Construct IT Autumn 2009 Meeting

in conjunction with London South Bank University
 
Summary (1 of 3)
The Autumn 2009 meeting was held in conjunction with London South Bank University on the 26th November in London. The theme of the event was focused on the challenge and opportunity of ICT investment & strategy in the economic downturn.
 
The day began with a welcome and introduction by Peter Rebbeck (Construct IT chair) which was then followed by Professor Barry Symonds (Head of Department of Property Surveying & Construction) welcoming delegates to London South Bank University before raising the challenge of delivering technical aspects today. Professor Farzad Khosrowshahi (Director Construct IT) then provided a brief progress update on Construct IT activities in relation to projects, events, research, and publications.
 
Andrew Gay (veteran chief executive and chairman of major businesses including CIO at The Ministry of Justice) provided the keynote around 'More for Less ... Year on Year'. Andrew began by discussing the financial challenge of the current cost squeeze where there will be no spend in certain areas and overall ICT spend will be 20% lower. He went on to raise that the delivery of ICT programmes in the both the public and private sectors have been disappointing, e.g. in 1996 $82 Billion was wasted on IT projects/programmes in the USA that were never ever implemented, which has led to a total failure to deliver any benefits. In presenting the key aspects of failing projects the question was raised of why projects are still being delivered in the same way? Andrew emphasised that the key to successful projects is all in the delivery through simple processes and systems, consistently working infrastructure, effective training, universal secure access, and sensible MIS on key elements of the business. He continued that overall Project Management is crucial and to deliver the future requirements of business (e.g. supply chain management) then this will be the most critical skill of all in delivering ICT projects. Andrew then discussed that the watershed territory of the late 1990s still exists today in relation to Y2K, emergence of ERP, the start of outsourcing, recognition of the significance of the CIO role, etc. For construction, Andrew stated that simplicity in ICT is essential. He then raised the issues that while ICT professionals understand the business they do not understand the process along with the inheritance factor of ICT implementations affecting future projects. In light of these issues, he discussed how the Ministry of Justice are taking a strategic approach to transform their portfolio of ICT through a combination of integration, optimisation, and strategy that is driven by an imperative to change. He stated that the key elements to realising success delivery is making what exists work together with the buying in of all the project team through the continuous communication of clear objectives. A number of illustrations of waste were given such as email circulation and reduction, process inefficiencies, data loss, data centre utilisation, ICT staff/payroll ratios, etc. which was followed by posing whether there were any skeletons in the cupboards of delegates? Andrew then discussed that there are a number of generic changes that need to be pursued of making the best of what exists, stopping divergence from shareable systems, moving to the next generation of networks, building in new technology and ensuring it is used, Open Source and reuse, driving the ICT profession from base education through SFIA, and working on and with the 'intelligent customer' in plain language. Andrew stressed that showing value to the organisation requires ICT behaving consistently either through low cost/price or quality. The session concluded that successful ICT is all about delivery, value for money, and benefits.
 
Following the keynote, Ken France (The Knowledge Practice) focused on IT investment in the current challenging economic conditions and the aim of the whole day of turning it on its head and exploring the opportunities. Ken began by looking at the current recession that is he stressed was extraordinary and although not all bad news the stark reality is that GDP dropped into the negative since Q1 2008. While a positive return is forecast by the Treasury from 2010 the reality is that the rate of growth will not return to that of 2005-07. In conclusion to the recession he stated that the recovery will be slow, there may be pipeline deficiency in 2011/ 2012, a further round of job losses cannot not ruled out, organisations are seeking flexibility to adjust overhead in line with reduced volume, and the return to growth forecast should unlock Capex for investment to improve cost effectiveness in IT. Ken then went on to present some highlights of the first of a series of three IT benchmarking surveys in conjunction with the National Computing Centre and Construct IT focused on IT usage, expenditure trends, IT strategy and plans for organisations operating in the UK construction industry. The first in the series on 'cost reduction and cost effectiveness' aimed to survey IT expenditure and coping strategies in the top 200 firms and received detailed responses from 40+ companies (20%) representing contractors, professional services, and house builders. In terms of the headline findings, Ken discussed that there has been a hard check on Capex from late 2008 with IT upgrade projects having been postponed, a significant reduction in IT contractors, initial redundancies having been made and a further reduction of staff numbers is being sought while rate of recovery remains uncertain, and there is widespread re-negotiation of services and support contracts. In presenting the results, Ken discussed that in relation to Opex and Capex trends there is an average 36% reduction in Capex and the operational IT budget forecast for 2010 is 0.0% at best and -4.1% at worst, which with such spread in results indicates the current uncertainties. The % of IT expenditure breaks down to 30.4% on staff, 24.3% on communications and telephony, 19.2% on software and 8% on hardware while the average IT expenditure is £2,750 per head. When looking at the increase and decrease on budget share then Ken reported that it is only applications where there is an increase. From the perspective of the current practice of managed services (outsourcing) then the results indicate that application development is moving back in-house along with desktop management and support as is telephony as we move towards VoIP. Ken next raised a number of economic challenges facing organisations of short term economic uncertainty and pressure from boards demanding for 'more for less', while Opex budgets remain neutral or decline. In addition, an increasing competitive environment will require improved processes & performance and reduced overhead that is focused on business strategy and greater agility. However, clients, global, and industry drivers are creating new service opportunities which in turn are 'raising the bar'. Ken then poised the question ... "which areas to focus on in order to drive down cost and which to invest for business value?" From the results, the areas to target in terms of IT Infrastructure were identified as server/storage virtualisation and improved infrastructure. He stated that infrastructure modernisation offers areas for cost saving and cloud computing and Virtual PC are just emerging but are beginning to receive a lot of interest. Furthermore, case study benefits indicate potential savings of 30% with improved reliability and service quality. When looking at investment opportunities Ken discussed improving the back office through construction ERP and shared services, business process management, enhanced IT security for the new environment, and regulation, compliance and IT governance. He then raised the MOOSSE (Maintenance, Operations & Ongoing Support of Systems, Software & Equipment) factor in relation to the proportion of IT expenditure to just keeping things ticking over? He went on to report the ratio of IT budget currently being split 85% Opex to 15% Capex, while IT infrastructure modernisation offers new investment potential for 20% target savings in Opex towards sustaining higher levels of investment at a constant overall spend per head. Ken summarised a new economic model where construction organisations are well placed to take advantage of current technology modernisation opportunities. He emphasised that those organisations that will win out will be those accelerating change along with achieving a higher sustained investment from a reduction in the MOOSSE ratio from 85% to 65%. Also, investment in new software-driven business capabilities increases by factor of 3-5 times at normal levels of IT budget growth resulting in a competitive position. Ken suggested that from the long term growth in IT transaction costs as % of sales value being linear since 1960's and the spend in 1989 of 0.25% which increased to 0.6% in 2009, then this effect equates the extra value from IT in UK construction to 10% (approx.) of staff cost over the last 20 years. Therefore he proposed that if productivity from IT now increases geometrically over the next 20 years then the extra value created by IT would be equivalent to 50% saving in staff cost in real terms, which could translate into 25% higher productivity at 25% lower cost (although higher compliance costs and greater complexity (risk) might tend to hold up output price). Furthermore, he stated that IT would be at the core of business process and risk management capabilities as is currently in other industries. In planning the way forward Ken discussed that the utility computing model will become ubiquitous within a 10 year timeframe and early adopters will complete deployments in 5-7 years. He proposed that the leading organisations in the construction industry can be in this first wave in order to fund more capable, collaborative solutions. He emphasised that the robustness of the business case with a clear strategy should support the investment decision for the first stage in enabling projects, however, the impending upturn is a conductive time for IT managers to launch a radical agenda that is based on sound research. He concluded the time to start is now!! ... more>