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CIOs face global competition, more cost pressures in 2007

Innovation, global competition and staff retention are among the priorities CIOs should focus on in 2007, according to columnist James Champy.

There is always opportunity in complex and confounding business conditions. Can you be smarter than your competitor and make the best of a challenge? That's the way I view the year ahead. Nothing will get easier.

IT will continue to face the pressure of keeping costs down, while delivering more value to customers. To be successful in 2007, IT organizations need to anticipate what's ahead and focus on the following four areas:

  • IT budgets will continue to increase modestly but will be subject to closer scrutiny.

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    Every company I know -- with the exception of petroleum companies -- has put itself under cost pressure in order to compete. The pressure will become more intense in 2007. Even small to medium-sized companies will feel the competition from offshore providers. I receive more than a dozen email messages a day from an offshore provider trying to sell me something -- from drug prescriptions (competing with the local pharmacy) to applications development services (competing with Accenture) to wristwatches (competing with the guy on the street corner).

    But in 2007, companies will become more aware that they cannot compete on price alone. Pressure will increase on IT to be more innovative in creating value for the company's customers. As you feel the pressure to produce more with less, you may be confounded by the fact that your company is still profitable and accumulating a lot of cash. It may just not want to spend it.

  • IT talent will remain in short supply; pressure to increase compensation will intensify; but your people will feel increasingly disconnected.

    The prediction that offshoring IT services would put thousands of U.S.-based IT professionals on the street has not materialized. In some companies, people have been displaced, but finding an IT job should not be a challenge. There are thousands of IT positions going unfilled, the result of a significant decrease in interest in engineering and computer science in the U.S. Companies are being forced to go offshore to find the talent.

    This means salary pressures are likely to increase in the States. Onshore IT talent will cost more, at a time when companies are looking to reduce costs broadly, putting people under more pressure to increase productivity.

    But even as salaries increase, there is still evidence that people are disenchanted with the workplace. They feel they are working harder but not sharing in the rewards of the company's success. Several studies indicate that executives and shareholders are the principle beneficiaries of recent productivity improvement. In 2007, workers will demand more of the pie and certainly more of your attention.

  • Offshoring will be politically challenged but won't slow down.

    With changes in Washington from the last elections, there will be more noise than action -- but moving work offshore may become more challenging. This is a dangerous condition, since no protectionist economy has ever produced competitive companies. Keep looking at the best place to do your IT work. The power of the global economy is too strong to stop.

  • Everyone will be looking for technology's next big act, but the biggest news may be the Wii you get for Christmas.

    Line executives are always worried that some big shift in technology will obsolete what their company is doing with IT. If you're reading the popular business press, you may think that Google will take over the world and that soon you will get all your IT services over the Internet -- for free.

    Services like Google certainly have a lot to offer the corporate environment, but it will be many years before a true IT utility emerges. This won't happen in 2007, although it will be a good year to look at what Internet services are providing and ask hard questions about whether they can supplant your corporate services.

    This may also be the year when the entertainment value of IT will appear to exceed IT's business value. I had the opportunity to try out the new Nintendo Wii over the Thanksgiving holiday. The technology is incredible. I played golf and tennis, bowled and drove a truck at high speeds through realistic landscapes -- all in the comfort of my living room. The Wii wireless, handheld device sensed my motions with great accuracy.

    Maybe we will soon simulate the corporate environment on a flat screen and play corporate games. Oh well, that will probably come in 2008.

James Champy is chairman of Perot Systems Corp.'s consulting practice and head of strategy for the company. He is also the author of the best-selling books Reengineering the Corporation, Reengineering Management, The Arc of Ambition and X-Engineering the Corporation.

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