Surviving The Perfect IT Storm

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IT may never be the same.

The IT industry has been hit hard by the economic slowdown, the devastating collapse of the Internet bubble and the aftershocks of outlandish high-tech spending in the late ’90s. It’s been hit so hard, according to a Forrester Research Inc. analyst, that it has been permanently changed.

And if IT workers want to stay employed in this changing landscape of smaller budgets and largely outsourced IT work, they better update their skills and move into managerial roles, says Laurie Orlov, research director of applications and services at the Boston-based analyst and industry research firm.

In an exclusive conversation with Datamation, Orlov, author of the report, “Caught in the Perfect Storm: Tech Restructures,” talks about how the corporate IT department is changing, how IT buying will change, how some vendors will be affected and what IT workers need to do to stay employable.

Q: You say the economy will improve but the IT sector will continue to suffer. Why is that?

The change in the IT market is not entirely economic. There are other changes that are keeping it from booming back to its previous level. Globalization is affecting the pricing of labor. Because of international, high-speed Internet connections, companies can outsource work to Far East countries, India and the Philippines. This has displaced U.S. jobs that need to be reincarnated. And vendors are going to be hit too.

Q: What do you see affecting major software, hardware and networking vendors?

Open source. Open source is changing a lot of business. Linux, for example, is being used by a number of companies because it costs a lot less. Open source applications built on Linux are being priced lower because the source is open and viewable and can be augmented by developers without paying fees to proprietary owners. That will affect widespread operating systems, like Sun Solaris, and Microsoft’s Windows 2000. It’s going to price-pressure them. They’ll have to drop prices to make any market share. When there’s price pressure, there’s a fall-off from revenue and then things never look the way they did.

Q: How do you think the IT industry will change?

I think we’re looking at new innovations that need to happen to compensate for the fall-off. If we don’t see that innovation, you’ll see a much smaller IT industry. Actually, you’re already seeing that…Some of the innovations will be focused on targeting services to specific niches, specific industries and specific local user groups.

Q: How will the corporate IT department change?

Corporations are looking at a shrunken and outsourced world. Their own organizations will get smaller. Companies are trying to throw them into outsourced services as quickly as they can. That will give rise to service providers that focus on specific processes — supply-chain logistical processes that track trucks and shipments, for example. Companies will outsource their work to them and tech people will migrate into these outsourced jobs.

Q: How will this change the IT worker’s job?

They’re going to have to become extremely customer focused. Up till now, they’ve been insular — inwardly focused. The era of customer-centric thinking and good communication skills will be a requirement for the new world order. Companies just won’t need an army of people maintaining databases.

Q: What IT workers will survive this shift and retain their corporate jobs?

Project managers will make it. Analysts with good communication skills will make it. Literate people who can understand tech but can also communicate effectively about it will last.

Q: What skills will IT workers need to develop?

They’ll need the ability to grasp horizontal business processes that span business departments. The purchasing department buys stuff and the accounts payable department cuts the checks. You’ve got to understand how those departments work together and what needs to happen to make them work. They’ll also need the ability to monitor vendors for levels of quality and negotiate service-level agreements. We’re looking at managerial skills — not keeping the servers up because there will be fewer servers with greater capacity.

Q: Do you think this shift to outsourcing will be a phase?

It could be a phase if it produces unsatisfactory results. Outsourcing business processes, like call centers, is already happening and it will continue to happen…If it doesn’t work, it will be a pendulum swing and people will drag it back inhouse.

Q: Do you have any advise for IT leaders and technicians?

Hone your project management skills. Develop standards to know when vendors are doing well by you. Scrutinize your contracts, and drive a hard bargain with your vendors. Focus on shutting down things that are baring little fruit. Inventory what you have and shut down what you don’t need. We think people bought too much technology in 2000 and they’re still trying to absorb it. Tech spending is in a slump because of the attempt to absorb all that technology.

Q: Will there be an upside to this change?

We’re going to get less waste and more business benefit to IT. We were kind of fat and happy for a while.