Research summarizes key findings on the five of the most important and disruptive technologies to watch in 2009, as well as five critical key issues for CIOs to manage.

1. RESEARCH ALERT
RA-543
DECEMBER 24, 2008
M. WEST, M. KOENIG, B. GUPTILL, B. MCNEE
Title Top-Ten Disruptive Technologies and CIO Issues for 2009
This Research Alert summarizes key findings from two recently published
What is
Strategic Perspectives, focusing on five of the most important and disruptive
Happening?
technologies to watch in 2009, as well as five critical key issues for CIOs to
manage (see Figure 1, and STR-541 and STR-542).
While readers may want to dig deeper into the original source Perspectives,
which includes relevant customer quotes, or an expanded set of critical
issues to be addressed and Strategic Planning Positions (SPPs) per each
technology or topic, this Research Alert provides an interesting quick-and-
dirty snapshot of where enterprise IT is heading over the next 12-24 months.
Let’s begin with the list of top disruptive technologies, all of which are of
Why is it
increased interest as a result of the current economic downturn:
Happening?
• Software as a Service: The economic appeal of SaaS is that usage-
Figure 1
based or subscription pricing can move software costs into the operating
“Top 10” List for 2009
budget from the capital budget. Plus, the supporting infrastructure is off-
th
On December 19 , Saugatuck
premises, thus eliminating the need to buy additional hardware or hire
published two Strategic
Perspectives, entitled Five Key personnel to manage it. Critical Issue: Integration.
Issues for CIOs in 2009 , and
Five Disruptive Technologies Strategic Planning Position(s):
to Watch in 2009.
- 2009 will be the year that serious horizontal and “buying center”-
Top 5 Technologies to Watch
• Software-as-a-Service driven SaaS suites emerge, via pure-play investment and aggressive
• Cloud Computing
industry consolidation and M&A.
• Virtualization
- By 2012, roughly half of the companies considered quot;SaaS Master
• Open Source
• Social Computing Brandsquot; will be pure-play SaaS providers; the remaining will be
traditional Master Brands who have repurposed their businesses.
Top 5 CIO Priorities
• Balancing Act
•
• Cloudy Future Cloud Computing: Whether it is on-demand storage services, an on-
• Managing Hybrid demand application development platform, a runtime infrastructure for a
Environment
custom mission-critical application, or integration-as-a-service, CIOs are
• Vendor Viability /
taking cloud computing seriously. Cloud computing – whether through
Consolidation
• Skills, Skills, Skills public or private services – promises reduced costs while satisfying the
Source: Saugatuck Technology needs of both large and small enterprises alike. Critical Issue: IT
Management challenges.
The authors invite your
comments and inquiry on this Strategic Planning Position(s):
Strategic Perspective.
- By 2013, at least 20 percent of enterprise IT workloads – that
Please contact:
historically would have operated on-premise – will be run in the Public
Mike.West@saugatech.com
Cloud, providing significantly enhanced functionality, lower costs,
Mark.Koenig@saugatech.com
Bruce.Guptill@saugatech.com
fewer staff, and reduced carbon footprint.
Bill.McNee@saugatech.com
• Virtualization: Consider that on average, a physical server typically runs
Browse Related Research: at ten percent or less utilization, while a virtualized server can mean an
• Business Strategy / Mgmt. increase in utilization to sixty or seventy percent. This means that data
• Emerging Trends /
centers can reduce the number of servers required to support the
Technologies
• IT Management business by eighty percent or more. Critical Issue: Ownership.
• IT Spending / Priorities /
Strategic Planning Position(s):
Economics
Entire contents © 2008 Saugatuck Technology. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden.

2. SAUGATUCK RESEARCH ALERT
- By YE 2010, large enterprises will virtualize at least 35 percent of non-
desktop IT infrastructure and 20 percent of desktop IT infrastructure.
- Through 2013, management tools, processes, expertise, and services
(not functionality) will remain the key limiting factor in user adoption of
IT Virtualization.
• Open Source: The same factors that attract users to open source – lower
costs and reduced times of development, and reduced dependency on
vendor-specific technologies – have attracted commercial software
vendors to use and incorporate open source into their offerings and
portfolios. Critical Issue: Governance.
Strategic Planning Position(s):
- By YE 2009, open source will be part of practically all software in user
enterprises.
- By YE 2009, the widespread inclusion of multiple open source
software components by vendors (including SaaS and cloud
providers) will force users and vendors to invest significant IT,
Finance, and Legal resources on open source licensing governance.
• Social Computing: With the potential to improve information sharing
internally, and connect companies more closely with external customers,
suppliers and partners, social computing is beginning to prove itself
beneficial to the enterprise. Critical Issue: Integrating social applications
into enterprise business applications.
Strategic Planning Position(s):
- By year end 2010, one-quarter of business process improvement
initiatives will include the integration of social information into the
context of business applications and workflows.
Now, taking a step back from these new technologies, let’s consider the
broad management challenges facing CIOs in the coming year:
• Balancing Act: CIOs must balance radical, immediate, operational cost-
cutting requirements from the CEO, who will be looking to protect
precious cash through the economic downturn. At the time, there will be
demand to improve IT services to internal and external users, retaining
customers and growing revenues. Critical Issue: Scope of cost cutting
and shift to self-funding projects.
Strategic Planning Position(s):
- The global economic downturn will result in flat-to-modest IT budget
growth in 2009, across most industries (0-2 percent), with IT budgets
rebounding in 2010 into the 4-6 percent range.
- Through 2010, to continue to deliver existing service, CIOs will
renegotiate contracts, and seek dramatic operational efficiencies,
while accelerating outsourcing initiatives, and cloud / SaaS
investments that do not require substantial upfront capital.
• Cloudy Future. Saugatuck believes that CIOs will turn to cloud
computing to meet the twin objectives of reduced costs and improved
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3. SAUGATUCK RESEARCH ALERT
service. But with cloud still in its infancy, and standards still evolving,
selecting cloud solutions may seem to be a gamble. Critical Issue:
Avoiding vendor lock-in and “operationalizing” with broader enterprise.
Strategic Planning Position(s):
- Through YE 2009, less than half of enterprises adopting cloud
computing will see cost savings of 20 percent or more – especially
when considering not just compute resources, but total IT
management costs.
• Managing a Hybrid Environment. Virtualization and cloud computing
don’t necessarily mean that systems management personnel have less to
do. In fact, they will likely have more complicated jobs. Further, SaaS
and cloud computing necessitates that systems management shift from
managing assets to managing provider processes and contracts. Critical
Issue: Skills/staff retaining.
Strategic Planning Position(s):
- Through 2010, two of the biggest challenges associated with
managing hybrid environments are fully addressing the data, process
and workflow integration challenges, and shifting the focus from an
asset to process management framework.
• Vendor viability and consolidation: Saugatuck expects the longer-term
trend toward industry consolidation to continue, now impacting a new
round of emerging players who have been largely funded since the last IT
downturn. In particular, Saugatuck anticipates that 2009-2010 will be a
period when a number of category leaders will emerge across a variety of
SaaS segments, via a combination of organic growth and aggressive
M&A activity. Some of the biggest winners will be pure-play SaaS
providers extending their brands into complimentary segments, and/or
where they have a common buying center. At the same time, we
anticipate significant investments from Microsoft, IBM, SAP and Oracle,
among others, as they attempt to transition their businesses (and retain
their customers and developer/channel networks). Critical Issue: Portfolio
risk mitigation.
Strategic Planning Position(s):
- By YE 2010, 30 percent or more of SaaS and Open Source start-ups
that currently have annual subscription revenues streams of $5 million
or less will fail, along with 50 percent or more of those focusing on
Enterprise Social Computing.
• Skills, Skills, Skills. Saugatuck has been hearing for years how CIOs
cannot get the skilled workers they need to make systems work efficiently
and effectively. While this applies to legacy skills, the emerging cloud
computing era demand a significantly new skills mix – and not all existing
staff with transition easily to this new world. Critical Issue: Managing skills
transition during period of downsizing.
Strategic Planning Position(s):
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4. SAUGATUCK RESEARCH ALERT
- Through 2012, one of the biggest inhibitors to the adoption of cloud
computing will be the re-training or sourcing of IT management skills –
as the focus shifts from managing assets to business processes.
Market Five Disruptive Technologies to Watch:
Knowing how, where and when technology and business disruption is likely
Impact
to occur, enables user firms to improve their planning, management and
decision making. Knowing how, where and when user firms will plan and
manage disruption in business and technology helps technology vendors and
services providers identify opportunities and plan offerings.
Saugatuck does not expect most user firms to invest heavily in any IT for the
next year or more, unless those firms are experiencing dramatic growth, or
have needs for new or improved IT that will clearly result in strong business
improvement. A shift “backwards” toward more centralized IT spending
scrutiny (capital and operational) with a renewed emphasis on compelling
business cases will be the norm. Such practices can be effective in helping to
manage IT costs with traditional technologies.
Under this scenario we can expect some investment in these technologies
and some progress toward business and IT improvement – especially when
they can help deliver new innovation cost-effectively, or lower the cost of
existing service delivery.
But these five disruptive influences will also continue to come in through “side
doors” and could reach critical mass through unofficial channels and
practices. User firms that are unaware of their presence and/or lack effective
governance to deal with these influences will find costs for IT management,
security, integration, and operations escalating during a time when those
firms may need some very tactical restraint.
Five Key Issues for CIOs to Manage:
Being aware of realistic, important management challenges just over the
horizon is important for any successful (and cost-effective) management
strategy. And being aware of peer/colleague concerns and challenges
promotes the spread and implementation of best practices, and enables
improved collaboration between business partners. It also enables improved
collaboration between users and vendors, so that vendors can better serve
and support (and profit from) user concerns.
Any discussion of “top five” technologies, CIO challenges, or other aspects of
business and technology management is of course open to debate. What’s
most important is that CIOs – and their CEO, COO and CFO colleagues – do
not fall into reactionary modes of operation and management.
Doing so is easy in the best of times. But during times of such economic
uncertainty, it is even easier to react rather than to plan and execute – and
reaction-based management is a trap to avoid at all costs – even when it
seems less costly.
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