Investing During the Downturn
October 14th, 2008
CIO’s as Investors
CIO’s are required as a primary role to be investment managers. The company is acquiring technology assets and we carefully choose our investment strategy against a matrix of objectives. A primary objective is to select solutions which exceed or can be extended to exceed the requirements of the business, so that these solutions are flexible, extensible, and can grow with the business. At the same time we are required to invest wisely. CIO’s spend much of their time managing the selection process, managing the resulting investment portfolio, and assuring returns. On the whole, too few CIO’s have made the switch to open source and SaaS based sourcing strategies. This latest downturn should change all that.
The Old Model
Fundamentally, the model within which these investments have been made in the past, focusing on perpetual license models, is obsolete. In good times, it is inferior simply due to the large inordinate up-front cost to acquiring technology. In an economic downturn, it’s worse than inferior, as the company finds itself with sunk costs that cannot be recovered in lean years. There is little opportunity to reduce the expense of the technology by reducing it’s usage when we are trapped into a fixed cost to maintain the original predicted volumes.
Time to Change
As sound investment managers, all CIO’s should use this opportunity to get on board with open source and SaaS based technology investments. Bad economic times can be a perfect time to swap out old investments for new. The cost model is so fundamentally different, that in many situations you can select and deploy new open source or SaaS solutions for less than you will spend to pay up on annual maintenance, and support for an existing old model investment. Simply put from the vantage point of an investment manager, the approach, is sound investment practice.
October 16th, 2008 at 10:07 pm
Doug,
good point about the compelling need to consider SaaS delivery, particularly in the current economic context. Though, you should approach SaaS with caution. Some caveats -
* Data integration strategies - how do you integrate one SaaS vendor with another (SaaS or internally hosted system)? the current solutions, presumably SOA based web services, touted by many of th vendors are yet to be proven fully.
* Provisioning/De-provisioning considerations - for each SaaS provider, you need to have some kind of manual mechanism.
* Authentication - tied to the previous point, how do you integrate with Active Directory which is inside the firewall? Again, most AD integration solutions provided by vendors are yet to mature.
Overall, SaaS works well from the standpoint of quick to deploy, lower initiation costs, does not require infrastructure investments (nothing significant). The proverbial “but”… you need to go in with your eyes open about the total cost of ownership, given the implications of the caveats I have mentioned above.
Venkat
October 17th, 2008 at 8:23 am
Thanks Venkat - some earlier posts of mine point to these challenges, oft repeated in the press, and they are valid. We are in “phase 2″ of our Saas/OSS adoption strategy, and have adopted MyOneLogin from Tricipher for SSO, and Boomi for any integrations our SaaS vendors have not already provided (order-to-cash process for instance is pre-integrated by Intacct/Salesforce so we don’t worry about that one). Thanks for the comment