A year after devastating quake, firms still rebuilding IT strategies

Thursday, March 10, 2011

Roughly one year after Chile's magnitude-8.8 earthquake buried the local economy below a mound of operational challenges and flattened IT purchases, companies in the country are viewing their ICT environments in a different light.

Technology expenditures were stopped dead in their tracks during 2Q10, as firms shuffled their capital toward rebuilding physical infrastructure and replacing machinery to get their businesses off the ground.

Major players in the IT industry were not immune to the destruction, as IP connectivity solutions provider Global Crossing (Nasdaq: GLBC) scurried to reboot its Santiago datacenter knocked offline by the powerful catastrophe.

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In that context, the earthquake's reverberations also led to a realignment in technological priorities, producing a cohort of local firms that are now mobile-savvy and far more aware about the impact of future natural disasters, industry executives and analysts are saying.

"The earthquake has led to a different perspective," the Chile country manager for international tech consultancy IDC, Natalia Vega, told BNamericas. "There has been an impact not only [near the epicenter] in the south, but across the entire country."


The earthquake set off significant communications systems changes at both government and private enterprise levels.

President Sebastián Piñera's administration took the reins about two weeks after the earthquake struck, and according to president of Chilean IT industry association Acti, Raúl Ciudad, the administration hit the ground running in terms of implementing an emergency communications system.

"There has been process toward strengthening telecommunications that are parallel to traditional services," he told BNamericas. "They are creating more capacity, too, and they are implementing a monitoring system that can be used in the event of an emergency."

Meanwhile, Chile's private sector companies have established telecommuting policies and beefed up investments around mobility, according to IDC's Vega.

BNamericas previously reported that portable PCs were seen driving an estimated 30% increase in overall computer sales in Chile last year. Meanwhile, according to the Cisco broadband barometer, mobile broadband connections in Chile jumped 40% year-over-year during 1H10, beating out countries such as Argentina and Venezuela, which posted 26.7% and 15.3% increases, respectively, during the same period.


The February disaster also produced strong aftershocks in the design and execution of company contingency planning.

Acti's Ciudad said local firms have made significant strides in terms of backing up their hardware, software, data centers and raw information.

IDC's Vega agreed, stating that firms have strengthened their IT infrastructure against future catastrophes through purchase of new servers, storage and PCs. According to IDC figures, local hardware sales jumped 29% last year, and pulled in 60% of Chile's 1.87tn-peso (US$3.88bn) IT pie.

Chilean companies have also expanded their data center perspectives by eyeing facilities located at a greater distance from their central operations, and have new people calling the shots in terms of disaster preparations, Vega said.

"The earthquake accelerated the adoption of solutions for operational continuity," she said. "Among different managers of different companies, there was also a change in the decision-making process. The CIO no longer makes the decision alone; he's been joined by members of the board of directors, or by other general managers."


Fallout from the February quake is still producing a favorable investment climate for IT companies, but opportunities have also evolved.

Demand still exists, particularly around mobility, but at the same time IDC says overall hardware growth will slow to 4% this year, meaning that Chilean firms have completed a significant part of their splurge in this area.

The ace is now being held by providers that can successfully encourage local companies to leverage existing investments and take their IT environments a notch higher.

"Virtualization solutions can be adopted to support operational continuity," said IDC's Vega. "In Chile, there is awareness about what virtualization is, but adoption has still been gradual."

Increases in virtualization investments will also have a spill-over effect on storage expenditures.

"Virtualization solutions are supported by storage," Vega said. "The earthquake's impact on growth in this market will be noticed in 2011."

Technology providers should also peddle their consulting together with their products, the analyst added.

"More than just X, Y, or Z technology, companies need to know how to incorporate technology into their business processes," she said. "They need to have technology providers support them in their business planning."

"From the point of view of the technology provider, that means understanding vertical markets and different organizations."


Chile's IT industry also has critics who argue that post-quake development has been pockmarked by uneven advances.

US storage solutions supplier EMC's (NYSE: EMC) sales director for Chile, Peru and Bolivia, Guillermo Moya, said in a recent opinion piece that the manufacturing industry has lagged behind in efforts to get its operational continuity plans up to snuff.

Additionally, complicated IT environments abound across multiple sectors.

"Companies have been filled up with different types of infrastructure. They have various - not just one - types of servers, and the same holds true for storage and networks," Moya said. "They have administration and operation systems that are so complicated that they consume time and budget."

In a previous interview, Ernst & Young Chile risk and management advising partner Andrés Acuña said the earthquake has taught local firms very little in terms of data security.

"They are committing the same errors that they made almost 30 years ago in terms of not defining the project well enough, and leaving security as the last priority," Acuña said at that time. "There's a lack of planning, project structuring and correct measurement of the project's impact."