End-of-Year IT Spending Insights from the Trenches


There's no question the economic downturn is affecting consumer purchasing habits. At a Best Buy last week, I heard a woman tell her daughter that she was willing to purchase an iPod Nano for her. The girl, who looked to be about 12, wanted an iPod Touch under the tree instead, but it didn't look as if mom was going to budge. Assuming the girl went along with it, the woman saved herself 80 bucks.


In that same spirit, many companies are looking at their IT expenditures with a more critical eye. I've written several times about shifts in IT budgets, highlighting surveys from, among others, CIO.com and Goldman Sachs. Analysts such as Forrester Research have apparently been hearing similar sentiments from their clients. Forrester started with a forecast of a 9.4 percent growth in IT spending earlier this year, lowered it to 6.1 percent in September and settled on an anemic 1.6 percent earlier this month.


I interviewed a few folks out in the field to find out how, if at all, their IT spending priorities are changing as we move into a new year with no economic recovery in sight.


"Keeping the lights on" is the top priority for clients and partners of management and technology consultancy Interphase Systems, says Lew Smith, its product manager of Virtualization Solutions. Not surprisingly, given his title, Smith says many companies with limited virtualization deployments are looking to further expand the use of the technology in their data centers. "They're finding they are getting the efficiency benefits they were sold when they purchased the software, and they want to reap those benefits in the full data center."


While his contacts have put some big projects on hold or, more rarely, canceled them, Smith says he's not seeing the kinds of sweeping budget cuts one might expect given the grim economic picture. "What I've seen in the last couple of months is companies trimming the nice-to-haves and keeping the must-haves," he said.


This lends credence to the idea of IT as a budget area so fundamentally important it can't be sliced too much, for fear of affecting mission-critical systems.


Like virtualization, green IT is another trend gaining traction in the economic chaos, says Smith. As companies prepare to refresh hardware they can no longer cost-effectively support, they are seeking more energy-efficient models. "Companies are doing comparisons from server to server to find out how they perform from an efficiency perspective. I am seeing much more interest in these types of questions."


The tough economy has resulted in some improvements to the budgeting process in California's Orange County, says Tony Lucich, the county's chief information security officer and enterprise architect. After the board of directors asked officials to revisit the list of projects they had approved earlier in the year, Lucich says the process became more focused on business needs rather than the traditional technology replacement cycles.


"I've seen some remarkable collaboration in what is traditionally local officials defending their fiefdoms," says Lucich. "People are reacting to a united problem with a united response."


Whereas the project list before was broader and closely tied to a three-year strategic plan, Lucich says it's now based on a more immediate need to cut costs and avoid them. Some items considered a "nice-to-have" are moving into the "need-to-have" column and vice versa. For instance, says Lucich, the county is rolling out videoconferencing to cut down on costly trips to the courthouse for prisoner arraignments. Without the videoconferencing, officials were faced with the prospect of adding more prisoner holding areas and deputies at the courthouse and more vehicles to get prisoners there.


"What was a very structured process is becoming a more flexible one," says Lucich. "Before, if we could show a two-year ROI for something, it would have made it to the list. Now we're looking for ROI in months, not years. We're looking for clear business value and justification."


The county is also inviting local governments to leverage its technology investments. For instance, after signing a contract for emergency-notification services, the county told cities they could be added to the master contract and enjoy a volume discount if they wanted to use the services for announcements other than emergency notifications.


Like Smith and Lucich, Bruce Culbert, CEO of IT recruiting company iSymmetry, says companies are "very focused on projects that will lower cost of operations, provide real-time visibility for the business to make timely decisions and help in acquiring, growing and retaining customers." To that list, he adds the mandatory investments required to comply with a growing list of regulations such as the Health Insurance Portability and Accountability Act and Sarbanes-Oxley.


Culbert ranks what he sees as the top IT spending priorities moving into 2009: cost-reduction and operational-efficiency projects; customer-facing solutions, such as online marketing, sales and service applications; business intelligence initiatives; regulatory and compliance programs.


The views of these three men mesh pretty closely with the priorities mentioned by technology executives in a Goldman Sachs survey back in July. In my post about that survey, I shared a comment from Charles King, an analyst from Pund-IT Inc., that appeared in a Computerworld article:

The message here is CIOs are looking primarily to tested, well-understood technologies that can result in savings or increased business efficiencies whose support can be argued from a financial point of view.

Nearly six months later, that still seems to be the message. Whether it will remain the message when flush economic times return remains to be seen.