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Cisco chief stresses IT consolidation, need for showing a profit

Convergence is the new necessity in an economy where IT is being pressured to turn a profit, says Cisco CEO John Chambers.

LAKE BUENA VISTA, Fla. -- Despite the Disney World backdrop, the mood at the annual Gartner Symposium ITxpo is decidedly sober as IT professionals hunt for ways to drain the most they can from existing systems and brace themselves for a new role throughout the enterprise.

There is no missing the central message to this year's annual weeklong conference: convergence, a meeting of IT and business operations, is the new necessity in this new economy. Cisco president and CEO John Chambers hammered the point home at a keynote address Monday morning, kicking off a conference attended by more than 6,000 technology professionals.

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"The best times are still ahead, but companies have to show returns,'' Chambers said. "There will be consolidation and an evolving role for IT first."

A recent Gartner Dataquest survey released here showed that more than one-half of CTOs now report to CEOs, a collaboration trend that analysts say is crucial for developing real-time enterprises with real-world results.

"IT used to be an expense item; now it is a business process," Chambers said.

Roger Armstrong, a member of the IT staff at the Washington, D.C.-based National Reconnaissance Organization (NCO), listened to Chambers, and later said the theme of convergence resonated with him.

"Our CEO is out here somewhere, and I hope he heard that," Armstrong said. "Right now, we are not doing it."

Ken Picarel, a project manager at Houston-based Cooper Industries, traveled to this year's conference with Scott Feldbush, a vice president of Cooper B-line, a business division at the manufacturing company. Echoing sentiments shared by many of their colleagues, Feldbush and Picarel said they didn't come to window-shop, or to take a wild ride through the new-technology pavilion.

"We're here for two reasons," Feldbush said. "We're currently looking at common system back-end architecture,'' and, he said, they wanted to see whether working, or contracting with Gartner, would be a wise decision.

"I'm trying to understand the architectural differences between main vendors -- SAP, PeopleSoft, Oracle -- and how implementations would work," he said.

Gartner CEO Michael Fleisher opened the event by telling a standing-room-only crowd that they were lucky to be seated on the buyer's end of the negotiating table -- even if they are holding fewer budget dollars than they were during IT's high times.

"You have the incredible good fortune to be what is, quite simply, the best market ever for tech buyers,'' Fleisher said, in his opening remarks.

Chambers was interviewed for the crowd by Joe Baylock and Mark Fabbi, Gartner vice presidents, and pressed on Cisco's pricing premium, which rocketed 72% in the first half of the year. (Chambers was reminded that Cisco's competitor, Dell Computer Corp., would be overjoyed with a 30% margin.)

"Price is not the decisive factor for customers,'' Chambers said. It's ROI and productivity increases that should be driving factors, he argued.

In a way, Cisco embodies the current conflict that many IT pros here said they are feeling. Knowing they must keep investing to optimize current systems, many came here hoping to determine how much is too much to pay.

"We're willing to pay for a good product,'' said Charles Uyeda, an IT professional at Washington, D.C.-based Aerospace Corp. "But a 70% price margin is scary."

Gartner Dataquest issued a release Monday saying that worldwide IT spending on products and services will climb 3.4% in 2002 and another 7% in 2003, fueled mostly by the telecommunications sector. The announcement was buffeted by the prediction that any real signs of improvement would be unlikely before the 2003 Q2.

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