This month seems to be my month for CIO meetings. Part of a VC’s job besides helping management with strategy and hiring people is to help with customer introductions and strategic partnerships. In this tough market, my partners and I have been doing our best to help along these fronts. While being in New York can be a disadvantage in terms of finding new companies and hiring great industry people, it is great for our access to customers and the Fortune 500. In New York, we can keep a close ear to the ground and learn about spending priorities and other short and long term problems that CIOs need to solve. This is yet another data point we can use to help us place our bets. I met with another CIO yesterday in the financial services market and thought you would be interested in hearing a few tidbits from the meeting.
1. IT Budgets are loosening up across the board for capital expenditures and people-lots to do, he is looking to hire people for the first time in a couple years, although he does not want to hire too many people if the market collapses in 6 months.
2. IT Priorities-one of the big areas of new spending will be for technology that supports revenue creation instead of cost cutting. For example, this includes making sure that the trading systems can keep pumping out transactions-there is alot more volume today with the market coming back and they have not upgraded their systems in a couple of years when they either overbought or were oversold too much technology. In addtion, his firm wants to upgrade existing applications (many run in old perl scripts and mainframes) and put them on a new application infrastructure like J2EE. Other high priority categories include business continuity/disaster recovery and security, which is not a surprise.
There was nothing earth shattering about this meeting except it does confirm my belief that spending is increasing and that CIOs are starting to look at expenditures that will help generate revenue for the first time in awhile. In addition, it seems that given his priorities, larger IT vendors like Dell, EMC, BEA, and Sun would benefit from his increased spend. As usual I spent some time pitching my companies and the first question he asked after each pitch was, “What other financial service customers do you have?” This is not unlike any other meeting with a CIO and just reminds me how hard it is for a startup to get its first, high-profile, referenceable customer as no one wants to be a guinea pig. Secondly, it shows how important it is to find the early adopters in a particular vertical and make them referenceable so their peers can follow. CIOs spend alot of time these days managing risk not taking on risk.
It would appear that the CIO you spoke to took what Nicholas Carr says to heart in “IT Doesn’t Matter”:
“The key to success, for the vast majority of companies, is no longer to seek advantage aggressively but to manage costs and risks meticulously.”
Having worked in a startup for the past four years where we have done our share of grovelling at the feet of CIOs, I have increasingly come to feel that power has increasingly shifted to the customer.