Description: The demands on IT are great no matter what the economic climate. Intel CIO Stacy Smith shows us how to meet the challenge of lowering costs and getting higher returns on IT investments.
Hi, I'm Stacy Smith. I'm the vice president and chief information officer for Intel Corporation. Today, I'm going to talk to you about the economic situation that faces IT or what they call internally, the abandon all hope for CIOs graph.
So, let me start here, and what I'm going to show you is the various economic climate that a company may face. So, what I'm drawing here is the revenue line. You have a situation where revenue is growing; all the employees are pretty happy. Revenue starts to flatten out. The employees get sad and revenue starts to decline. This is where you get a new CEO and all the shareholders are mad. So we call this the revenue line. Underneath that, I'm going to draw the demand for information technology and so what happens is, in a situation where revenue is increasing, the demand for IT actually increases by more than the revenue. This is the time where you're adding new sales offices. You might be adding factories. You're connecting to new customers and so your demand for applications and infrastructure grows.
As revenue starts to flatten out, your demand on IT continues to increase. You might be looking at IT as an opportunity to do automation in the space or to reduce other kinds of costs. For instance, at Intel, when revenue starts to flatten out, we encourage employees not to travel and so what we see is that our phone and network usage goes way up in the company and similarly, as demand starts to decrease, you start to look at IT as a way to offset other kinds of spending. So you might put in factory automation to avoid adding new factories or hiring new people and so we'll call this line the IT demand line. And then the third part of this is the budget, and this is the part that is abandon all hope for CIOs. So in a situation where the revenue is increasing, if you work for a really forward-thinking company, you're going to get some increase to your IT budget. But it's always going to be less than the amount of revenue increase. As revenue starts to flatten out, typically the investment that you're making in IT will decline a little bit and as revenue drops, the investment that you make in IT could decrease pretty significantly. So we call this IT investments and what you'll notice is, in every one of these scenarios, the demand for IT increases by more than revenue and the IT investment role increase or decrease and create a gap between the demand and the investment dollars.
So, there's two ways that you can balance this equation. The first way is, you've got to find cost savings. You've got to find creative ways to reduce significantly the cost that you have going on inside your IT shop so that you can help to create dollars to invest in new capabilities. So some examples of this at Intel is, we found that, as we take our design engineering organization from some proprietary base systems to standards-based Intel, Linux-based servers, we can actually save hundreds of millions of dollars in capital cost. Those are the kinds of things that you have to do in order to find the dollars to invest in new capabilities. The second thing you have to do is, you have to be able to articulate the business value in the investments that you're making in information technology. We have to be able to competent at a company level with investments in new factories and new products and we have to show that the investments we're making in IT actually are giving us a bigger return in the investments that we make in some of these other areas.
So the morale of the story is, in the way that we can avoid the abandon all hope graph is, a company has to be able to drive cost down at a rate that's faster than the budget cuts and they have to be able to plough new investments into creative areas, so they bring strategic competitive advantage to the company.
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