McKinsey Revisits IT's Shopping List

"… these two adoption trends indicate that a technology architecture transformation is beginning to take shape …."

--McKinsey & Company

When McKinsey & Company published its IT Shopping List at the beginning of the year, I noted that two items - virtualization and web services -- did not rank near the top of most CIOs' shopping lists.

The most popular items were more established technologies like ERP, VoIP, business intelligence, and security. That's true even though McKinsey and almost everyone else acknowledge virtualization and web services are the next big things.

Perhaps sensing the disconnect, McKinsey focuses squarely on virtualization and web services in its latest technology article. The authors are Kishore Kanakamedala, Vasantha Krishnakanthan, and Roger P. Roberts.

Citing data from the earlier survey, McKinsey reports that 86% of CIOs "cited progress" in "server consolidation" and that virtualization is the "next natural move." As for software as service, 38% of CIOs said they plan "to use the software as service approach during the next 12 months." In addition, "few companies are using software as a service in systems ... that need a lot of tailoring or customization."

Translation -- companies are starting to put their toes in the water on both the virtualization and the web services fronts. A major implementation of either would still, however, be a major news headline or feature story in most IT trade publications. To use the phrasing of my earlier post -- not all high-tech is equal and where you sit on the innovation cycle reflects to what extent you are a net consumer or investor of innovation. Virtualization and web services are still net consumers of investment dollars -- i.e., adoption sucks up more cash then it gives back near term. So adoption is slow in an era of flat IT budgets. The money to pay for those investments must come from efficiencies gained from the relative "cash cows" of innovation like ERP — technologies on which companies are much more willing to spend money.