Time for IT to shine

With the rise of social networking will come the decline of brand loyalty, warns Forrester. But now is also the time for IT to shine as firms look to greater collaboration with partners and customers to specify how products and services should be developed.

There's a big change coming in the way that companies interact with their customers and organisations need to be ready for it, according to George Colony, CEO of Forrester Research. Speaking at the analyst firm's IT Forum conference in Berlin this week, Colony spoke of a “gateway recession” bridging two different approaches to management and declared: “It is time for IT to shine.”

He predicted that the way that customers and businesses interact and engage will change and brand loyalty will decline, due to the rise of social networking technology such as Facebook and Twitter. These will empower customers and enable them to scrutinise and discuss brand value with other customers in a way that was not possible before. What was previously regarded as “standard” innovation is dead, he warned, replaced by a new model based on social technology. There needs to be greater collaboration with partners and customers to specify how products and services should be developed. As a result, corporate decision-makers will have to rethink their sales strategies in order to maintain position, let alone in order to acquire new business or customers.

He cited the newspaper industry as a prime example of a sector that has had to change the way it interacts with its audience. “Colleges in the US have stacks of New York Times that are given away for free, but nobody reads them in the colleges. People no longer watch TV,” he said. “Companies must sell to them in a different way -  connect to Twitter, MySpace and Facebook to reach customers.” The current economic crisis, he said, will sweep away organisations that do not grasp the importance of and utilise social network technologies. “As the recession ends, it is time for IT to shine. It is similar to 1987, when companies started embracing desktop computers or to 1997, when companies began to welcome the internet,” he said. “But what will happen in the years ahead is that IT will become looser, not tighter,” he added.

“Technology was essentially a choice before for most companies, but digital is now mandatory. The CEO is no longer able to say 'I don't understand technology'. Today's boards can no longer forgive CEOs that don't understand digital.”

CIOs need to embrace Cloud Computing

Elsewhere at the IT Forum, there was a stern warning to CIOs to come to terms with Cloud Computing or suffer the consequences. Trying to ban the use of Cloud applications or services will simply result in business units and lines of business people electing to by-pass the CIO and the IT department, warned Forrester principal analyst James Staten. "If you tell developers not to use public Clouds, they will go under the covers and do it anyway," he said.

Forrester suggests that good uses for public Clouds include specific projects, such as marketing and sales promotions, high-performance computing, and end of quarter financial results processing, as well as enabling a 'suck it and see' option for new developments. "Clouds empower the spaghetti theory: throw it at the wall and see what sticks," said Staten. He cited The New York Times as the “poster child” for how enterprises are engaging with Cloud Computing. The newspaper kept its archived article, pre-1922, on microfiche and as a jpeg file, but the articles were not available online and could not be searched. The paper's IT department said reverting all these articles, some 4TBs of data, into PDF files would use up server and storage resources and take more than a week. So they used Amazon's Elastic Compute Cloud (EC2), which was able to batch process the 4TBs of data in less than 24 hours.

The important thing is to find the areas and the businesses that are best suited to the Cloud Computing model. Staten picked out gaming companies as an example of firms which can take advantage of the flexibility and scalability of The Cloud. “If the application scales to a million users, then the gaming company is getting paid as the user base grows. Cloud aligns revenue with investment, so you can invest just in time, rather than upfront to match forecasts,” said Staten. He claims the critical value in Cloud Computing is “elasticity to supply peak demand without long-term commitment”, but he warned that the economics of Cloud Computing might not make sense for longer-term projects. “Hour per hour, Cloud costs more than traditional hosting but offers flexibility for peak loads,” he said. "The 10 cents per CPU hour model adds up. Over a month, it might even cost more than conventional hosting. It is a rental business."

There is also a danger that Cloud Computing becomes a new form of vendor lock-in. “You can be locked into The Cloud,” warned Staten. “It is also hard to move an in-house application onto The Cloud, and once you've moved them on to The Cloud, you can't move them back.”

Forrester also discussed how to get more value out of those vendors with whom customers already have a relationship and in whose technology they have already invested. The recession means that such vendors are being forced to provide better value as well as simplify licensing and pricing, according to Forrester analyst Ray Wang. In a new report, Wang examined the way pricing and licensing strategies at 12 enterprise software vendors changed between the fourth quarter of 2008 and the first quarter of this year and found that vendors are generally being more flexible at the negotiating table, especially with new customers.