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This list of technologies is not an exhaustive one, but it does include some of the major ones I see organizations increasing their investments in today.  Here are three of my takeaways from this survey:

• Good LOB and IT Exec Alignment.  The top three “transformation technologies” - web services, virtualization and wireless/mobility - are the same for LOBs and IT executives.  This consistency is pretty reassuring, suggesting good alignment between organizations’ business transformation decision-makers and technology decision-makers.
• Web services’ surprising #1 position for LOBs suggests the industry is crossing a critical chasm.  As we’ve written, SOA - the architectural foundation for the next era of IT - will be most rapidly adopted when it is available not just as a set of standards and development tools, but within actual online business and consumer services.  The surprising fact that line of business executives consider “web services” as the top transformation technology suggests we’re getting close to that time: the LOBs who responded to this survey are almost certainly not thinking about web services as XML, SOAP, WSDL or other technical standards, but as web-delivered (and SOA-enabled) services such as Software-as-a-Service, storage-as-a-service, online information services, and so forth.  They’re getting the idea that the proliferation of SOA-enabled business, IT and consumer services available over the Internet will increase their ability to quickly expand their business capabilities and competitiveness.
• Virtualization is an obvious #1 for IT executives.  It’s not a very surprising finding that IT executives’ #1 technology for transformation is virtualization.  The quest to consolidate, rationalize and simplify access to IT resources - most visibly data center resources - is being driven by the dual imperatives of efficiency and speed.  Virtualization, in its many forms, is - and will be - a runaway #1 concern for IT execs for the next several years.  Web services’ strong #2 position for IT executives makes sense as well, for two reasons: 1) as we noted above, it’s the #1 choice for IT executives’ internal customers, LOB executives; and 2) web services is, of course, one form of virtualization.

So what do these perspectives on transformational IT mean for CIOs and their IT management teams, and by extension, to the IT suppliers serving them?  When I presented these findings at IDC’s recent U.S. IT Forum in Boston, I offered two questions with which CIOs should be challenging themselves:

• Are you and your team sufficiently focused on this wave of transforming technologies - investing in the technologies, re-skilling to take advantage of these technologies, and selecting suppliers who have competency in these technologies?
• Do you have enough of an “R&D” culture within your IT organization, to see the next wave of transforming technologies coming?

These challenge questions are uncomfortable for many CIOs, because they naturally lead to disruptive decisions about IT investments, skills and culture.  But they are vital questions to address, for one obvious reason:  the companies that can answer “Yes” to both are the ones that will be prepared for the in-process global commerce revolution that David Tapper was talking about at Directions.

Now, as we’ve predicted, IBM is making its move. Last month, at its annual gathering of business partners, IBM finally revealed the core pieces of a new, Internet-infused service delivery model it’s been developing for the SMB market, labeled the “Blue Business Platform”.  Here are a couple of clips of IBM’s Sam Palmisano (with Google CEO Eric Schmidt) talking about the new Platform at the event:

The “Platform” actually consists of three interconnected elements:

• An online application (and services) marketplace called “Blue Central”.  IBM is building this marketplace to also be a solution and services delivery platform, supporting downloading of pre-integrated applications as well access to hosted/SaaS solutions.
• A new generation of on-premise systems, referred to by IBM as “Blue Cubes”, that are simple and appliance-like, that connect to the marketplace and its online services for easy adoption and operation.
• A services-based application integration toolkit that allows ISVs to integrate their applications with all of the Blue Business Platform elements, leveraging the marketing, delivery, support and integration services, including the ability to be downloaded to, and run on, Blue Cube systems.

Here’s a simple chart IBM has used to communicate this to business partners (click on chart to enlarge):

A few thoughts about this IBM effort:

• An iTunes for Business Solutions?  Conceptually, this model of simple on-premise devices connecting through the Internet to a marketplace of downloadable and SaaS solutions sounds very similar to Apple’s iPod/iTunes Store “system”.  (We foreshadowed IBM’s shift to this strategy of more closely linking systems to solutions value in our review of IBM’s STG analyst event last Fall - it’s worth another read.)  Undoubtedly, IBM’s hope is that bringing simplification to the SMB world in this way will result in the same kind of growth and market share benefits that Apple has enjoyed with its simple and disruptive iPod/iTunes model.
• Remarkably “Under-Covered” in the Press.  I looked at the Wall Street Journal, New York Times and Business Week the day after the announcement and found virtually no coverage of this announcement.  Pretty remarkable, considering that, with the Blue Business Platform, IBM is rolling out a fundamentally new model for doing business, the success of which will determine much of IBM’s fortunes during the next two decades. I think the lack of attention is, in part, because much of the market is still catching up the fact that the solutions/services model is on the cusp of radical change, and - surprisingly - many do not yet fully understand the disruptive implications for the marketplace and its key players.
• Aimed - First - At Partners, Not Customers.  Another reason the announcement was under-covered is that the new IBM model is in the early “under construction” phase: IBM must still convince its ISV and channel partners to move to this new model to make it a reality. IBM already has been working with several dozen partners to test out the new approach, but it will take many months to 1) recruit the solutions ISVs, 2) do the integration work with those partner solutions, and 3) train channel partners to leverage the new model, in order to make this marketplace a real destination for many customers.  Moving partners will take some time, but partners’ interest to transform will be high; as we’ve written, partners that want to survive and grow in the next decade and beyond, must transform themselves and their offerings to support the new model (whether IBM’s, Google’s salesforce’s, SAP’s, or Microsoft’s implementations).  These partners who cling to the old model will become obsolete.

My bet is that this model for business solutions delivery, like the iPod/iTunes model for media, will indeed stimulate a lot of new growth by significantly lowering adoption barriers.  On the other hand, I’d be very surprised if IBM doesn’t face stiffer competition in its market than Apple has in its market, as rivals such as Microsoft, Google, salesforce.com, SAP, Oracle and others, introduce and/or expand their own simplified, online/offline solution delivery platforms.  Indeed, in the video above, Google’s Schmidt, while praising IBM for collaborating with Google on some Cloud Computing efforts, also noted that Google’s own efforts to sell cloud-based solutions (albeit fairly simple ones thus far) have been promising; and we would not be surprised at all to see Google emerge as a major provider of this “Cloud+Marketplace+Appliance” model to enterprises large and small in this next wave of enterprise IT.

[This is a 4-part PLAYLIST. Simply click the above to play all four parts.]

IBM reported strong financial results for the first three months of this year, with 1Q revenues up 11%, income from operations up 26% and gross margin up 1.3 points. IBM had a positive view of market demand, driven by: 1) Corporate customers still “spending to save” (i.e., investing in IT that helps reduce operating costs); and 2) Emerging markets continuing to increase IT investments rapidly.

IBM’s formula for achieving these results were virtually identical to those of earlier quarters (2Q07, 3Q07, 4Q07):

• Disproportionate investment in high-growth, high-value product and service offerings — pruning slow-growth offers and skewing investment toward high-value, high-growth offerings. Of note, the Global Technology Services (GTS) organization, in turnaround mode for the past couple of years, delivered very good growth (17%) and over 2 points of margin improvement.
• Diversification of business across a wide geographic span — Sixty-five percent of 1Q sales were outside the U.S. — which helped the company with: 1) the weak dollar favorably uplifting “as reported” sales across the board; and 2) 11% real growth for IBM in emerging markets, which now account for 17% of the company’s overall revenue.
• Continuing improvements in operating efficiency — with improved operating margins across IBM’s three main lines of business, for an overall IBM improvement of 1.3 points.
• Use of generated cash to further improve earnings-per-share growth — due to IBM’s periodic stock buybacks, the first quarter earnings-per-share was strengthened by a 7.8% year/year reduction of in shares outstanding.

One obvious area of concern for the company is the hardware business: IBM is still working to rationalize its mix of products toward higher growth and better profitability, in a sector that continues to be extremely competitive. We expect IBM to make some major announcements this year to simplify the deployment of low-end and mid-range servers in the high-growth SMB space (see our note on IBM’s Server & Technology Group analyst meeting from last October); we believe IBM is betting that innovation in the delivery and usage model will provide it with a competitive edge in this increasingly important part of the market.

You can watch the broadcast replay here: http://blogs.idc.com/ie/?p=173

FYI, here are the panelists:

• Victor Isaac Cheung
  (Hong Kong Phooey)
• Kenny Sia
  (Kenny Sia)
• Meenakshi Reddy Madhavan
  (The Compulsive Confessor)
• Daryl Tay
  (Unique-Frequency)

The main reason I think this pairing makes sense has nothing to do with terms of service or functionality - it has to do with Google positioning for the explosion of SMB opportunityDennis’ post reasonably questions the sense of this match, in part because of information privacy worries tied to Google’s Terms of Service (does Google really lay claim to ownership of all content produced with its apps?), as well as his assessment that Google’s current software is still functionally primitive compared to the best packaged software out there. Put both of these together, he argues, and why would a business choose Google as its business software and services provider (with or without Salesforce in the Google fold)?

The former concern was credibly shot down in a comment from one of the Google Doc/Writely founders - Google cannot legally, and doesn’t want to, make public your private data. [Upon looking at the Google Terms, it also appears to me that Google has revised its terms to more clearly point this out.]

The objection over functionality, in my mind, is short-sighted, given the track record of success by “good-enough” disruptors throughout the history of the IT industry. Google Apps may be somewhat less stuffed with functionality than those from Microsoft, but they are free - and for many organizations (not all, of course) that will be “good enough”. And does anyone doubt that Google Apps will get better and better, as adoption goes up, and funding goes up? Through incremental improvements, such as the roll-out of Google Gears (for offline use of Google software), Google’s steadily moving up the functionality ladder. And certainly, Salesforce’s apps would add a lot of capability and credibility to a Google portfolio.

Google must strengthen its position as a key online destination for SMBs, so that it can sell advertising to the thousands and thousands of companies that want to reach SMBs around the worldBut the main reason I think this pairing makes sense has nothing to do with terms of service or functionality - it has to do with Google positioning for the explosion of opportunity for products and services designed for the Small and Medium Businesses (SMBs) sector - what we’ve called the SMB Long Tail. Virtually all industries on the planet - not just IT vendors - are falling over themselves to find ways to profitably reach SMBs, many of them in emerging markets (BRIC and beyond), because that’s where the greatest spending growth will be in the business sector during the next 5-10 years.

Google must strengthen its position as a key online destination for SMBs, so that it can sell advertising to the thousands and thousands of companies that want to reach SMBs around the world. Buying Salesforce - with its expanding portfolio of online business applications, services and partners - would immeasurably strengthen Google’s ability to attract a huge and global SMB community.

As we discussed in IDC Predictions 2008, this is one of the fastest-growing economic regions on the planet - as evidenced by the rising, crane-filled Dubai skyline. The region’s 2007 GDP growth rate of 5% was over two times that of the U.S. and Japan, and over three times that of Western Europe. This economic vitality is fueling rapid IT investment, with IDC projecting over 11% annual growth in IT spending through 2011.

So what’s on the minds of CIOs in this dynamic part of the world? Here are a few of my takeaways:

• Infrastructure Build-Out: Building out a modern IT infrastructure is a big priority for many, as economic growth is putting pressure on CIOs to scale the IT foundation quickly. So a lot of discussions were around scalable, affordable and manageable approaches for server, storage and network build-outs, as well as securing the IT environment.
• Consolidation & Virtualization: At the same time CIOs were talking about expansion, they were also focused on consolidation and virtualization initiatives to make their existing IT operations more efficient.
• SOA Foundation: SOA was on the lips of many of the CIOs in the room, as they are looking at service-orientation as both a technology approach they are demanding from suppliers (to ease/speed integration), as well as a business model and management approach for their own IT organization.
• Skills Squeeze: Skills acquisition and retention was a common challenge, with Middle East CIOs squeezed not only by the perennial difficulty of getting westerners to relocate to the region, but now a slowing flow of talent from India and Pakistan, as the subcontinent’s booming economic growth is keeping skilled people there. There were many nods of agreement as a CIO panelist from Saudi Arabia talked about the need to invest more in the training of young people in the Middle East to fill the gap.
• Limited Broadband: When I presented IDC’s “post-disruption” vision of a hybrid “onsite/online” enterprise IT world, including widespread use and availability of “everything-as-a-service” - with processing, storage, business applications, information and analytics, et al., available as online services - one delegate stood up in Q&A to offer a reality check. He noted that the feasibility of the “everything-as-a-service” model is limited in the Middle East today by broadband availability that “s#cks”. There was virtually universal agreement among the CIOs in the room with this statement. This is no doubt, in part, an issue of the telcos struggling to keep pace with the scorching business growth in the region. But the slow pace of progress is also almost certainly due to the monopoly and quasi-monopoly control of telecommunications in a good number of these countries. There is significant pressure to accelerate the opening up of telecommunications competition in this region, and my sense is that that pressure will win the day sooner rather than later, for one simple reason: broadband capacity is becoming every bit as essential a piece of infrastructure for economic development as the new steel and brick and asphalt that you see everywhere there. In these growth economies, pinching broadband access will be the same as pinching economic growth.

Here are two of the slides, the first looking at what LOBs want from their CIOs, the second looking at what CIOs want - in turn - from their IT suppliers:

I’m heading off to give the presentation, so I’ll hold off on commenting on these findings for now. But I’ll offer some perspectives on these results in the next few days.

(FYI, we looked at this same question last year in What Business Execs Really Want from IT: Pass the Relevance Test.)

Here is a video excerpt:

In both our 2006 and 2007 surveys, Customer Care and Product/Service Innovation ranked #1 and #2, respectively. This year, given widening economic concerns, it is not surprising that Sales Productivity (which ranked #4 last year) has jumped to #1, just marginally ahead of Customer Care, and nudging Product/Service Innovation to #3.

These findings confirm strategic business priorities we’ve identified in prior posts, priorities magnified by the opportunities and pressures of globalization. Globalization offers greatly expanded global sales opportunities, but also expanded global competition, making improved sales productivity a vital priority. Accordingly, optimizing direct and indirect sales capabilities has been among the top four CEO strategic priorities for the past two years. The surge of Sales Productivity to the number one agenda item in 2008 is almost certainly due to CEO concerns about the challenging economic climate this year.

Globalization is also continuing to intensify the importance of both strengthening customer relationships and improving (and accelerating) new product and service development, so we’re not surprised to see these two continuing to be among the big three of CEOs’ priorities.

The other continuing trend we see in the CEO agenda list for 2008 is the strategic importance of developing and maintaining excellent IT capabilities. As we’ve discussed before, a growing number of CEOs understand that the ability to execute their other strategic initiatives depends more than ever on IT, as a critical part of the operational infrastructure. Failure to maintain excellence in IT can hamstring virtually all the CEO’s other initiatives.