IT Leadership Perspectives

On November 4th, Taos hosted our Fall 2005 IT Directions Event. We thought this would be an excellent forum in which to gather opinions, suggestions and predictions from Bay Area IT leaders on what’s in store for the world of IT in 2006 as a compliment to the report we put together for this year end article. The results show that although there are trends, priorities, and strategies that differ greatly from company to company. The good news is that optimism has returned to the Silicon Valley.

The interviewees included:

• Alan Bianchi Senior Director of Information Technology for TIBCO Software
• Carina Ferrel Director of Information Technology of Serena Software
• Sharon Mandell Vice President of Information Technology of Knight Ridder
• Jeff Morris Chiron IT, US Operations Manager
• Debbie Morris Program Manager, SBC
• Dave Newton Senior Director of Information Technology of Safeway
• Brien Porter previously Director IT Infrastructure of Plumtree Software
• Belinda Rodman Sr. IT Director of Macromedia
• Ron Wilson Senior Director of Information Technology of Mercury Interactive

Taos: Let’s begin with the Nasdaq. Currently we see the Nasdaq at around 2150. Do you think that’s likely to stay roughly the same in 2006 or are we going to see a sharp increase or perhaps a decrease in the numbers?

Ron: I think the Nasdaq will continue to rise in 2006 and I predict that it will probably rise by more than 10 percent. I think there’s a lot of opportunity as the economy picks up. In the early years of 2000 a lot of things were put on hold and now there’s a lot of pent up demand for products and services that Nasdaq companies serve. Also, the increasing globalization of our businesses creates even further demand for products and services, which too will drive the market up.

Dave: I’m very optimistic about the next year. I think a lot of things are coming together in terms of a worldwide economy and the US is well positioned to deal with that, particularly in California.

Carina: Folks are going to be more confident this year. The predictability about the outcome of SOX will be more in line and not sway one way or the other therefore investors are going to be more secure in how companies reacted last year vs. this year.

Sharon: I would have to say the Nasdaq will stay the same or decrease. With energy prices the way they are its going to be hard to ward off a recession.

Belinda: I believe the NASDAQ will continue to rise in 2006. The economy is healthy right now, oil prices are coming down, interest rates remain low and job creation is on the rise.

Alan: I think right now with the interest rates the way they are, pending inflation, the Nasdaq is too high. I see it settling more around seventeen, eighteen hundred.

Taos: In general, do you think that there’s going to be an increase in Bay Area employment in 2006 or do you think it will decrease or stagnate?

Ron: I think the trend right now is toward more jobs although there are a lot of things going on in the global economy and a lot of natural disasters and other types of activities that are influencing the global economy that could impact employment opportunities. Barring the unforeseen, continuing natural disasters or major shifts, I would expect the economy to continue to grow and the jobs in the Bay Area to continue to increase.

Dave: I think it will continue to increase. Historically when you think of employment increase you think of pharmacology, biotechnology and plain old information technology. These have gone through such a downturn that they have to come up. Companies have started to spend and grow over the last twelve months and longer. There’s no reason that won’t continue to increase. Outsourcing will continue as a trend but some core IT components will come back as well, which will increase employment. Critical functions are coming back on as we learn how to deal with a dual relationship; internal vs. outsourcing.

Brien: I feel the economy is seeing a period of moderate growth, some growth in employment. That said, many factors like the reconstruction of the gulf coast will weigh heavily on the overall employment picture.

Sharon: After the crash people really stopped investing, putting many things on hold such as equipment needs and software needs. Companies are evolving again as the economy continues to improve in certain areas and everyone’s infrastructure is going to need to grow with that. That’s going to produce jobs here in the Bay Area.

Belinda: If you look at the current indicators I’d say jobs will grow; everyone that I know that is out there looking for a new position is getting multiple offers. So in the technology sector I think it’s going to be a very positive.

Carina: I do not believe there are going to be more jobs overall. I think there will be more jobs in specific segments but in general the overall population of workers will decrease as those jobs in more commoditized roles get outsourced offshore., The types of jobs that remain and even increase will be strategic - management, architecture, project management and the like.

Alan: I think it will probably stay the same as it is now, which is better than it has been. I think it’s actually on the upswing. It won’t be like it was in 1999 or 2000 but you’re seeing a lot of people move around, with skilled employees in core disciplines hard to come by.

Jeff: There should be new opportunities coming in stem cell research and other related high tech jobs that support may spur job growth in the Bay Area. It also seems like a number of people have abandoned IT careers entirely or left the Bay Area. This is resulting in the demand for key IT skill sets outpacing the supply of talent.

Taos: You mentioned IT. Do you think the Bay Area will see an increase in IT jobs in 2006?

Ron: Absolutely. I think in the short term you will continue to see new IT jobs in 2006, but I’d say that as we start to move two, three, four or five years out there may be a decline as more people shift commoditized IT services offshore.

Debbie: I agree that the IT industry in the Bay Area is going to pick up. And, the fact that there have been more mergers and acquisitions, indicates that there is also more consulting work available. There’s a lot of integration work that needs to take place. Beyond that, there are several companies, especially smaller ones that are in need of Management and IT expertise and are short of talent because so many people have transitioned into other industries. There is a gap that needs to be filled and I think that’s why the Bay Area is starting to heat up.

Sharon: I think the biggest challenge in keeping the talent you need here in the Bay Area is housing prices and the high cost of living. There are technology centers developing broadly across the US and certain is work going overseas, but I think there is still plenty of opportunity in technology jobs in the Bay Area.

Dave: IT jobs will grow but we can’t hold the late nineties as the benchmark we use for good growth. There will be growth, but in the core strategic disciplines needed to run and direct IT.

Brien: Yes, along with a pulling back in some outsourcing that went on in the early 2000’s and didn’t hold to the promise.

Alan: The entry level jobs are going away with offshoring, but IT management jobs might be on the rise.

Belinda: Absolutely. Companies are having to spend more on keeping up with business initiatives, Sarbanes Oxley, integration due to acquisitions, becoming more efficient etc... IT is becoming a more strategic function for most companies and companies are having to up the ante. Another indicator is the consulting market. The Systems Integrators that I meet with are completely staffed right now, with little or no bench and rates are rising back to the early 2000’s. This demonstrates the increase in IT Projects and Initiatives.

Taos: How do you think offshoring is contributing to the so-called “brain drain”?

Alan: I don’t think of it as much as a “brain drain” because I think the real knowledge is still staying here and that’s the business knowledge. How to code a couple lines, that’s not, to me, the real important stuff.

Belinda: I don’t believe it’s contributing to a brain drain. Certain commoditized functions are moving off-shore and that’s OK. Functions that need to stay close to the business will remain here.

Taos: You don’t feel these entry level jobs are a stepping stone for our young professionals entering into IT?

Alan: Traditionally the technical entry level jobs got people in but I think more young professionals are going to come into the IT industry as a business analysts, project managers, more business oriented vs. technically oriented roles, and who knows what’s going to happen in four to six years. New technologies will come out that could change things. I think here in the US we’re suited to adapting technologies, and I think the work force is much more flexible where as countries focused on outsourcing will be focused on roles that have become commoditized, not new technologies.

Taos: So do you think offshoring/outsourcing is good for the global economy or do you think there’s going to be an eventual backlash?

Brien: Outsourcing is a business reality, but I do see a backlash from the early hype. People are looking at what was done and see a lot of the shortcomings. For small companies it’s very difficult to manage someone in New York let alone in Bangalore where it’s a different time zone and a different culture. For larger companies there has to be a serious commitment. For outsourcing to work you need to have not just a person or two, but a true management structure. You also need to make sure your outsourcer commits to having some sort of retention policy because what you’re seeing is a lot of turnover in their staff. If you don’t have a management structure in place specifically organized around the offshore relationship, it will be very hard to realize the value.

Sharon: Economics always wins and if somebody is providing a quality service at a lower price, dollars are going to flow to that place. I think it’s going to create displacement and challenges for our local economies but in the end I think you tend to offshore things that are less strategic and it gets you refocused on the things that create value here. The big challenge for us is maintaining an interest in technology because the fear with where the more routine jobs are going is that nobody enters the space. And as long as either immigration or education stays strong or both together I thinks it’s just an evolution that’s not necessarily a good thing or a bad thing.

Carina: For a global economy it’s probably a good thing. For the American economy, potentially, in the short term it will be a good thing. Long term, I think the impact on the education and the opportunities for the young people, who want to go into the field of IT, are going to be diminished due to the cheap labor or the perception of cheap labor offshore.

Debbie: For offshoring to work you need to make sure contracts are well thought out. You need an offshore management representative at the remote site, adjusting their schedule to your time zone, who can translate requirements and take responsibility for making things actionable. Whether it is systems testing, development, or production support, you have to ensure that your expectations are clearly defined and agreed to. The positive to outsourcing for those who recognized this as critical to success is that it caused companies to develop finite requirements. Your partner will only code what you tell them to code. If you forget something, they’re not going to code it. And so this is perhaps where you get back to the “brain drain” component; they’re not going to take the initiative that, perhaps, an internal employee would to bridge that gap and fix the problem.

Belinda: I think off-shoring is good for the global economy in general. I think we will find a balance of what functions can be sent off-shore and what should remain in the US. I believe in general it will improve the quality of technical resources as certain new markets open up and there is more competition.

Taos: Moving into the New Year, what are your top IT initiatives for 2006?

Ron: Outsourcing our operations, enabling the back office functions of the business with our SAP implementation, and finally globalizing our CRM platform based on Siebel.

Dave: Business intelligence at a fine granular level; enabling better business knowledge of the activities that are going on. Also, a continued push toward cost reduction on commodity based things, and finally staff development and growth.

Sharon: Consolidation and rationalization of our infrastructure and applications, continued investment in new businesses so as we acquire new companies we make sure our infrastructure can support them. Finally, we’re constantly investing in new web technologies.

Carina: Investing in overdue upgrades across IT, insuring that the ERP solution has a single point of truth, and working to integrate and consolidate applications in order to better manage the business.

Alan: A fairly large Oracle ERP upgrade, workflow automation, especially in the HR space and the management of the entire employment lifecycle. We also have some technology initiatives such as wireless across all campuses.

Taos: What are your top 3 biggest IT challenges?

Ron: The top challenge in IT is continual alignment with the business in an ever changing, dynamic business environment and making sure that we’re continuing to drive efficiency while the company is growing.

Dave: It comes back to, how do you grow talent if you can’t hire to junior level positions, and yet the senior level talent is in increasingly shorter supply. Eventually this will catch up to us if we are not preparing for it.

Sharon: Our biggest challenge is the cultural change associated with consolidation and rationalization of applications. I think the infrastructure is fairly straight forward. If you’re building out something that is more robust and provides better service, people don’t tend to argue with it. But in order to consolidate our application infrastructure across our businesses almost everybody is going to be required to change how they do business in some way. I think that business process evolution is the most challenging thing we’re going to face across the company.

Jeff: Reduce recurring expenses, manage integration with Novartis IT, and consolidate data center operations.

Debbie: We’re going to go through a merger with AT&T and as you can imagine this is a big merger with a sizeable integration challenge.

Alan: Reducing the cost of our infrastructure. We spend a heck of a lot of money just keeping the lights on. How do we reduce those costs? Especially you look at telecom, that’s where we get hit hard. So our challenge there is to reduce cost and still maintain service. Second, we’re looking at outsourcing. We’re not a really big shop so the challenge is making an eight to ten person outsource really effective. Third, given that the job market is hotter now, how do you keep you’re really good employees and keep them challenged?

Belinda: The biggest challenges are prioritizing resources in both IT and the Business to work on all the projects across the enterprise. There are so many competing functions – Sales, Marketing, Finance, Operations, HR etc. and each business unit has important needs.

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