After the dot-com crash, however, when budgets dried up, CIOs no longer possessed the luxury of inflated IT budgets. Instead, they found themselves having to get the most out of their current IT architectures. That's when the realization hit home that maintaining 57 different financial systems and 14 call center applications was draining resources and mitigating the ability of IT to deliver on the value promised by so many software solutions such as CRM.
"I knew CIOs even in 1998-'99 who knew they were spending way too much money on maintenance and were frustrated even then," she said. "But in '98-'99 you could still get the money if something was 'business critical'. What's happening now is CIOs of all sizes are understanding (centralization) is more than just tactics, that they really need to have a whole strategy around how they move to more of a shared, dynamic utility environment."
For many CIOs the first steps along this road were to centralize and standardize their infrastructures and applications. At Hewlett Packard, for example, after the Compaq merger, the company was maintaining 145 different instances of SAP. Today, the company is using just one outsourced to it's Managed Services division and accessed remotely by the company's far-flung global empire, said Joe Hogan, vice president of marketing for HP Managed Services.
"The first thing you've got to do is standardize on an architecture," he said. "The second thing you really have to do is consolidate. Once you consolidate things, that gives you the ability, in one central location, to begin to go ahead and use the (excess capacity) of the server base you've consolidated and clustered up."
For Xcel Energy, a $9.5 billion power provider in the Western US, the truth hit home after the merger, which formed the new company, and the electric crisis of 2002, said Mike Carlson, Xcel's director of Business Transformation. In fact, Carlson was hired specifically to help Xcel rationalize its IT infrastructure.
The first thing Carlson did was install a $1.6 million global storage area network (SAN), which now saves the company $5 million per year in maintenance costs. But that was just the start. Business units that once handled their own IT independently now get most computing needs fulfilled by a centralized IT unit run by IBM. If one of its four divisions wants more than just the standard offerings, that unit's divisional CIO must make a business case for the deviation.