Monthly Archives: April 2012

Tech

IT investments deliver profits, study finds

Spending on revenue-enhancing IT systems more beneficial than focusing on streamlining processes to cut costs

Investing in IT departments can have a big impact on a firm’s profits, more so than similar spending on R&D and some marketing endeavors, according to a team of university reasearchers.

The researchers reached their conclusions after examining the IT investments and financial data of about 450 companies in an effort to draw a link between IT spending and profits.

The work, published in the journal, MIS Quarterly , led to several key conclusions.

First, IT investments are “positively associated with profitability,” according to the research paper .

The researchers said they were able to look deep enough at these unidentified global firms to draw insights into the type of IT investments that are most helpful. They found that companies are better off spending on projects that create revenue instead of reducing costs.

For instance, a company that builds or buys a business intelligence system that helps sell products will see more bottom line benefits than a company that spends IT dollars to automate internal processes to trim expenses, said the paper’s lead author, Sunil Mithas, an associate professor Robert H. Smith School of Business at the University of Maryland.

He noted that cost cutting systems are likely not unique, and thus don’t offer a competitive advantage. “Your vendors will sell the same system to your competitors,” Mithas said.

But firms that spend IT dollars on revenue generating products may come up with systems that “are highly differentiated from your competition” said Mithas, “It will be very hard for your competition to replicate that.”

Mithas said the team was unable to pinpoint an optimum level of IT spending.

Some firms are good at managing IT spending consistently, while others may pull back on IT investments after a failed project, and thus become a laggard.

The team, which also included researchers from the University of Illinois, the University of Texas, and the IE Business School in Madrid, Spain, concluded that that IT investments are more likely to enhance profits than advertising or R&D spending.

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Even in R&D and advertising intensive businesses, such as the pharmaceutical industry, strong IT investments can prove fruitful. The paper cited a project Pfizer which “enabled virtual teams from different business units around the world to collaborate in research and develop new drugs.”

The researchers examined IT investment and financial data from 1998 to 2003.

Mithas said there is no reason to believe that anything has changed since then — even with constantly changing technology.

The IT spending data was gleaned from surveys conducted by a consulting firm that the researchers didn’t identify due to a non-disclosure agreement. Mithas could only say that the firm is among the top IT consulting companies in the world.

The absence of a identified source for the IT spending data in this paper drew criticism from Paul Strassmann , a former U.S. Department of Defense CIO and acting CIO of NASA who has written about the correlation of IT and profits.

Strassmann said that “unless the authors disclose the origins of the critical IT numbers, the entire paper must be considered speculation and not verifiable analytic proof.”

Mithas said the paper went through “a blind peer-review process by top academic scholars familiar with this domain of enquiry and such relevant data related details were shared with them.”

The reviewers “appeared satisfied with the data quality and procedures we used for analyses.”

Mithas said the findings are strong and said a characterization of the study’s findings as speculation “is a little extreme.”

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Microsoft, Tech

Microsoft counted as key Linux contributor, for now anyway

Microsoft’s work on the Hyper-V driver accounted for a significant chunk of recent Linux kernel development

For the first time ever, and probably only temporarily, Microsoft can be counted as a key contributor to Linux.

The company, which once portrayed the open-source OS kernel as a form of cancer, has been ranked 17th on a tally of the largest code contributors to Linux.

COME AGAIN? Microsoft: ‘We love open source’
The Linux Foundation’s Linux Development Report, released Tuesday, summarizes who has contributed to the Linux kernel, from versions 2.6.36 to 3.2. The 10 largest contributors listed in the report are familiar names: Red Hat, Intel, Novell, IBM, Texas Instruments, Broadcom, Nokia, Samsung, Oracle and Google. But the appearance of Microsoft is a new one for the list, compiled annually.
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Overall, Microsoft contributed 688 changes, or about 1.0 percent of the accepted changes to the kernel, since version 2.6.36. Company engineers also signed off on 2,174 changes, or about 1.1 percent of all the changes in this review period.

Much of the work Microsoft did centers around providing drivers for its own Hyper-V virtualization technology. Microsoft’s Hyper-V, part of Windows Server, can run Linux as a guest OS. Linux kernel developer and LWN.net editor Jon Corbet, a co-author of the study, estimates that Microsoft’s involvement peaked around last year’s 3.0 release of Linux and will diminish over time. “Even the [hypervisor] drivers can only need so much cleaning up,” he wrote in an article explaining the influx of Microsoft contribution.

For the Linux Foundation, Microsoft’s involvement in Linux shows how widely used the OS kernel is these days. Microsoft must work with Linux to be part of the larger enterprise computing ecosystem.

In the time period covered by the report, more than 1,000 developers from nearly 200 companies contributed to the kernel. Lone contributors provided the largest number of changes, 11,413 changes or about 16.2 percent of all the changes in this review period. Among contributions from companies, Red Hat provided the most changes, or 7,563, or 10.7 percent of all changes. After Red Hat, Intel provided the next largest batch of changes, 5,075, or about 7.2 percent of all changes.

On average, between 8,000 and 12,000 patches are added to each new kernel release, which, overseen by Linus Torvalds, come out every two or three months. The vast majority of these changes are developed by outside parties.

In addition to Corbet, Linux kernel maintainer and Linux Foundation fellow Greg Kroah-Hartman, and Linux Foundation Vice President of Marketing and Developer Services Amanda McPherson co-wrote the report.

The Linux Foundation is a nonprofit organization devoted to further developing and maintaining the open-source Linux kernel. It is funded by companies that use Linux in their products and services, including Hewlett-Packard, IBM, Intel, Novell and Oracle.

Microsoft, Nokia, Tech

Leaving IT may be your best IT career path

The best way to ensure a successful IT career in the long run may be to go off the IT reservation. That was my takeaway from the Career Without Boundaries session at the Computerworld Premier 100 conference.

The panelists didn’t come right out and say that. But the IT executives on the stage all had done stints in other parts of the business – and brought that experience back. Kate Bass, CIO at Valspar, spent 21 years in finance. Dr. Katrina Lane, senior vice president and CTO at Ceasars Entertainment Corp., has a technical degree but cut her teeth in marketing, focusing on areas such as analytics, media planning and teleservices.
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Sheila McGovern, managing partner for the Human Capital division at IBM, has a degree in quantitative business analytics. She started in tech but then moved into the HR field before landing her current job. One day, she says, “I sat down with a business leader and he said, ‘You know Sheila, you’ll never go any higher with IT.'” So McGovern moved around, working in HR, supply chain, financial systems and finally HR consulting. “A few years ago I came back. I really benefitted from getting on the business side. I wouldn’t trade that experience,” she says.

Gaining business cred
This movement back and forth is more common between other business units than it is in IT, but such a move can help rising IT stars overcome a major stumbling block for IT executives: The general lack of understanding -– and lack of respect — for what IT does.

“Running an IT organization is like managing an iceberg. There’s only small piece of that anyone ever sees,” says Bass. And everyone and their mother thinks they can do that piece it better.

“When you go to legal or finance everyone knows you need an expert,” says McGovern. IT is different. “Most people go home and turn on consumer electronics and they work and work better than what they have at work,” she says. “And it’s only getting worse.”

“I left a finance organization, which is very highly respected. You don’t have to work at it, whereas in IT that’s not always the case,” says Bass. But coming in from another group can give an IT executive a level of credibility that may be difficult to achieve for those rising up within the IT ranks.

Leaving IT is not the only way to gain experience. Another way to attack this issue is to embed IT people directly into the business units, a strategy that David Zanca, vice president of IT at FedEx Services, has embraced. “If you want to understand the business units you have to walk in their shoes,” he says. But FedEx still fights the good fights against silo mentality. Marketing and IT, even when in adjacent offices, may still not be fully aligned. If you’re going to walk in their shoes, why not really walk in their shoes?

Increasingly, the IT career path demands this from IT leaders. IT careers are bifurcating into two groups: The uber-specialists with deep technical knowledge, and IT executives who can manage as business analysts. The great middle of IT organizations is falling away, says Barbara Cooper, CIO for Toyota Operations of North America. So getting very deep technically -– or getting that deep knowledge of the business, will be the career path choices.

The vast middle tier of administrative IT functions will become commoditized and “sourceable,” Cooper says. “What’s sweeping away is the bureaucratic layer of managers who are mostly administrative in nature. You’re either up and into this new frontier or you’re sourced.”

“The thing that’s left is the consultative roles around serious business problem solving and investment strategies for solutions sets for the business,” Cooper adds. She has actively recruited from the business to fill those new positions, but it’s easier to groom someone from the IT side to learn the business acumen than the other way around. It is, she says, “a new breed.”

At Toyota the door to IT now swings both ways. A former CIO for sales and distribution at Toyota, whom Cooper had managed and mentored, left IT to work in the business side. Three years later Cooper hired him back as part of her succession plan. If a tour of duty in the business is important, good mentoring is essential to develop a mature, nuanced management style and to develop the political skills to make it happen, Cooper says.

That’s what happened with another mentee of Coopers: 2011 Computerworld Premier 100 IT award winner Doug Beebe, formerly corporate manager of information systems, who was recently recruited by the business to a new position as corporate manager of real estate and facilities.

Cooper may have lost Beebe — that’s a consequence of developing strong business acument and leadership skills in your management. But she’s not worried about the brain drain. “This is a way station in his journey for broadening and rounding out his experience. I have a notion that he is destined to come back to the IT line of business.”

Google, Tech

Google Drive will offer 5GB of free storage, leak suggests

Google’s cloud storage service rumored for release next monthIt looks as though Google will offer users 5GB of free cloud storage space on its new Drive service.

According to a leaked image obtained by the Talk Android blog, Google Drive will give users “5GB from the start” with the ability to “upgrade to get more space at any time.” The cloud storage service also says that users will be able to “put files in Google Drive” where they can then be accessed via “desktop, mobile phone or tablet, and drive.google.com.”

MORE GOOGLE NEWS: New Google Account Activity lets you know what Google knows about you

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TECH ARGUMENT: Amazon Cloud Drive vs. Apple iCloud
If the leaked image proves accurate, it will mean that Google is matching the 5GB of free data storage currently offered by Box, Amazon Cloud Drive and Apple’s iCloud to all users, and is exceeding the 2GB of free data storage offered by Dropbox to all users. There are no details yet on how much additional storage space users will be able to purchase on Google Drive, but it will likely fall somewhere between the 50GB of maximum cloud storage offered by Box, Apple and Amazon and the 100GB limit that Dropbox offers subscribers.

Google is a relatively later entry into the cloud storage market, as Apple has had its cloud storage service up and running since last June while Amazon has had its Cloud Drive app running since last March. Google has already been offering a cloud-based music service, Google Music, that lets users store up to 20,000 songs online where they can be accessed from any computer, tablet or smartphone with an Internet connection.