Corp 164 ResrchRptScenario

The Gartner Scenario 2006:
The Current State and Future Direction of IT

The Gartner Scenario 2006:
The Current State and Future Direction of IT
Ken McGee, Betsy Burton, David W. Cearley, Jeff Comport, Jackie Fenn, Robert A. Handler,
Kathy Harris, Janelle B. Hill, Dale Kutnick, Andy Kyte, Mark P. McDonald, Jay E. Pultz, Mark
Raskino, Christopher Ambrose, F. Christian Byrnes
This report is in three sections. The first provides a background to the actions that IT organizations
should undertake during the next three years. The second describes the specific tasks that CIOs and
their managers must perform. The third is a compendium of emerging trends that will change the IT
industry in the more distant future.
Key Findings
• CIO budget increases remain less than 3% for the fourth year in a row.
• Huge and complex demands for IT are largely going unmet.
•T
he fastest IT growth opportunities during the next 10 years will grow from
a vast array of newly emerging business and society trends and demands.
Recommendations
During the next three years, CIOs and their IT executives must:
•L
ead their organizations to establish a track record of creating value
faster than reducing IT costs by 2009
• Complete automation of IT operational processes
• Attain “corrective phase” security status
• Operate all revenue-generating channels in a Web 2.0 architecture
• Complete enterprise platform migration by 2009
• Retire 10% of their applications
•M
odel critical customer- and supplier-facing business processes
by the end of 2007
Table of Contents
4-11 The Economy, Business Climate and the State of the IT Industry
11-27 Tasks IT Professionals Must Complete by 2009
27-28 Conclusion
Research
Publication Date: 27 October 2006 ID Number: G00144450
The Gartner Scenario 2006: The Current State and

Future Direction of IT
Ken McGee, Betsy Burton, David W. Cearley, Jeff Comport, Jackie Fenn, Robert A. Handler,
Kathy Harris, Janelle B. Hill, Dale Kutnick, Andy Kyte, Mark P. McDonald, Jay E. Pultz, Mark
Raskino, Christopher Ambrose, F. Christian Byrnes
This report is in three sections. The first provides a background to the actions that IT
organizations should undertake during the next three years. The second describes the
specific tasks that CIOs and their managers must perform. The third is a compendium of
emerging trends that will change the IT industry in the more distant future.
Key Findings
• CIO budget increases remain less than 3% for the fourth year in a row.
• Huge and complex demands for IT are largely going unmet.
• The fastest IT growth opportunities during the next 10 years will grow from a vast array
of newly emerging business and society trends and demands.
Recommendations
During the next three years, CIOs and their IT executives must:
• Lead their organizations to establish a track record of creating value faster than reducing
IT costs by 2009
• Complete automation of IT operational processes
• Attain "corrective phase" security status
• Operate all revenue-generating channels in a Web 2.0 architecture
• Complete enterprise platform migration by 2009
• Retire 10% of their applications
• Model critical customer- and supplier-facing business processes by the end of 2007
© 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form
without prior written permission is forbidden. The information contained herein has been obtained from sources believed to
be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although
Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal
advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors,
omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein
are subject to change without notice.
TABLE OF CONTENTS
1.0 The Economy, Business Climate and the State of the IT Industry.............................................. 4
1.1 Economic Growth ........................................................................................................... 4
1.2 CEO Priorities................................................................................................................. 5
1.3 CIO Priorities .................................................................................................................. 6
1.4 The State of the IT Industry............................................................................................ 7
2.0 Tasks IT Professionals Must Complete by 2009 ....................................................................... 11
2.1 CIOs: Establish a Track Record of Creating Business Value Faster Than Cutting
Costs by 2009..................................................................................................................... 11
2.2 IT Operations Managers: Complete Automation of IT Operational Processes by 200913
2.3 IT Security Managers: Attain "Corrective Phase" Security Status by 2008 ................. 14
2.4 IT Business Intelligence Managers: Create a Business Intelligence Competency
Center by 2008 ................................................................................................................... 15
2.5 IT Outsourcing Decision Makers: Apply a Multisourcing Discipline to All Sourcing
Arrangements by 2009 ....................................................................................................... 17
2.6 IT Architects: Operate All Revenue-Generating Channels in a Web 2.0 Architecture
by 2008 ............................................................................................................................... 18
2.7 Application Development Managers: Complete Enterprise Platform Migration by 200919
2.8 Application Development Managers: Establish Cross-Project, Enterprise-Level
Application Management Before 2009 ............................................................................... 20
2.9 Application Development Managers: Retire 10% of Applications by 2008 .................. 21
2.10 Business Process Improvement Managers: Reinsert People Into All Customer-
Facing Business Processes by 2008 ................................................................................. 22
2.11 Business Process Analysis and Planning Managers: Model Every Mission-Critical
Customer- and Supplier-Facing Process by 2007.............................................................. 22
2.12 All IT Managers: Transform the Organization From "Technology First" to "Business
First and Technology Second" by 2009.............................................................................. 23
3.0 Emerging Technology, Business and Social Trends................................................................. 24
3.1 Build the Real-World Web ............................................................................................ 24
3.2 Create Road Maps for Emerging Business .................................................................. 25
3.3 Create Business Innovation Roles ............................................................................... 26
4.0 Conclusion ................................................................................................................................. 27
LIST OF TABLES
Table 1. CIO Priorities in 2006 .......................................................................................................... 6
LIST OF FIGURES
Figure 1. Annual GDP Growth Rates, 2006 ...................................................................................... 5

Figure 2. CEO Priorities in 2006........................................................................................................ 6
Figure 3. Gartner Executive Programs IT Budget and Business Growth Rates, 2006 ..................... 8
Figure 4. IT Spending Growth in the United States and Western Europe, 2005 .............................. 9
Publication Date: 27 October 2006/ID Number: G00144450 Page 2 of 29

© 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
Figure 5. End-User Spending on IT Products and Services, 2005 and 2006 ................................. 10
Figure 6. Total Worldwide IT Spending Growth Rates, 2005-2007................................................. 10
Figure 7. Establish a Track Record of Creating Business Value Faster Than Cutting Costs ......... 12
Figure 8. Complete Automation of IT Operational Processes......................................................... 14
Figure 9. Attain Corrective Phase Security Status .......................................................................... 15
Figure 10. Create a Business Intelligence Competency Center ..................................................... 16
Figure 11. Apply a Multisourcing Discipline to All Sourcing Arrangements .................................... 18
Figure 12. Operate All Revenue-Generating Channels in a Web 2.0 Architecture......................... 19
Figure 13. Establish Cross-Project, Enterprise-Level Application Management............................. 21
Figure 14. The Origin of IT Workers, 2006 and 2010...................................................................... 24
Figure 15. Emerging Technologies.................................................................................................. 25
Figure 16. Emerging Business Trends ............................................................................................ 26
Figure 17. Emerging Demographic Trends ..................................................................................... 27

ANALYSIS
This report is organized into three sections. Section 1.0 identifies the near-term economic and
business climate, on a global basis. We then provide an overview of CEO priorities and compare
them with CIO priorities as determined from Gartner's annual Executive Programs survey. We
conclude this section with a snapshot of the health of the IT industry. All elements of Section 1.0
combine to provide a background to the vital steps clients must undertake during the next three
years.
Section 2.0 describes the specific tasks that CIOs and their direct report managers must
undertake and complete no later than 2009. In many cases, those tasks must be completed even
sooner.
In Section 3.0, we provide a compendium of emerging trends that we believe will have profound
effects on the IT industry in the more distant future.
We begin our effort to describe the current state and future direction of the IT industry by outlining
the near-term economic and business environment within which clients will be operating and from
which they will be seeking future IT funding.
1.0 The Economy, Business Climate and the State of the IT

Industry
1.1 Economic Growth
According to Global Insight, worldwide gross domestic product (GDP) in 2006 is expected to grow
3.4% over GDP levels achieved in 2005. Although this is a respectable amount of growth, a
slowing growth trend since the third quarter of 2003 continues. Projections for growth in 2007 call
for a slowdown to 2.7% over 2006 levels.
Once again, the leaders of economic growth in 2006 are China, other nations in Asia, and North
America (see Figure 1). In the United States, Global Insight predicted strong growth at the start of
2006 but also forecast a rather sharp slowdown to 2% growth by the end of the year. In the
"eurozone," marginal improvements over 2005's figure of 1.4% will mean annual growth of 2.2%
in 2006. Japan's growth is predicted to be ahead of levels attained during the past few years,
thanks to hopes of improved consumer spending and increased exports (especially to China).
Earlier in 2006, Global Insight predicted exceptional rates of growth for China in the near term: a
10.6% increase in 2006 (following a 9.8% increase in 2005) and a 9.2% increase in 2007. After
experiencing a 2.5% rate of growth in 2005, Australia's GDP should grow 2.9% this year, but a
slight reduction is expected in 2007. In Latin America, Global Insight expects a growth rate of
between 4% and 5% during the next few years. Falling housing prices, inflation, fear of avian
influenza, rising interest rates and increased oil prices remain the major concerns to future
economic health in certain emerging markets.

Figure 1. Annual GDP Growth Rates, 2006
Grow th
10%
8%
6%
4%
2%
0%
na
a
ne
n
y
a
.
.
li a
ce
.K
.S
an
di
pa
re
ad
zo
ra
hi
an
In
Ko
Ja
an
m
C
st
ro
Fr
er
Au
h
Eu
ut
So
Source: Global Insight
1.2 CEO Priorities

Using insight gained from Gartner's own Gartner/Forbes survey as well as an array of other CEO
surveys, we have compiled our understanding of the most consistent priorities facing today's chief
executives. Figure 2 lists those CEO priorities. At the top of the list are concerns about growth.
Strong economic growth in the past has shifted to increased concerns about a slowdown in the
future. Second is increased competition. As well as feeling the pressure of competition in their
industries, many CEOs have to compete harder for resources. While the concern about
competition is nothing new, the origin of the competition is. CEOs have expressed concern about
competing with companies located in much lower-cost regions of the world, especially within
developing economies. Also, many basic commodity inputs that have long been relatively stable
in price and supply now require more attention.
IT occupies third and fourth place on the CEO priority list. The Gartner/Forbes survey suggests
that IT is perceived as valuable by CEOs when it increases speed to market, fosters innovation,
provides real-time information, improves productivity and uses information as a competitive
weapon. But CEOs are also concerned about IT inhibiting change: IT leaders who can make only
incremental changes seem to be creating inertia.
Information overload is CEOs' fifth concern: Senior managers want to reduce time-consuming
juggling of information to maximize a precious business resource — management attention.
Mergers and acquisitions are the sixth priority. As weaker players merge or are acquired, CEOs
of stronger companies want to protect themselves from takeover. Compliance is the seventh
priority, especially the time, money and personnel required to attain and maintain an enterprise
within a climate of regulatory compliance. The number of regulations and agencies continues to
increase, often causing turmoil and increased workloads for already overburdened corporate
staff. Finally, CEOs are expressing an increased interest in having projects or any additional
funding justified by an analysis of the return on assets. In this regard, we see the desire for
growth in action and with very specific growth targets in mind. Because return on assets is the
relationship between annual profitability and total assets, any manager seeking funding for a

project must be prepared to explain how the investment will enhance profit growth at a rate faster
than growth in asset value.
Figure 2. CEO Priorities in 2006
1 Growth 5 Information Overload
2 Competition 6 Mergers and Acquisitions
3 IT as an Enhancer 7 Regulation
Return on Assets =
4 IT as an Inhibitor 8 Annual Net Income x 100
Total Assets
Source: Gartner (September 2006)
1.3 CIO Priorities

In the latter part of 2005, Gartner's Executive Programs organization conducted a survey of more
than 1,400 CIOs to determine the new priorities and budget changes they were expecting in
2006. Table 1 indicates their priorities and compares them with findings in 2005 and 2004.
Table 1. CIO Priorities in 2006

To what extent is each of the following CIO actions a Change From Rank Rank Rank
priority for you in 2006? 2005 2006 2005 2004
Delivering projects that enable business growth Same 1 1 18
Linking business and IT strategies and plans Same 2 2 4
Building business skills in the IT organization Up 3 9 1
Demonstrating the business value of IT Down 4 3 2
Attracting, developing and retaining IT personnel — 5 * *
Applying metrics to IT organization and services Down 6 4 14
Improving the quality of IT service delivery Same 7 7 3
Having flexible technology infrastructure — 8 * *
Improving IT governance Up 9 10 11
Consolidating the IT organization and operations Down 10 8 **

To what extent is each of the following CIO actions a Change From Rank Rank Rank
priority for you in 2006? 2005 2006 2005 2004
*New question for 2006.
**New question for 2005.
A growing number of CIOs and their organizations are in the midst of a transformation from
internally focused departments that contain costs to ones that support growth. In 2005, CIOs
focused on contributing to business results, often in the form of improving and integrating
business processes and delivering more-effective business intelligence. In 2004, CIOs prepared
for the upswing in economic growth. Now it's time to deliver IT's contribution to growth.
Why? Simply put, CIOs and their organizations must deliver more value than the business can
buy in the marketplace, or they face becoming another commodity. They are doing it by delivering
secure, high-quality IT services and, in some cases, by extending those services into business
processes.
This transformation requires CIOs to excel in three distinct, but related, roles:
• The senior technology executive responsible for leading the IT organization
• The technology leader responsible for applying IT to enterprise issues and challenges
• A member of the executive team who needs to develop business, technology,

leadership and personal skills
The 2006 CIO agenda defines the requirements for IT contribution. This changes the
conversation between IT and the business from discussions about enablement to plans for
contribution. "IT enables the business" is a phrase often used to describe IT's relationship to the
business, but it must be updated to reflect the future value proposition for that relationship.
1.4 The State of the IT Industry

Figure 3 shows Global Insight's projections of the degree to which companies in each industry
sector were expecting to increase revenue. It compares those rates with the increases in IT
budget anticipated by CIOs from companies in the same sectors. The CIOs' figures were
obtained from Gartner's 2006 Executive Programs survey. The results from that particular survey
show that IT budgets from those Executive Programs clients will grow at rates below revenue
growth rates in every industry sector.

Figure 3. Gartner Executive Programs IT Budget and Business Growth Rates, 2006
Manufacturing Projected IT Budget

Growth 2006
Projected Business
Insurance Growth 2006
High Tech
Healthcare/Pharma
Government
Financial Services
0% 1% 2% 3% 4% 5% 6% 7% 8%
Source: Global Insight and Gartner Executive Programs (September 2006)
As well as increasing by less than company revenue, IT spending is expected to grow at a lower
rate than expenditure in other areas of the business. Our Executive Programs CIO survey
respondents expected their IT budgets to increase by 2.7% in 2006.
A much broader and slightly more favorable view of projected annual IT budget changes by the
end of 2006 comes from "U.S. IT Spending and Staffing Survey, 2005" and "Western Europe IT
Spending and Staffing Survey, 2005." Figure 4 shows results from those surveys.

Figure 4. IT Spending Growth in the United States and Western Europe, 2005
United States Western Europe

IT Spending IT Spending
6% Up 5.5% Up 3.0%
5%
4%
3%
2%
1%
0%
Source: Gartner Dataquest (November 2005)
To provide a global view on the current state of the IT industry, Figure 5 shows the amount of
worldwide spending within the following specific IT categories:
• Computing hardware
• Software
• IT services
• Telecom
These spending levels were derived from "Gartner Dataquest Market Databook, June 2006
Update." Within each category, we are depicting the amount of spending as well as the percent
change expected for 2006 versus levels achieved during 2005. Note that these figures include
spending by businesses, governments and consumers.

Figure 5. End-User Spending on IT Products and Services, 2005 and 2006
Billions of Dollars
$3,500
2005
4.7%
$3,000 2006
$2,500
$2,000
6.0%
$1,500
$1,000
3.5%
-0.2%
$500
8.0%
$0
Computing Software IT Services Telecom All IT
Hardware
Note: Percentage figures indicate growth rates between 2005 and 2006.
Source: Gartner Dataquest (June 2006)
Figure 6 also depicts information from "Gartner Dataquest Market Databook, June 2006 Update"
and identifies past results and forecasts for worldwide IT spending.
Figure 6. Total Worldwide IT Spending Growth Rates, 2005-2007
Total IT Spending in 2006 = $2.78 Trillion

Annual Growth
10% Total IT Spending in 2007 = $2.91 Trillion
8%
7.5%
6%
4% 4.7% 4.8%
2%
0%
2005 2006 2007
Source: Gartner Dataquest (June 2006)

2.0 Tasks IT Professionals Must Complete by 2009
Now that we have provided an overview of short-range forecasts for the economy and business-
sector growth, CEO concerns, CIO priorities, IT budget growth, and worldwide IT spending, it is
clear that huge and complex challenges lie ahead for many IT organizations. Although IT budget
growth will be modest at best for most organizations, CIOs and their staffs will still be expected to
support efforts that directly contribute to business growth.
However, despite modest increases in IT fund allocations, CIOs can still significantly contribute to
their enterprise's quest for growth. Those efforts can begin by acting on the projects that already
appear on most unwritten "to do" lists, but that rarely find their way onto the "official" lists.
To help CIOs take the most productive near-term steps to directly support delivering business
growth and effectiveness to the enterprise, we have identified eight IT executives and matched
them with the single most important action they must complete by 2009. We won't waste time
using lukewarm terms like "consider," "understand," "plan for" or "identify." Instead, we talk about
specific tasks and completion dates. Executives who complete tasks will be well on their way
toward becoming genuine contributors in organizations where the drive for growth is the top
priority.
Finally, while growth can be defined in many ways, the same is true for success. Therefore, while
each task will contribute to growth, we have provided the added insight of indicators that show the
most likely results to be realized once each task is completed. These indicators of value creation
are in four areas: saving money, efficiency, effectiveness and agility.
Here now are the specific tasks that IT executives must complete, beginning with the CIO.
2.1 CIOs: Establish a Track Record of Creating Business Value Faster Than
Cutting Costs by 2009
CIOs and their organizations must increase their contributions as businesses, under pressure to
grow, expect more from IT. CIOs are now expected to provide high-quality, secure and cost-
effective services. They must deliver a record of performance to establish their position and their
contribution to the business.
To do this, CIOs will need to create business value faster than the market and technology can
reduce costs (see Figure 7). This means that they have to establish a record of success. How?
CIOs must:
• Be equally successful at delivering current operation and improvement in the business

and at creating change by working on the business:
• Gain clarity on business expectations from IT (enabling or contributing)
• Improve operational, development and delivery processes to put more resources

into transformational change
• Increase the business impact of new applications
• Make IT's contribution earlier in enterprise decisions by increasing their involvement in

product and corporate development processes:
• Use their understanding of operational issues to reduce the risks inherent in product
and corporate decisions

• Strengthen the ability of the enterprise to increase the number of customers and
market share by strengthening the information value chain
• Change the sources of IT talent as the workforce moves from being focused solely on
technology to looking at the business first and technology second:
• Build up their skills in business process, information management and relationship

management to work effectively in a networked business
• Increase the percentage of employees hired from the business side (rather than the
IT side) fourfold to get the right mix of business and technology skills
Indicators of value creation:
• Saving money: Low
• Efficiency: Low
• Effectiveness: High
• Agility: Medium
Figure 7. Establish a Track Record of Creating Business Value Faster Than Cutting Costs
Contributing $$$
Cost Value
$$$
Reduced Created
Enabling
Cost $$$ $$$ Value
Reduced Created
At Risk $$$
Cost Value
Reduced $$$ Created
2006 2009

2.2 IT Operations Managers: Complete Automation of IT Operational
Processes by 2009
Given the slow rate of IT budget growth, the next three years will place an extraordinary amount
of pressure on IT organizations challenged to continually show members of the enterprise that
they deliver sufficient value to warrant remaining an intact organization. To do this, IT executives
must do more than just cut costs. They must deliver value that is measurable and of significant
importance to the enterprise. We believe that there are at least three main dimensions of
business value that clients must deliver during the next three to five years.
The first of these value qualities is efficiency. Creating the ability for the same people to generate
more output through improved tools and processes reaches all the way from the workers to the
bottom line. Second, agility is a top priority in all undertakings. Entering or retreating from
markets, increasing new opportunities, and avoiding harm are attributes valued by any executive.
Third, effectiveness will be among the most common metrics used to define IT success.
Quantifying the business benefits directly born from future IT solutions will be a key factor in
determining whether to keep IT staff on the payroll.
Using a layered technique, IT groups can determine where process automation products fit in
with the synchronization of infrastructure resources and business needs. Figure 8 shows the
pyramid to achieve the top layer of business management. At the lowest layer, element
management is dominated by infrastructure manufacturers' tools that are specific to certain
infrastructure components. A new generation of configuration management vendors is creating
tools that operate in multivendor environments and bring rigorous change management and audit
capability to configuration management. Tools at the operations management layer understand
the physical interrelationships between components and provide such features as component
discovery, status monitoring, fault management and troubleshooting.
• Saving money: High
• Efficiency: Medium
• Effectiveness: Low
• Agility: Low

Figure 8. Complete Automation of IT Operational Processes
Business
Management
Business service
views, business
impact analysis,
modeling, capacity planning
Service Management
Baselining, historical analysis,
service-level agreement reporting,
end-user experience monitoring
Operations Management
Administration, discovery and topology, fault management,
status monitoring, troubleshooting, event console,
alarm correlation, root-cause analysis, inventory
Element Management
Installation, configuration and maintenance
of individual infrastructure components
2.3 IT Security Managers: Attain "Corrective Phase" Security Status by

2008
Figure 9 shows the four phases to improving enterprise information security:
• Awareness phase: This phase is characterized by a sudden recognition among

business executives that "something must be done" about information security. The start
of this phase entails the constitution (or reconstitution) of a dedicated information
security team, under the auspices of a full-time team leader, often reporting directly to
the CIO. A detailed security policy review often characterizes the bulk of activity during
this phase. In some organizations, this unfortunately results in "business as usual,"
based on the assumption that a policy rewrite will solve the problem. About half of
Global 2000 organizations are in this phase.
• Corrective phase: Once a consistent vision and strategy have been accepted, the
organization can initiate a strategic information security program. During this phase,
security and risk governance processes and structures are revamped, and other
organizational actions (for example, establishing a security program office and centers
of excellence, and appointing security representatives for each line of business) are
initiated. Steps are taken to develop and evolve a strategic information security
architecture.
• Operational excellence phase: Successful transformation of the way information

security is embedded into the culture of the organization is indicated by moving into the
operational excellence phase. All the key foundations of business-driven security
(strategic, operational and administrative processes; effective policy structures;
appropriate roles and responsibilities) have been instituted. The organization uses trust

management as the primary mechanism for deriving business-focused policies and
appropriate control measures. Metrics are associated with the major security processes,
and these are reported with the emphasis on continuous improvement. The business
typically understands and accepts the residual risks within specific domains.
• Efficiency: Low
• Agility: Low
Figure 9. Attain Corrective Phase Security Status

Blissful Awareness Corrective Operational
Ignorance Phase Phase Excellence Phase
Conclude 20%
Catch-Up
Projects Continuous
Design Process
Maturity Architecture 40% Track Technology and
20%
Business Change
Develop New Institute
Policy Set Processes
Review
Status Quo
Initiate Strategic
20%
Program
Re-establish
Security Team
Duration of More Than Three Years

2.4 IT Business Intelligence Managers: Create a Business Intelligence

Competency Center by 2008
Traditionally, most practitioners have viewed business intelligence as a layered technology tied to
a specific database management system and designed to provide executives with reports and
dashboard-like views of what departments were doing, how well they were doing it and where
opportunities for growth might lie. But business intelligence's value is more than information
dissemination. Today, leading business intelligence and performance management initiatives are
interactive, flexible processes that begin with the business objectives, the needs and skills of
people within the company, and the critical business processes, and then incorporate the
technology that best serves those needs (see "Key Steps to Making Business Intelligence
Strategic").
The key to integrating these elements is the business intelligence and performance management
competency center, which consists of people from the business areas of the company as well as
the company's IT "gurus," working together to drive the appropriate business intelligence
evolution. The center's role is to champion business intelligence and performance management,

as well as ensure that the business alignment, project prioritization, management and skill issues
associated with significant business intelligence projects are aligned with technologies and
standards. The competency center must cross boundaries associated with people, technology
and processes (see "Toolkit: Eleven Best Practices for Supporting a BICC"). The creation and the
formation of a competency center should become an enduring part of the organizational structure
(whether it's real or virtual).
However, its goals and members should reflect changing business and market realities; it must
work to increase agility. As business goals and vision evolve, the competency center will need to
integrate new visions. As the business intelligence role and business intelligence technologies
evolve from enabling users to measure, decide, manage and optimize to enabling them to
discover and innovate, the center must enable, lead and support this evolution (see Figure 10).
The fundamental role of a business intelligence and performance management competency
center is persistent; its specific tasks and membership are dynamic.
• Efficiency: Low
• Agility: High
Figure 10. Create a Business Intelligence Competency Center
Measure Decide Align Optimize Discover Innovate Lead
Business Intelligence and Performance Management Continuum
2012: BI and Performance Management

Driving Business Transformation
Discover
2004: IT Driving BI Measure
Innovate Business Strategy

Measure Optimize Performance Management
BI Platforms People Process
Decide Analytic Applications

Data Warehouse
BI Platforms
Align
Information
Management
Lead Infrastructure

2.5 IT Outsourcing Decision Makers: Apply a Multisourcing Discipline to All
Sourcing Arrangements by 2009
Multisourcing is the disciplined provisioning and blending of business and IT services from the
best set of internal and external providers in the pursuit of business goals. Multisourcing fulfills
the requirements of evolving operational imperatives (such as quality, automation, cost and
globalization) and business disciplines (such as quality, process excellence and core
competence) — see Figure 11. Multisourcing is a revolution in business operations as dramatic
as the Industrial Revolution or the advent of mass production a century ago.
Just as we no longer remember those companies that were overwhelmed by the Industrial
Revolution, two decades from now the companies that did not adopt multisourcing will also be
forgotten, or at best serve as cautionary tales of failure. We've been outsourcing for a long time
— more than 20 years. Yet most organizations are ill-prepared to move toward multisourcing and
the discipline that is required. They have a complex mixture of insourced and outsourced
functions and, increasingly, an array of approaches for onshore and offshore delivery. The result
is a disparate, tactically outsourced set of services. Companies must move toward a new era of
value chains to serve clients and operate businesses (and government entities).
Early adopters of multisourcing will begin a new trajectory that melds the best practices of
strategic outsourcing with the best practices of applying business disciplines and operational
improvements. Organizations must evolve multisourcing as a core management discipline.
Taking the step toward multisourcing is imperative. Multisourcing will be the new norm for
successful businesses. The combined forces of a focus on core competence, IT,
communications, globalization and hypercompetition will not allow companies to maintain their
current practices.
• Efficiency: Low
• Agility: Medium

Figure 11. Apply a Multisourcing Discipline to All Sourcing Arrangements
Sourcing Selective Outsourcing M

Actions IT Outsourcing and U
Business Process Global Sourcing/Offshoring
Outsourcing L
Shared T
Services/Internal I
Core Service Company
Business Competence S
Disciplines
Business Process
O
Business Process
Management U
Six Sigma Re-engineering
R
C
Mass I
Operational Focus Efficiency
Customization
Imperatives N
Quality Globalization G
1980 1990 2000 2010

Technology Process Value Chain
Innovation Innovation Innovation
2.6 IT Architects: Operate All Revenue-Generating Channels in a Web 2.0

Architecture by 2008
Enterprise architects must act as catalysts that speed the formation of unified business
technology strategies and their execution. The enterprise architecture process must switch from
limiting complexity by limiting choices to accelerating innovation and execution by coordinating
complexity. It can do so through unified business and IT strategy, decentralized execution, and
loose coupling among all related stakeholder disciplines (see Figure 12). Related disciplines
include:
• Portfolio management to ensure business alignment and optimize investments
• Corporate counsel to ensure appropriate legal considerations are factored into decisions
• Risk management to support effective identification, mitigation and elimination of

ensuing risks associated with rapid and continual change organization
• Change management to manage the pain of organizational change and instill a culture
that is tolerant of change
• Multisourcing to ensure that sourcing relationships are flexible enough to support the
impending changes and factor dependencies between myriad partners and internal
organizations
• Solution delivery to ensure architected business strategies are understood and

attainable
• Operations to allow for concurrently engineered and available infrastructure to support

new models and their supporting technologies

• Security to ensure that appropriate security is factored into new technology-enabled
business models early on
• Efficiency: Low
• Agility: Medium
Figure 12. Operate All Revenue-Generating Channels in a Web 2.0 Architecture
Enterprise Architecture Scale-Free and Self-Organizing

Network
Identify global business opportunities
that exploit long-term markets
Create scale-free strategy integrating
IT strategy, business strategy and
Web 2.0
compliance strategies Google
Execute strategy via architected Wikipedia
independence and autonomy Salesforce
MySpace
2.7 Application Development Managers: Complete Enterprise Platform

Migration by 2009
Discussions about the application portfolio with IT teams across all industry sectors point to a
strong trend that, in order to deliver an IT agility that meets the needs of the business, there will
need to be a wholesale re-architecting of the application platform. This is true whether the current
platform is a package solution such as an ERP, SCM or CRM suite waiting to morph into a
service-oriented architecture implementation, or a custom-developed application portfolio that is
no longer capable of supporting the enterprise's demand for significant change.
However, the act of taking the application portfolio and transforming it so that it can support the
current and future needs of the business for agility, while remaining robust and reliable, creates a
significant challenge for the whole IT management team and its governance process. This is
because the traditional approach to application management has been a one-at-a-time approach
— a silo approach. Each application investment has been considered in its own right, justified on
its own return on investment, funded as an individual project and implemented as though it were
the center of the universe. The challenge of re-architecting the application platform demands a

much more integrated and holistic approach to the portfolio of applications that support the
enterprise.
This holistic approach will demand that the IT organization, business users and business
strategists adopt a new model for IT application governance, IT budgeting and IT strategic
decision making. Gartner recommends that this transformation be addressed as a multiyear
program that will likely encompass at least seven major work streams:
• Inventory: To capture a complete set of inventories of processes, applications,

information and existing projects that will need to be considered in the migration process
• Governance: To create the enterprise platform migration governance model that will be
used to guide the individual projects that constitute the program and that will serve as
the constitutional model for resolving conflicting priorities
• Finance: To institute a multiyear budget process that will enable the enterprise platform
migration activities to ride over the turbulence of the annual budget cycle
• Architecture: To ensure that the business architecture and IT architecture are managed
as a coherent whole throughout the life of the migration process, as well as to guide the
product and service selection that will be the platform of the future
• (Re)sourcing: To develop a structured methodology, based on Gartner's multisourcing

research, that will enable the appropriate resources to be secured for the transformation
activities themselves, as well as to ensure appropriate management of services that will
be delivered by third parties as part of the transformed application architecture
• Project initiation and review: To ensure that there is adequate investment in project
management capability and methodology in order to deal with the surge of
interconnected projects that will be needed to support the migration activity
• Validation and release management: To ensure that the "go live" implementation
activities are planned, tested and delivered in such a way that risks are minimized and
that benefits are gained as early as possible in the implementation process
• Saving money: Medium
• Efficiency: High
• Agility: High
2.8 Application Development Managers: Establish Cross-Project,

Enterprise-Level Application Management Before 2009
Application management has focused on software at the project level. The project, often
equivalent to an application, has served as the basic building block for software methodology,
deployment and prioritization. Business drivers toward agility and business-process centricity
force much greater consideration of business processes that cross multiple applications and
projects. Optimization at the project level is now suboptimization at the enterprise level.
Enterprises must complete a retooling of their prioritization, budgeting and project definition
processes to establish an enterprise-level perspective (see Figure 13). Megaprojects must give
way to an emphasis on continuous improvement through resource changes, methodology

changes and changes in technical architecture that enable higher composition, reuse and
integration. These changes require a stronger link between enterprise architecture and
application architecture, as well as greater scrutiny of legacy overhang.
• Agility: Medium
Figure 13. Establish Cross-Project, Enterprise-Level Application Management
2006 2009
Enterprise
Architecture
Application
Portfolio
Business
Service
Portfolio
Project Priorities
An enterprise perspective focuses
Serialized project prioritization is on enterprise value, on a portfolio
suboptimized by missing of applications and projects, and
interrelationships and synergistic increasingly on reuse through a
enterprise value portfolio of services
2.9 Application Development Managers: Retire 10% of Applications by 2008

Most companies have no standard process for retiring applications and the associated technical
or operational resources. As a result, organizations manage a large number of "orphaned"
applications that provide little or no functional business value, yet they increase complexity,
consume budgets and degrade performance in the overall IT and operational environment.
Most companies are unaware of the extent of orphaned application software and resources. Most
CIOs admit that the problem exists at some level. Most infrastructure and operations managers
say that 10% of applications may include orphaned applications and that managing these
applications may consume as much as a tenth of the IT budget. IT leaders responsible for retiring
applications indicate that no one is retiring applications.

Orphaned applications exist in every organization, and these applications represent "found
money." A clean sweep to retire these applications will benefit IT organizations and the business
units that own the applications.
CIOs should perform a rapid inventory of installed applications on all platforms. They should
triage the inventory and prioritize the process to retire orphaned applications. Then, they need to
implement a process to retire applications through project management and application portfolio
management processes.
• Agility: Low
2.10 Business Process Improvement Managers: Reinsert People Into All

Customer-Facing Business Processes by 2008
Virtually no industry sector can escape the effects of ever-increasing rates of business change.
Executives are constantly striving to improve their enterprises' agility, and so make them more
able to avoid harm or to seize new opportunities. Companies have to identify those vitally
important business processes that are particularly vulnerable to even subtle market changes.
However, of all the individual business processes within a given organization, which ones warrant
analysis and, if necessary, redesign to guarantee the most favorable business outcomes
possible? We suggest analyzing all customer-facing processes first. Particular attention should be
paid to elements within a customer-facing process where revenue may be generated or lost,
based on how uniquely a company is addressing the needs of individual customers.
Companies should identify when human interaction will increase the probability of a sale or
reduce the probability of losing a customer. A likely area of significant change is customer care
processes that are heavily dependent on IT-based self-service solutions, which will see increased
degrees of human interaction.
• Agility: Medium
2.11 Business Process Analysis and Planning Managers: Model Every

Mission-Critical Customer- and Supplier-Facing Process by 2007
In 2000, a group of 16 IT vendors banded together to create a standard way to depict typical
business processes. According to the Business Process Management Initiative's Web site
(www.bpmi.org), the initiative's core objective is to promote and develop open, complete and
royalty-free XML-based standards that support and enable business process management in
industry. In May 2004, the group released version 1 of a standard, Business Process Modeling
Notation. The purpose of this standard was described in the document's abstract: "The Business

Process Modeling Notation (BPMN) specification provides a graphical notation for expressing
business processes in a Business Process Diagram (BPD). The objective of BPMN is to support
business process management by both technical users and business users by providing a
notation that is intuitive to business users yet able to represent complex process semantics. The
BPMN specification also provides a mapping between the graphics of the notation to the
underlying constructs of execution languages, particularly BPEL4WS."
With hundreds or even thousands of individual processes existing in a corporation or public-
sector agency, there is always an opportunity to improve the efficiency of how the process is
carried out. But with so many opportunities, where is the best place to start? Gartner highly
recommends tapping into the power of business process management by first modeling all
customer- and supplier-facing business processes by 2007. However, once a process is
reanalyzed, reformulated and modeled, the benefit from this effort does not end with a more
efficient process and a well-documented graphic depiction of workflow. The other highly useful
outcome achieved from this effort will be the creation of an interface between the workflow's
graphical depiction and an executable language. By doing this, the same graphically depicted
business process workflow diagram will be entered into operation through a business process
management system.
This linkage between the model and the executable means that changes to the model can
immediately become operational. This can dramatically impact business agility. Organizations
must determine which tasks and decisions in the model need to exploit such agility and
implement technologies to support this level of agility. This may require human workflow
management, business services designed around service-oriented architecture, rule engines,
business activity monitoring or other technologies to meet the time-to-action requirements.
• Agility: Low
2.12 All IT Managers: Transform the Organization From "Technology First"

to "Business First and Technology Second" by 2009
As stated earlier, the average IT budget will grow a mere 2.7% in 2006. On average, budgets
increased by 15.0% in 1998, 15.9% in 1999, 9.7% in 2000 and 10.1% in 2001. Yet these
spending levels were unique expenses related to Y2K, and were followed by radical slowdowns
after the recession of 2000 to 2001. In 2002, IT budget increases averaged 1.3%, followed by 0%
in 2003, 1.4% in 2004 and 2.5% in 2005.
With the projected average growth of 2.7% in 2006, we see nothing on the horizon to suggest any
change to a trend of increases below overall economic growth, as reflected by GDP growth rates.
No new "killer applications," new technologies, fundamental changes nor any revolutionary shifts
will appear in the near term that could accelerate IT budgets faster than GDP.
If the lackluster growth in IT budgets continues, enterprise executives will find it harder to
conclude why IT services should be delivered by anyone other than external service providers. To
offset this prospect, successful IT staffs will shift their primary emphasis from technical to
business expertise and innovation (see Figure 14). Among the key ways to accomplish this is to

identify IT's future role in business process management. Becoming true business innovators will
ensure job security beyond merely demonstrating IT expertise.
• Agility: High
Figure 14. The Origin of IT Workers, 2006 and 2010
2006 2010
(CIO Responses) (Projected)
Other Other
No Experience No Experience
External External
Business Business
Other IT Other IT
Organizations Organizations
3.0 Emerging Technology, Business and Social Trends

This section presents our view of the longer-term future. It first provides an overview of emerging
technology trends. However, to more accurately present a view of the future, we have augmented
our long-standing coverage of emerging technology trends (a decidedly supply-side perspective
of the future) with two new areas of research coverage: emerging business trends and emerging
society trends. These demand-side forces are offered during these times of modest IT budget
and spending growth so that IT vendors and IT practitioners alike may gain greater insight into
what businesses and people will need in the future and what they will be willing to pay for that
future.
3.1 Build the Real-World Web

Increasingly, objects will not only contain local processing capabilities (thanks to the falling size
and cost of microprocessors), but also be able to interact with their surroundings through sensing
and networking capabilities. Radio frequency identification technology is already driving shifts in
supply chain and retail, and emerging camera-based approaches use mobile phone cameras to
recognize one- and two-dimensional bar codes. Location discovery is creating new opportunities
for locating nearby service providers. Micro-electromechanical systems place tiny moving parts
onto a chip to sense and react to the environment.

The result of the additional sensing and connectivity will be a rapid proliferation of applications
that take advantage of this "real-world Web," similar to the flood of ideas (many ill-founded, some
transformational) that have surrounded the World Wide Web (see Figure 15). Business
applications will center on increasing visibility of physical assets, including equipment, products
and even people. CIOs should seek early tagging and sensing applications where improved
visibility of items or location will avoid ongoing costs or avert undesirable events.
Figure 15. Emerging Technologies
Location
GPS, Galileo
Object Identification
1-D and 2-D Bar Codes, RFID Tags
Point-of-Sale Scanner
Reads Phone Screen
Micro-
electromechanical
Systems
Direction, Acceleration
Wireless Networks
Wi-Fi, Bluetooth, ZigBee
Lookup Services
Sensor Networks
People, Products, Bar Codes ...
Temperature, Chemicals …
3.2 Create Road Maps for Emerging Business

Figure 16 shows some emerging business trends. Proactive transparency has crept up on
businesses during the past five to seven years. Innovators are using the trend as a competitive
weapon. A clear example is open-source software, through which powerful new models for
creating business value have been developed.
For public corporations, the globalization of capital flows requires increased disclosure of
information. To compete for capital, they must reduce risk to lenders by keeping them better
informed. In globalized microbusiness, IT is penetrating emerging consumer markets at an
incredible rate. Using the Internet, a small company such as Share Microfin can interact with
major financial corporations around the globe. Companies lend small amounts, perhaps $60 or
$70 at a time, to transform the lives of individuals who use the money to start a village business.
In this case, business units of ING and Deutsche Bank are forming partnerships with this
innovative institution.
In the "next era of productivity," improvements in productivity from past IT efforts will slow down,
causing businesses to commence a new generation of profit-seeking productivity gains in
business processes and especially in occupations that have been largely untouched by IT. Of the
22 major occupational categories recognized by the U.S. Department of Labor, five clerical

categories constitute 35% of all jobs in the United States. As with manufacturing and other jobs in
the past, we expect the next era of productivity innovation to target, reduce or eliminate clerical
roles and the processes these people perform.
Figure 16. Emerging Business Trends
New Business From Foreseeing

Globalized
Globalized Social
Social
Low-Income Customer
Microbusiness
Microbusiness Analytics
Analytics
Populations Demand
A New Way to Balance Between

Proactive
Proactive Design
Design
Compete for Design and
Transparency
Transparency Innovation
Innovation
Investment Capital Engineering
New Productivity
Next
NextEra
Eraofof Learn From New
Gains From Jobs "Greenfielding"
"Greenfielding"
Productivity
Productivity Businesses
"Untouched" by IT
Dynamic
Dynamic
Business
Business
Consumer Prices
Change When
Warranted
Source: C.K. Prahalad, "The Fortune at the Bottom of the Pyramid"
3.3 Create Business Innovation Roles

Despite the notion that "IT has changed everything," an objective audit of human activity over the
past 20 years will reveal that it has not. Society remains affected by trends driven by:
• Human behavior
• Business activity
• Business processes
• Value to the business

Few forces can match the power of a society seeking to bring about or resist change. Whether
the issue at hand is a desire to overthrow the government, reshape national priorities, or express
preferences in food, music or fashion, those in the business of serving people who ignore the
wishes of the population do so at their own peril. Often, the signs of change are apparent. In other
instances, changes occur with an abruptness that leaves the most-seasoned society watchers
speechless. Figure 17 presents major catalysts contributing to changes within societies that
directly affect our clients. Users of IT should monitor them, vendors of IT should plan for them,
and both groups should take specific actions. The following are some issues that will have
profound effects on us all:
• By 2030, more people will live in urban areas than rural ones.
• By 2050, there will be more people 60 years old or older than people 15 years old or
younger.

• By 2050, one in five people will be older than 60 years.
Other issues to explore include the cost of energy, the role of women in society and the future of
work. Innovative solutions for addressing the issues raised by these trends must come from a
new breed of IT professionals.
Figure 17. Emerging Demographic Trends
Emerging Emerging Emerging Energy

Technology Business Social
Public/Private Trends Trends Trends
Healthcare
Back Office
Aging
Population
• Accounts receivable Business
• Accounts payable Real-Time Process
• Taxes Enterprise Management
Education
• Inventory
• General ledger
Worldwide
• Supply chain
Revenue Consumers Population
• ERP
Generation Growth
• And so on
4.0 Conclusion
Section 1 of this report describes the IT industry for CIOs and their departments as an
environment primarily characterized by very modest IT budget growth operating within a world
where overall economic growth may also be slowing down. If readers were to simply read Section
1 of this report, they could easily (but wrongly) conclude that Gartner is forecasting a bleak future
for IT practitioners. If other readers were to read only Sections 1 and 2 of this report, they could
similarly (and once again wrongly) conclude that a relatively bleak future awaits IT practitioners,
but that at least they can remain busy until 2009 completing short-term imperative tasks. Yet
despite some troubling findings described in Section 1 and some long-standing but unaddressed
issues that must be resolved in Section 2, in point of fact our entire report actually portrays a very
positive message for information technology and information management.
We are fast approaching the end of the current era in the evolution of IT. Indeed, we are seeing
signs that suggest the fastest growth and wealth opportunities in the information technology and
management industry will shift from a monolithic path of improving the operational, logistical and
administrative performance of once-manual business activities, to a far more complex future
paved with many parallel paths.
One path will see the continuation of IT constantly improving the operational, logistical and
administrative business processes that have already been enhanced by IT. This will be the path
upon which most IT vendors and most IT practitioners will travel during the next 10 years. But in
anticipation of the approach of the multipath IT era ahead, we identified how clients can help

prepare for the arrival of this era by specifically identifying certain tasks that must be completed
by certain executives by certain dates.
As the legacy path continues, a second and far more rapidly growing parallel path will continue
evolving as an increasing number of IT and information management offerings are directed
toward consumers rather than enterprises. These offerings will accelerate the arrival of a day
when people will become increasingly more dependent on self-service, increasingly more
independent through self-empowerment and increasingly more powerful through self-
determination.
Finally, yet another path will evolve, running in parallel with the legacy and IT consumer paths:
the path of IT solutions driven by unprecedented demands emanating from emerging business
and emerging society trends. New and threatening business models will make 50-year-old and
100-year-old companies shake with competitive concerns. New solutions will address the
challenges presented by societal changes that have never been witnessed before by the human
race. We are calling the companies meeting these emerging needs members of "the other IT
industry." Therefore, the true power of IT's future lies not with merely replacing solutions for
challenges that IT has already solved, but instead with directing IT to solve challenges where IT
has never gone before.
Stability and maturity best describe the current state of the IT industry. Spectacular and truly
exciting times ahead best describe the future direction of the IT industry.
For all three paths described above to reach their true potential for value creation and beneficial
contribution to business and society, they will all require innovators who will see the needs and
deliver them. There is no reason whatsoever why IT practitioners cannot be among those future
innovators.

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© 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form
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The Gartner Scenario 2006:

The Current State and Future Direction of IT

11-27 Tasks IT Professionals Must Complete by 2009

The Gartner Scenario 2006: The Current State and

• Huge and complex demands for IT are largely going unmet.

• Complete automation of IT operational processes

• Attain "corrective phase" security status

• Operate all revenue-generating channels in a Web 2.0 architecture

• Complete enterprise platform migration by 2009

• Retire 10% of their applications

Table 1. CIO Priorities in 2006 .......................................................................................................... 6

Figure 1. Annual GDP Growth Rates, 2006 ...................................................................................... 5

Publication Date: 27 October 2006/ID Number: G00144450 Page 2 of 29

Publication Date: 27 October 2006/ID Number: G00144450 Page 3 of 29

1.0 The Economy, Business Climate and the State of the IT

Publication Date: 27 October 2006/ID Number: G00144450 Page 4 of 29

1.2 CEO Priorities

Publication Date: 27 October 2006/ID Number: G00144450 Page 5 of 29

Figure 2. CEO Priorities in 2006

1 Growth 5 Information Overload

2 Competition 6 Mergers and Acquisitions

1.3 CIO Priorities

Table 1. CIO Priorities in 2006

Publication Date: 27 October 2006/ID Number: G00144450 Page 6 of 29

• The senior technology executive responsible for leading the IT organization

• A member of the executive team who needs to develop business, technology,

1.4 The State of the IT Industry

Publication Date: 27 October 2006/ID Number: G00144450 Page 7 of 29

Manufacturing Projected IT Budget

Source: Global Insight and Gartner Executive Programs (September 2006)

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United States Western Europe

Source: Gartner Dataquest (November 2005)

Publication Date: 27 October 2006/ID Number: G00144450 Page 9 of 29

Figure 6. Total Worldwide IT Spending Growth Rates, 2005-2007

Total IT Spending in 2006 = $2.78 Trillion

Source: Gartner Dataquest (June 2006)

Publication Date: 27 October 2006/ID Number: G00144450 Page 10 of 29

• Be equally successful at delivering current operation and improvement in the business

• Gain clarity on business expectations from IT (enabling or contributing)

• Improve operational, development and delivery processes to put more resources

• Increase the business impact of new applications

• Make IT's contribution earlier in enterprise decisions by increasing their involvement in

Publication Date: 27 October 2006/ID Number: G00144450 Page 11 of 29

• Build up their skills in business process, information management and relationship

• Saving money: Low

Publication Date: 27 October 2006/ID Number: G00144450 Page 12 of 29

• Saving money: High

Publication Date: 27 October 2006/ID Number: G00144450 Page 13 of 29

Source: Gartner (September 2006)

2.3 IT Security Managers: Attain "Corrective Phase" Security Status by

• Awareness phase: This phase is characterized by a sudden recognition among

• Operational excellence phase: Successful transformation of the way information

Publication Date: 27 October 2006/ID Number: G00144450 Page 14 of 29

• Saving money: Low

Figure 9. Attain Corrective Phase Security Status

Duration of More Than Three Years

2.4 IT Business Intelligence Managers: Create a Business Intelligence

Publication Date: 27 October 2006/ID Number: G00144450 Page 15 of 29

• Saving money: Low

Figure 10. Create a Business Intelligence Competency Center

Measure Decide Align Optimize Discover Innovate Lead

Business Intelligence and Performance Management Continuum