to Innovation• The road ahead – Smart Thinking• A customer’s story 2
    3. 3. Current Perspectives UK economy contracted 0.3% in the last three months of 2012 (NIESR) http://www.bbc.co.uk/news/business-20987571 GDP contraction puts UK’s AAA credit rating at risk http://business-reporter.co.uk/2013/01/gdp- contraction-puts-uks-aaa-credit-rating-at-risk/ George Osbornes pledge to cut deficit this year set to fail, warns OBR Watchdog says only implausibly large surge in tax revenues or a significant drop in state spending could help Chancellors boast be lived up to – The Independent, 21st February 2013 3
    4. 4. “Tonight we have a starkreminder of the debtproblems facing ourcountry”, George Osborne- Reuters, 23rd February 2013 4
    5. 5. • The Scottish economy moved out of recession between July and September 2012, growing by 0.6%, according to official figures. – http://www.bbc.co.uk/news/uk- scotland-scotland-business-21291786 5
    6. 6. Industry Pressures BBC News - Swiss bank Wegelin to close after US tax evasion fine (bbc.in/UkeMC3) BBC News - UBS fined $1.5bn for Libor rigging (bbc.in/ZMHWL7) Thomson Reuters is to cut 2,500 jobs from its underperforming financial and risk division (http://www.finextra.com/News/FullStory.aspx?ne wsitemid=24546) JPMorgan Chase is to cut headcount by 4,000 jobs in 2013 as it bids to save $1bn in costs (http://www.finextra.com/News/FullStory.aspx?ne wsitemid=24583) 6
    7. 7. Governance and Legislation• Bank Reform “too timid” – Daily Telegraph, 3rd Jan 2013 – Institute for Public Policy Research (IPPR) said “Customers still pay too much in fees...” – Even the problem to electrify the ring fence between retail and investment banks would not “solve the problems” (Tony Dolphin, Chief IPPR Economist)• Treasury set for £170m bank fine windfall • The Treasury is expected to get about £170m from bank fines with record penalties related to Libor-rigging and other financial scandals. • with further fines expected before the end of its financial year the windfall could exceed £200m. • Another bank is likely to settle over Libor and is expected to pay a fine of about £350m. 7
    8. 8. Governance and Legislation • Politicians and regulators have “no shortage of excuses to launch ... clampdown” – Harry Wilson, Daily Telegraph 8th October (“Bleak Future for the Banks of Tomorrow”) 8
    9. 9. The IT Scorecard 9
    10. 10. • Forrester: IT spending facing challenges in 2013, espec’ Europe – Source: http://www.theregister.co.uk/2013/01/11/forrester_it_spending_2013 _2014_forecast/• 2013 technology budgets to push up spending by 1.4% to $1.154T tr - Gartner – Source: http://www.channelregister.co.uk/2012/11/06/it_spending_forecast/• Measured as a percentage of revenues, financial services firms spend more on IT than any other industry• Financial services firms’ IT budgets equal 7.3% of their revenues, well above other industries – http://www.finextra.com/Resources/Feature.aspx?featureid=1834 10
    11. 11. • Asked if their organization was "distributed, agile, and flexible” 57% of IT leaders agreed.• 27% of businesspeople outside IT agree• Significant differences in perception between IT and non-IT employees – Source: InformationWeek survey of IT Perception. – http://www.informationweek.com/global- cio/interviews/6-ways-it-still-fails-the- business/240144288 11
    12. 12. Barriers to Innovation 12
    13. 13. The Backlog - “IT Debt” • 46% of IT decision-makers did not know the value of their IT debt (Global IT leadership research, Vanson Bourne, 2012) • 44% have no structured process for measuring and managing IT Debt • 45% without a process are not planning to implement one • 57% say they have an unclear picture of their application portfolio • Global IT debt will rise to $1 trillion by 2015 – Gartner • ... Despite over 70% of budget ploughed into “lights on” (Forrester) 13
    14. 14. Disruptive Forces• New Generation technology is taking up a lot of mindshare – Cloud – Mobile – Social Media• Gartner and Forrester agree – Gartner: Innovations to Change the Face of Business • 10 Critical Trends for the Next 5 Years – D. Cappuccio, ITXpo, Orlando, October 2012 (#1 – “Disruption”) – Forrester: Digital Disruption – CIOs, are you disruptive enough?• ...Requiring new budget, skills, technology and processes 14
    15. 15. The Road Ahead 15
    16. 16. Disruptive technologiesPressure to deliver applications on newtechnologies, such as mobile and cloud. Mobile Disruptive There will soon be 10 billion mobile technology devices on the internet (Cisco) Cloud Cloud Mobile Small business spending on Cloud will hit $100 billion by 2014 (CRN) New Architecture New Total product experiences through new Architecture IT architectures such as .NET or JVMIT debt/Backlog Innovation December 2011 NewIT Debt could rise to $1 trillion by 2015 Architecture(Gartner) Development Efficiency 70%+ of IT budget is spent on maintenance Skills and tasks leaving minimal money for innovation Development organization Efficiency Skills and Organization IT Debt Without the right IT skills, you won’t meet your current or emerging business need
    17. 17. CIOs are “investing in IT to help them emerge stronger” - (Computer Weekly Oct2012)Top three IT priorities for the next three years:• 51% listed reducing cost• 27% said upgrading IT systems• 22% improving customer experience• 20% Mobile• 18% CloudOne bank undergoing an “£80 million IT overhaul” of its “mainframe systems”• Sunday Telegraph (21st October)In 2013, IT spending is expected to increase by 5.5 percent as businesses andconsumers continue to invest in mobile devices, storage, networks and softwareapplications. - IDC Press Release, 25 Feb 2013
    18. 18. IT Innovation – Thinking Smart • Standish Group – “Modernization: Clearing a Pathway to Success” – 53% success with Application Modernisation – 30% success replacing application with a COTS package – 4% success when re-writing application from scratch • Gartner - Package: 42% chance of failure or excessive delays 18
    19. 19. A Customer Perspective: Modernization - sound practice Package 10x costCOST Rewrite 4x cost Modernize 1x cost Lowest cost Package Medium riskRISK Rewrite High risk Modernize Low risk Lowest risk Package 2-3 yearsTIME TO Rewrite 3-5 yearsVALUE Modernize 4 months Shortest time Package 0/10 competitive advantageCOMPETITIVEADVANTAGE Rewrite 6/10 competitive advantage(0 – 10) Modernize 10/10 competitive advantage Greatest advantage
    20. 20. Group Questions Disruptive technology 1: What is driving your IT priority? Innovation 2: What are your major barriers to innovation? Backlog 20
    21. 21. Disruptive technologyCWO Scotland IT ReceptionSmart IT: Achieving Innovation and InnovationGrowthBalmoral Hotel, Edinburgh, 27thFebruary, 2013 Backlog
    22. 22. Vanson Bourne Research (April 2012)Demographics – 590 senior IT decision-makers • ...countries across the globe ...a wide range of business sectors IT and software UK 100 Manufacturing 3% 11% France 100 Financial services 3% 30% Germany 100 4% Retail, distribution, tr ansport 5% USA 100 Business and 5% professional Brazil 100 Government 8% Australia 35 Education 19% 12% New Zealand 15 Healthcare Hong Kong 15 Other commercial sector Singapore 25 Other public sector ...respondents were from mainframe organisations with over 500 employees 22