An Opinionated Roundup of the Biggest IT News Stories of the Quarter

Compiled by Jon Reed, SAP Expert, SAPtips 

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Sarbox Isn't Just For The Big Guys

http://www.informationweek.com/showArticle.jhtml?articleID=164904340 

key excerpt: “Some private companies are embracing many of the Sarbanes-Oxley Act's corporate-governance and financial-reporting requirements, either because they're planning to go public, regulators are forcing them to do so, or it makes good business sense.” 

Jon Reed’s take: One of the biggest IT stories of the year is the ripple effect of Sarbanes-Oxley and how it is impacting IT budgets across the board, not just in publicly-held companies. As this article documents, there are a number of reasons for Sarbox's unexpectedly broad reach, including companies that eventually want to go public, companies that are required to comply because of industry regulations, or because companies have a relationship with suppliers that expect compliance. There is also the reverse effect: companies that decide to remain private because the standards of compliance are seen as daunting or cost-intensive. This article also makes the point that Sarbanes-Oxley fits into a broader spectrum of compliance trends, including regulations governing the storage and retention of electronic communications. Because of the growing body of compliance issues, the companies that "win" the battle for compliance are going to be the ones that incorporate compliance into their business processes and put a long-term plan for addressing regulations into place. The companies that won't fare as well are the ones who will remain in "crisis mode," scrambling to address each new requirement.

One way to stay on track is by implementing new technologies to aid compliance efforts. For example, one company cited in this article is using RFID to collect data for improved real-time financial metrics. One of the most important points in this piece: financial reporting is not always the key to mastering Sarbox. According to one executive quoted, "You can have strong financial reporting controls and weak business process controls... if a number of people can change prices, and there's no external review, then that's a weak business control." According to a recent survey of 68 private companies - companies that are not required by law to comply with Sarbanes-Oxley - the average amount set aside for regulatory compliance initiatives this year was $138,000. On the sobering side, more than 25 percent of those surveyed felt that the costs of compliance outweighed any of the benefits. Our take is that for most companies, the benefits of tighter controls will generally be worth the investment, but surveys like this are a good warning that it's not always smooth sailing when it comes to compliance-driven IT initiatives.

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Time for the Tech Tide to Turn?

http://www.businessweek.com/technology/content/jan2005/tc2005015_8019_tc119.htm 

key excerpt: "Low prices and the need to replace at least some old gear and upgrade big software systems are pushing many businesses into spending mode."  

Jon Reed’s take: The data in this article suggests that the IT market of 2005 is a "see what you want to see" market. If you want to believe that IT budgets are getting bigger, there is evidence that they are. If you want to believe that IT managers are still cost-conscious, that would be accurate also. If you want to believe that IT contract rates are going up, there is some data to support that view, but there is also information that suggests many IT professionals are stuck in low-rate, commodified skill areas. This article summarizes a CIO Magazine survey of 300 CIOs on their IT priorities for 2005. The survey found that CIOs expect their budgets to grow 6.7% in the next year. Those surveyed seem to be cautiously optimistic that these loosened purse strings will allow them to spend money on some long-awaited projects, including software upgrades. They see the ERP market as a prime area for investment, and there seems to be a window of opportunity in a so-called "buyer's market" to purchase ERP components at very affordable prices.

This kind of data is good news/bad news because it all depends on where you sit within the market. If you're a programmer concerned about contract rates, you're glad to know that labor costs are expected to go up. If you're a CIO, you're thinking that you might need to invest in labor-intensive projects now before IT contract rates go higher. In this survey, 13 percent of CIOs said that qualified labor is "hard to find," compared with 5 percent who said the same in 2003. In the current spending climate, the area that may suffer the most is hardware. This survey found that companies with 5,000 employees or more were likely to redirect at least 15 percent of their budgets from hardware purchases to compliance-related projects like Sarbanes-Oxley. In the final analysis, no matter where you sit within the IT marketplace, survey data like this indicates a healthier IT landscape where morale should be higher and innovative projects easier to launch, without as much risk of "scale-backs" or cancellations.

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Larry Ellison's Roving Eye

http://sap.ittoolbox.com/news/dispnews.asp?i=130755&t=5&a=SAP 

key excerpt: “Ellison downplayed acquisitions after the earnings report, telling BusinessWeek, ‘We have no plans to buy anything that doesn't contribute to our five-year plan to grow profitability by at least 20% per year.’ (See BW Online, 6/30/05, ‘Oracle's Squeeze Play for Profits.’) Yet, in practically the next breath, he laid out his strategy for buying software companies with narrow profit margins but rich maintenance-revenue streams.”

Jon Reed’s take: We included this article for a couple of reasons. First, because of the silliness of Larry Ellison promising no more acquisitions in one sentence and then laying out his criteria for future acquisitions in the next. Then, there's the juicy rumor that Oracle may even be considering the purchase of Siebel Systems. Though Siebel executives say otherwise, Siebel has been on the block for a couple of years now, and if Oracle had not bought PeopleSoft they would probably own Siebel by now. At this point, integrating Siebel might turn out to be more trouble that it's worth, but there is also the billion dollars in Siebel maintenance revenue dangling in front of Larry Ellison. In theory, Ellison should hold off until after the JDE/Oracle/PS "Fusion" integration is behind him, but Siebel does seem to fit the acquisition criteria that Ellison has laid out. A few years ago, buying Siebel would have really helped Oracle in its battle against SAP. But in recent years, SAP has strengthened its CRM product to the point that it's no longer a weakness that can be exploited. As interesting as it is to contemplate adding yet another software culture into the Oracle mix, in truth, Oracle's biggest move has already been made, and the Siebel decision is not going to significantly alter the enterprise software landscape.

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The Question in Oracle's Numbers

http://sap.ittoolbox.com/news/dispnews.asp?i=130631&t=5&a=SAP 

key excerpt: “When Oracle (ORCL) reports earnings for its fiscal fourth quarter on June 29, expect more tea-leaf reading than usual. Not only is it seasonally the software giant's best quarter, it's the first full quarter that PeopleSoft has been in the fold, following a contentious 18-month takeover battle.” 

Jon Reed’s take: One of the major questions facing Oracle is how the PeopleSoft acquisition will affect its revenue numbers. According to this summary of Oracle's earnings, Oracle still has some skeptics to overcome in the next few years. Its database and application server offerings have done well, but aside from the revenue boost from the PeopleSoft and Retek acquisitions, the enterprise application business has not been impressive. Some analysts are predicting that Oracle's core application business will actually decline. Once the initial boost from PeopleSoft revenues is in the books, the pressure to report solid apps numbers will increase. In the final analysis, the most important thing will not be the numbers, but how many big "wins" Oracle can score against SAP in the battle for customers and press release headlines.

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The Post-PeopleSoft Landscape and the Future of ERP

key excerpt: “Oracle's acquisition of PeopleSoft is not the dawn of a scary new era for CIOs; it's the twilight of the old ERP age. It may also be an opportunity to create an ERP future that adds value, not cost, to your business.” 

Jon Reed’s take: If you only read one article on the state of the ERP market this quarter, read this brilliant CIO Magazine piece by Scott Berinato. This article captures the core challenge ERP vendors are facing: to provide a new value proposition to their customers that goes beyond the core back office functions ERP is traditionally associated with. Framing his article from the vantage point of ERP users' concerns, Berinato captures a range of viewpoints on how companies perceive their ERP investment. Some are trying to extract maximum performance from their current software with minimal maintenance and upgrade costs, others are looking to upgrade but expect a higher degree of supply chain management functionality and greater web-based interoperability inside and outside company walls. The article begins with a critical point: all the industry buzz about Oracle and PeopleSoft doesn't get to the heart of the matter: if the big ERP vendors don't get in tune with what users are looking for, they are going to find themselves out of the loop when the next buying decision goes down. There's some funny quips in this piece about the way Oracle is sweet-talking its PeopleSoft customers, lavishing them with extra attention. Berinato paraphrases one analyst who joked that "PeopleSoft customers are getting the kind of access to Oracle that Oracle customers might envy." Much of the article focuses on the dilemmas PeopleSoft customers face in terms of upgrades and maintenance, but the advice holds true for any ERP customer in transition. There are a number of options for such customers, and those options aren't limited to SAP and Oracle. Microsoft is making its presence felt with a beefed up mid-market product line, and there are more outsourcing options than ever, including "business process outsourcing," which allows for the outsourcing of more and more "back office" business functions that are not mission-critical. Web services and "service-oriented architecture" offers other options for supplementing an ERP investment without necessarily upgrading.

Berinato's advice for ERP success is a simple one: make a lifecycle assessment to determine whether you are in a phase where you are better off capitalizing on your current system, or whether you might as well re-evaluate your prime vendor because you are already in a stage of upheaval due to corporate acquisitions and systems integration projects. One eye-opening stat for PeopleSoft users to consider: the $800 million in revenue that Oracle is expected to make per year on PeopleSoft accounts is not considered enough to justify the $10 billion purchase price. This is causing a fair amount of industry skepticism that Oracle will indeed support PeopleSoft as an independent product for the next eight years as it is currently pledging. And if you buy into that skeptical line of thinking, there are suddenly all kinds of options to consider. Berinato's three steps for PeopleSoft users are straightforward: you can either "sit tight," move to third party support, or upgrade to the Oracle enterprise platform. But regardless of which ERP software you have a stake in, this article will help you to get a broader view into where the market is headed.

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IT career news from around the Web

http://www.computerworld.com/printthis/2005/0,4814,83782,00.html 

key excerpt: “The geeks' star has fallen. The image of IT work is now not of a innovative entrepreneur one big strike away from landing a public offering. It is instead more akin to 1980s manufacturing jobs: monotonous and easily farmed out."

Jon Reed’s take: This ComputerWorld piece is a handy summary of the latest career-related news and trends. From an IT professional's perspective, there's both good and bad news to be found here. One of the most important stories in the bunch was a news item about a new book by author Daniel Pink titled A Whole New Mind: Moving from the Information Age to the Conceptual Age. Pink's thesis? For American workers to thrive, they need to move away from the technical skills that are becoming commodified in a global economy, and focus on "right brain skills" involving high-concept thinking and inventiveness in order to stay marketable. Another interesting book mentioned here is a book by consultant Matthew Moran called The IT Career Builder's Toolkit. One of Moran's main recommendations: IT professionals can increase their value to employers by developing their so-called "soft" skills and developing deeper business process know-how.

As for the IT hiring outlook, there seems to be conflicting information from the articles cited here. It seems that outsourcing is continuing to keep the demand for "onshore" IT talent in check, but at least one article reports that "talent wars are making a comeback," in particular for certain sought-after skill sets. Hot IT skills noted in this article include Storage/SAN/NAS, web services/SOA, security, open-source development, and an intriguing area called "extreme programming." But while there may be pockets of increased demand for IT professionals, ultimately we have to agree with the sentiments of Computerworld writers Mike Parent and Bob Rawson, who argue that "the geeks' star has fallen." They go on to say: "IT is (now) more akin to 1980s manufacturing jobs: monotonous and easily farmed out." The good news is that this rather grim prognosis does not call for hopelessness. Indeed, several of the articles we've referred to offer a way forward by broadening "soft" skill sets, deepening business process knowledge, and aggressively pursuing the latest technical innovations.