ict strategy: an sme perspective · intel microprocessors source: intel & silicon image 0 5 10...

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ICT Strategy: An SME Perspective

Presentation to MacIntyre Hudson LLP Milton Keynes

3rd March 2008

Prof. Jim Norton Senior Policy Adviser

UK Institute of Directors Chair IET IT Sector Panel External Board Member Parliamentary Office of Science & Technology

www.profjimnorton.com

• Setting the scene - the impact of exponential growth.

• ICT both benefit and threat?

• IoD Member research results:

• Uses and applications

• Challenges

• Business change not IT change

• Summing up - fertile soil.

Issues to be covered

2

The second half of the chessboard

Original idea: George Gilder at the Cato-Brookings Institution conference "Regulation in the Digital Age," held in Washington D.C. on April 17-18, 1997.

The cost-performance of electronics doubles every 18-24 months (Moore’s Law)

1 10

100 1,000

10,000 100,000

1,000,000 10,000,000

100,000,000 1,000,000,000

10,000,000,000 100,000,000,000

1,000,000,000,000

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Source: Gordon E. Moore. Cramming more components onto integrated circuits. Electronics Magazine 38(8), 19/4/1965, available at ftp:// download.intel.com/museum/Moores_Law/Articles-Press_Releases/ Gordon_Moore_1965_Article.pdf and Analysys

35 Doublings

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Moore’s Law in Action: Intel Microprocessors

Source: Intel & Silicon Image

0

5

10

15

20

25

30

35

40

45

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

M T

rans

isto

rs

4004

8008 8080 8086 80286 80386DX 80486DX

Pentium

Pentium II

Pentium III

Pentium 4

2T/18

The family of processors known as Penryn are based on circuits just 45 nanometres wide, reduced from the 65 nanometres of the current generation. Penryn chips will have 820m transistors compared with 580m in the previous 65nm generation and the die size will still be smaller

Moore’s Law v Biology?

Source: Carnegie Mellon University Field Robotics Centre 1997

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Opto-electronics follow the same path (Moore’s Law operates in telecoms, too)

Source: Fred A. Kish et al. Ultra High Capacity WDM Photonic Integrated Circuits. Optical Fiber Communication and the National Fiber Optic Engineers Conference 2007 and Analysys

37 Doublings 1980 1985 1990 1995 2000 2005

0

5000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

1975

Mbit/s

Techniques such as Dense Wave Division Multiplexing now allow the transmission of up to 160 wavelengths down one fibre cable, with photonic integrated circuits capable of carrying 1.6Tb/s [Kish07].

Exponential growth in US WAN fibre bandwidth

0102030405060708090100

1996 1997 1998 1999 2000 2001

Tbps

Source: Cisco & Silicon Image

5

The cost-performance of magnetic storage doubles roughly every 18months…

1 10

100 1,000

10,000 100,000

1,000,000 10,000,000

100,000,000 1,000,000,000

10,000,000,000 100,000,000,000

1,000,000,000,000

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 Source: E. Grochowski and R. D. Halem. Technological impact of magnetic hard disk drives on storage systems. IBM Systems Journal 42 (2) 21/4/2003, available at https://www.research.ibm.com/journal/sj/ 422/grochowski.html and Silicon Image

28 Doublings

Magnetic disk costs (3.5” platters)

020406080100120140

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

$/GB

Source: IDC & Silicon Image

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Cooper’s law for wireless

1

100

10,000

1,000,000

100,000,000

10,000,000,000

1,000,000,000,000

100,000,000,000,000

1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005

Cooper’s Law, (after ArrayComm Chairman, Martin Cooper), states that the number of conversations (voice and data) conducted over a given area, in all of the useful radio spectrum, has doubled every two and a half years for the last 105 years, ever since Marconi discovered radio in 1895

43 Doublings

Source: ArrayComm

But we have seen this before in the context of the telegraph…

1850 1852 Year

1846 1848

Miles of wire in the USA 23 000

12 000

2000 40

Source: Tom Standage, The Economist, “The Victorian Internet”

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The structure of the economy is changing

Structural demand for communications and

IT

Cost of basic technologies

Cost to users Short term demand

Source: Analysys

The first half of the chessboard has already delivered some surprises

Microsoft Corporation, 1978

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All these devices are now mobile enabled...

….welcome to the world of m-business

We are drowning in data…. Where is the life we have lost in living? Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?

T S Eliot, Choruses from ‘The Rock’, 1934

And a codicil for the 21st century… Where is the information we have lost in data?

The amount of information created, stored and replicated in 2006 has been calculated to be 161 Exabytes- equivalent to three million times the information in all books ever written and 20 Gigabytes for every man, woman & child on the planet.That figure is expected to reach 988 billion gigabytes by 2010.

Source: EMC http://www.emc.com/leadership/digital-universe/expanding-digital-universe.htm

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• Challenges




UK research shows that ICT use is linked to higher productivity

Source: Office of National Statistics, with London School of Economics and UK DTI http://www.statistics.gov.uk/CCI/nugget.asp?ID=1240&Pos=2&ColRank=2&Rank=640

Manufacturing companies in the UK achieve an extra 2.2 per cent in productivity for each additional 10 per cent of employees using computers. In newer firms, this extra productivity effect rises to 4.4 per cent. The effect associated with internet use is greater. Manufacturing companies in the UK achieve an extra 2.9 per cent in productivity for each additional 10 per cent of employees using the Internet. Again, for newer firms the effect is larger.

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Problem what problem? Standish “Chaos Chronicles” (2004 edition):

18% of projects “failed”; (cancelled before completion)

53% of projects “challenged” (operational, but over budget and/or over time with fewer features or functions than initially specified…

Typical Standish figures: Cost overruns on 43% of projects; and

Time overruns on 82% of projects.

Oxford University/Computer Weekly 2003 study: 10% of UK projects “failed”; and

75% of UK projects “challenged”. Source: www.standishgroup.com and Oxford University Computer Weekly study of IT project management, Chris Sauer and Christine Cuthbertson, Templeton College

Not just a historic problem…

Source: Standish Group Chaos Chronicles 2007

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• Challenges




Results from our IoD survey…

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Source: IoD Dell Report: Small & Medium Enterprises: successful growth through ICT investment Sept 06

Sample by employee numbers (%)

51%

11%

9%

8%

6%

15%

1-25

26-50

51-100

101-200

201-500

501+

Distribution of sample by sector (%)

39%

15%6%

17%

10%

13%Bus & Prof Servs

Financial services

Distribution & Hotels

Govt, Educ, Health &Personal Servs

Manufacturing

Other, inc. ConstructionMining & Transport

Results drawn from detailed telephone interviews with a balanced sample of 500 IoD members





• Challenges




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Growth ambitions of SMEs

Do you want to grow your business?

For those who want to grow their business, is the use of ICT a key

factor in helping your business grow?

Percentage of SMEs as a whole who see ICT as

a key factor

2004 2006 2007

92% 87% 91%

84% 85% 82%

77% 74% 75%

Source: IoD - Dell Studies 2004 & 2006, IoD-Dell Report SMEs: Successful Growth through Innovation, IoD Business & Technology report 2007 (to be published)

Importance of ICT by organisation size

0

20

40

60

80

100

Under £1M £1-5M £6-10M £11-20M £12-50M £51-100M £101-500M >£500M

79 76 78 80 89

81 88

94

Percentage indicating ICT as key factor

in growth

Annual turnover

Source: IoD Business & Technology Report 2007 (to be published)

Investment in ICT is important to organisations of all sizes - only a very weak correlation with size

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Key reasons for investing in new ICT

Increase productivity

Increase sales

Competitive pressure

Save time

Reduce costs

Reduce risk

Combination of factors

2007 2006 2004

35% 42% 64%

16% 8% 8%

8% 12% 3%

8% 11% 9%

5% 2% 5%

2% 2% 3%

15% 9% 1%


For Mediums sized organisations, there is little variation from the total figures in 2007. Productivity is cited by 38%, increased sales by 10%, competitive pressure by 8%, time saving by 4% and reducing costs by 7%.

Key tools for SMEs

0 10 20 30 40 50 60 70 80

Document Mgmt.

Total Mobility

Desktop Conf

Integrated Comms

Virtual Office

VoIP SAS Collab. Tech

Business Int.

Biometric Sec.

Perc

enta

ge u

se

Tools


For Medium sized companies the top four tools are unchanged, but business intelligence systems (4=) and collaboration tools (6th) are rated more highly than for smaller companies

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Key tools for cost saving

3.75

4

4.25

4.5

4.75

5

5.25

Virtual Office

Total Mobility

Integrated Comms

SAS Business Int.

Collab. Tech

Document Mgmt.

VoIP Desktop Conf

Biometric Sec.

Scor

e: M

ost I

mpo

rtan

t = 7

Tools


For Medium sized companies the top four tools for saving cost are rather different: Integrated Communications (4.96), Business Intelligence Systems (4.93), Virtual Office (4.85) and Document Scanning & Management (4.69).

Key tools for improving efficiency

3.75

4

4.25

4.5

4.75

5

5.25

5.5

Total Mobility

Virtual Office

Integrated Comms

Business Int.

Collab. Tech

Software as a

Service

Document Mgmt.

VoIP Desktop Conf

Biometric Sec.

Scor

e: M

ost I

mpo

rtan

t = 7

Tools


For medium sized companies the top four tools for improving efficiency are very similar: Virtual Office (5.15), Total Mobility (5.13), Integrated Communications (5.05) and Business Intelligence Systems (4.92).

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Key technologies for future development

3.5

3.75

4

4.25

4.5

4.75

5

5.25

5.5

Knowledge Mgmt. Sys

Intelligent Agents

Social Networking

Virtual Communities

Web 2.0 Grid Computing

Scor

e: M

ost I

mpo

rtan

t = 7

Tools


For medium sized companies the scores are typically higher but in almost the same order KMS (5.55), IA (5.28), Virtual Communities (4.91), Social Networking 4.85, Web 2.0 (4.72) and Grid Computing (3.82).





• Challenges




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SMEs grow steadily more worried across a range of ICT issues

Issue 2007 Result

2006 Result

2004 Result

Data Security 78% 68% 64%

Business Continuity 74% 71% 54%

Spam 67% 57% 47%

Maintenance & Support 57% 43% 41%

Mobility/Flexible Working 51% 30% N/A

Data Storage 47% 48% 27%

Keeping up with Technology 46% 36% 21%

IT Training 38% 30% 13%

Setting up an online presence 37% 29% 12%


Business Continuity is still not receiving enough attention

28% of respondents admitted to having no ICT business continuity or disaster recovery plans in place. This was predominately amongst the smallest companies, 1-25 employees (43%), in the Midlands (34%) and in the ‘Distribution & Hotels’ sector (42%).

Medium sized organisations fare better, only 7% admitted to having no ICT Business continuity r disaster recovery plan in place.

Of those with Business Continuity plans in place, 90% (92% for medium sized organisations) felt that they were well positioned to survive a disaster (despite the lack of off-site backups by many…)


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ICT Strategy must also encompass protecting the key assets…

92% of respondents agreed that they had business critical data stored in their ICT systems…

For those with business critical data stored, 11% admitted to backing up less than once per week (if at all!). Focused in the smallest companies 1-25 employees (21%) and ‘Distribution and Hotels’ sector (29%).

For all that back up at least once per week, 51% keep their backups on-site (18% off-site and 31% both off-site & on-site). Worst sector for keeping backups just on-site was ‘Government, Education, Health and Personal Services’ - 72%.

Medium sized companies are better at backing up (96% back up at least once per week) but still woeful at failing to keep a backup offsite (46% back up on-site only).






• Challenges




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There is no such thing as an ICT project … • The purpose of ICT is to

enable and support efficient working practices

• Getting these business processes right takes time, consultation and experiment.

• Introducing new business processes takes time and money, and is often disruptive.

In the words of the CSSA/Intellect report “Getting IT right for Government” published in June 2000: “There is no such thing as an IT project in isolation from its business change programme…”

Leadership of ICT enabled business change must be at Board level

Who leads major business change?

62%13%

5%

5%

4%

10%1%

CEO/MD

Another Exec Director

Finance Director

IT Head

The Board

Others

Don't know

Source: IoD Business Opinion Survey researched May 2006

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Sectors vary on the degree of Board-level leadership of major change Leadership by CEO or other Executive

Director

0

10

20

30

40

50

60

70

80

90

100

Sector

%

Manufacturing

Other, incl.Construction, Mining& Transport

Distribution, Hotels

Business & Prof.Services

Financial Services

Govt, Education,Health & PersonalSrvcs.


What is the typical budget split between technology spend ‘people’ spend in major business change?

0

5

10

15

20

25

30

35

0% 20% 40% 50% 60% 80% DK

% Budget allocated to 'people'

factors

% R

esp

on

den

ts

‘People’ spend includes: business process re-engineering, internal communications, training, changes to performance measurement, reward,…


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There are significant regional differences in the ‘people’ - ‘technology’ split…

0%

20%

40%

50%

60%

80%

South Midlands

North

Percentage budget allocated to ‘people’ issues






• Challenges




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Summing up – fertile soil….

ICT should be managed as a creator of differentiation and competitive advantage and not simply a cost centre.

Money spent on new ICT in isolation from a well thought through and resourced business change plan is generally wasted.

SMEs in general are embracing new technology and applications much more freely than of old.

Systems previously the preserve of large business, such as Knowledge Management systems and Business Intelligence systems are very much on the SME agenda.

The new opportunities in areas like virtual worlds and social networking are expected to be of interest.

Don’t forget that e-business channels often support physical world channels.

And remember the law of unintended consequences….

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Questions & Answers

Slides (in portable document format) available to download from:

www.profjimnorton.com/machud1.pdf

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