Technology

Disaster Recovery: What, Us Worry?

Survey shows corporations woefully unprepared for IT outages. Plus: ERP jockeying, SCM spending, JDE under-performing.
John Goff and Russ BanhamMay 15, 2003

With U.S. military forces now firmly in control of the whole of Iraq, the likelihood of terrorist reprisals against American interests seems high. Indeed, even as the government was lowering the terror alert level from Orange (high) to Yellow (elevated) last month, Homeland Security Secretary Tom Ridge warned that terrorist groups “may attempt to conduct attacks against the U.S. or our interests abroad.”

The May 12 bombing of a foreign housing compound in Saudi Arabia only underscored Ridge’s concern. At least eight Americans were killed in that blast. Intelligence sources reportedly cautioned that other attacks on U.S. targets in the Gulf region might be immiment.

Given the very real chance of reprisals against U.S. interests — and given the massive business disruptions following the 9/11 attacks — you’d think most corporations would already have robust disaster recovery plans in place.

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And you’d be wrong. Remarkably, a survey conducted recently by tech consultancy Gartner Dataquest found that many U.S. companies are not capable of withstanding business and IT outages caused by a severe calamity. In fact, Gartner says one in three U.S. businesses would lose critical data or operational capability after a major disaster occurred.

It doesn’t take a rocket surgeon to figure out why so many corporates are so woefully unprepared for calamity. A number of finance chiefs have told CFO.com that they’re still cutting their IT budgets — not increasing them. And the thought of shelling out precious capital on technology that may never be used, let alone generate revenue … well, such proposals tend to end up on a high shelf, up there with “The Enron Century” and “3-Hole Punch: The Coming Revolution.”

Not surprisingly, the Gartner study shows pretty clearly that money problems are at the root of this seeming corporate apathy over business continuity. Almost a quarter of the 205 respondents cited lack of funds as the main reason for not yet initiating a formal disaster plan.

Tony Adams, principal analyst for Gartner Dataquest’s IT Services group, says: “IT managers are not investing appropriately in disaster plans because they do not have a budget to accomplish their needed readiness.”

We’re not talking about modifying or upgrading a business continuity plan. We’re talking about just having one.

What’s more, Adams points out that budget constraints are forcing 40 percent of the survey’s respondents to simply guess what the damages would be from business and IT outages, rather than obtaining formal (but costly) assessments.

Equally worrisome: Gartner also found that many corporations that have drawn up business continuity plans don’t have the cash to actually implement the strategies. According to the survey, fully thirty-seven percent of IT managers who have an organizational disaster plan in place need additional investment to get those plans to a satisfactory level.

“The good news is that businesses now more widely understand that they must prepare in advance to solve the complex logistical and personnel problems inherent in a disaster,” said Adams. “Responsible leaders will rely on preparatory investment to better the odds of surviving such a hit to their business.”

Hype Rating? 7 (out of 10)
Business Impact? 9
Your Move:Gartner offers continuity and disaster recovery services, so it’s not exactly a stunner that they’d come out with this poll. Nevertheless, the survey results are fairly disturbing — particularly the part about plan implementation. Although many companies may be priced out of terrorism insurance, disaster recovery is a different matter. At the very least, CFOs and risk managers should make sure that their business continuity plans have gone beyond the planning stage. Once in place, those plans need to regularly tested, and re-assessed.

Enterprising, As Always

In mid-March, CFO reported on the rise in interest in corporate performance management systems. As CFO noted, CPM software is an attempt by vendors to create an overarching data and software system — one that weds budgeting & planning with business strategies. Essentially, such a system links supply-chain programs, budgeting & planning applications, analytics, and CRM apps into a single, real-time network. Some systems sew button holes.

As the CPM market evolves — it’s already been touted as the next big thing in corporate computing — many different sorts of software players will try to claim it as their own, and that certainly would include such ERP vendors as Oracle Corp., PeopleSoft Inc., and SAP AG.

But John Van Decker, senior program director at IT research firm Meta Group Inc., says that as of now, the companies coming at CPM from the business-intelligence space have the lead. “It’s still too early for the ERP vendors; with one or two exceptions, they’re not consistently able to support performance management,” he says. “While the ERP vendors offer very good integrated solutions, they’re generally not at the level of the BI and financial analytic vendors.”

They certainly can’t be counted out, however. “Their appeal is one-stop shopping; they can stress integration since they already ‘own’ the data via their ERP systems,” says Van Decker. “For some buyers, that will make sense. But for now, with one or two exceptions, their functionality is not as sophisticated as that offered by other types of companies.”

Chuck Teller, vice president of product strategy-financial management and EMP solutions at Pleasanton, California-based PeopleSoft, counters by saying, “Enterprise performance management is our play; it’s what we focus on. BI vendors are a tool play.”

Executives at BI companies often say that ERP vendors have not made the leap from dealing with transactional data to dealing with analytical capabilities. ERP players respond that in fact their products now function as, in Teller’s words, “a complete blueprint of transactional, analytical, and reporting solutions.”

Who’s going to come out on top? Hard to say, although betting against ERP vendors is generally a losing proposition. They have a remarkable ability to reinvent themselves — and their products.

Hype Rating? 7 (out of 10)
Business Impact? 6
Your Move: In theory, CPM makes a lot of sense. Linking B&P to strategy — and applying true analytics to transactional data — would appear to be a worthy pursuit. But we’ve heard this story before. Remember, ERP vendors started out selling modules, then trumpted uber-systems, then went back to flogging the modules. And deploying a CPM system across a large, multinational corporation seems sure to take years off the life expectancy of the average CFO. Nevertheless, given that companies can easily spend up to $1 million to deploy most forms of enterprise CPM in the first year alone, buyers will have to look hard at all the options.

Coming: SCE, Other Abbreviations

Speaking of overarching software suites: a new survey shows that the days of massive enterprise resource planning (ERP) deployments are over. It also shows that’s there no shortage of persistence on the part of software vendors, who continue to slap new marketing handles on old concepts.

According to the survey, conducted by research firm IDC, the supply-chain services market will grow at an annual clip of 9.2 percent over the next five years.

Admittedly, that bodes well for makers of supply-chain software. But IDC’s research found that in 2002, buyers of the stuff balked at rolling out large-scale SCM programs. Instead, corporate customers demonstrated a clear preference for smaller-scale projects that addressed immediate pain points with an up-front return on investment. “2002 was a turbulent year for the worldwide SCM IT services market, says Romala Ravi, manager for Supply Chain and Logistics services research at IDC. “But opportunities remain.”

By our lights, the real opportunity seems to lie in dressing up existing concepts with new buzzwords. IDC says that in the next few years, businesses will be most interested in supply chain execution (SCE), supplier relationship management (SRM), radio frequency identification devices (RFID), and product life-cycle management (PLC). In dealing with scores of vendors hustling these updated abbreviations, experts say some chief financial officers (CFOs) may find themselves suffering from Software-eNduced Output of Random Emissions (SNORE).

(Editor’s note: as noted above, product life-cyle management is generating a fair-amount of buzz these days. But are companies truly embracing the concept, or is PLM more hype than help? To find out. click here.)

Bytes

• Business software maker J.D. Edwards announced that its second-quarter results would fall short of expectations. The reason? The lousy economy left customers with little choice but to delay purchases. The Denver-based vendor of ERP and CRM applications expects Q2 revenues to come in around $200 million, with a resulting net loss of 1 cent to 2 cents a share. According to First Call, analysts had reportedly expected the company to report earnings of 6 cents a share on revenue of $214 million.