Tag Archives: budgets

IT Spending is Up … But Barely

Posted on by gregl

Corporate revenues overall may be improving in 2011, but top management is still not doling out commensurate dollars for their IT budgets.

“Anyone struggling to move their IT departments forward within tight budget constraints would not be surprised at the results of the latest IT budget survey: that things are getting better, but it’s a slow go,” writes IT author and pundit Joe McKendrick on ZDNet.com.

The most recent Computer Economics IT Spending and Staffing Benchmarks study concludes: “There are indications that the worst is behind us. IT operational and capital spending is rising. The increase is not strong and many IT executives lack confidence in their spending plans, but at least confidence is higher today than during the previous two years.”

Fact is, IT increases are far from strong. The Computer Economics study showed median annual growth of only 2 percent so far this year, which is better than the zero percent of the previous two years, but much lower than the 4 percent increase of 2008 or the 5 percent of 2007.

Industries with the largest increases in IT spending are insurance, wholesale distribution, manufacturing and healthcare, according to the study.

Government IT Focusing on Backup, Not the Cloud

Posted on by gregl

If you regard the federal government as your guide in IT spending, you’ll target most of your funds on backup and recovery solutions, while spending very little on cloud computing.

That’s what CompTIA – a nonprofit association for the IT industry – determined in its second annual Government IT Purchase Plans study. The goal of the government’s upcoming IT spending is to increase efficiency while reducing long-term costs.

Examining government spending-priority lists, the study found backup and recovery on 39 percent of the lists, as the most popular category. Security applications were next at 37 percent. Virtualization solutions followed at 30 percent, and content-management at 24 percent. Way down the lists were cloud computing and unified communications, both at 18 percent.

IT Budget Dollars Rising in Most Mid-size Companies

Posted on by gregl

Improved economic health in mid-size companies – those with between 100 and 1,000 employees – is being reflected in increased IT spending, according to a recent IBM survey entitled “Inside the Midmarket: A 2011 Perspective.”

The Q4 2010 survey of 2,000 companies in 20 countries reveals that 53 percent of respondents see their IT budgets growing in 2011, while 31 percent see them remaining at current levels and 16 percent are either unsure or are expecting further IT budget cuts.

“Midsize firms are increasing their investment in IT, striking a balance between solutions that drive short-term cost savings and those that enable revenue growth and stronger customer relationships,” according to the IBM report. “Globally, managing costs, improving efficiencies, driving up productivity, and focusing on superior customer service are all cited as critical business priorities.”

A comparative IBM survey in 2009 revealed major emphasis on cost-control among 53 percent of respondents. This year, only 21 percent say that’s their primary focus. Nearly 80 percent of CEOs in the newest study list their top priorities as customer focus, innovation and growth.

Looking specifically at IT budgets, some 75 percent of respondents said they intend to improve their IT infrastructures to “ensure flexible resilient, scalable, and secure IT systems.” Seventy percent see additional IT budget dollars going to improving employee productivity and “better focus on the customer.”

IT Budgets Growing, Shrinking by Similar Percentage

Posted on by gregl

There won’t be a big upsurge in IT spending in 2011, according to poll results TechRepublic.com recently compiled. With about 450 of its IT subscribers responding to the question, “Will your IT department’s 2011 budget be bigger, smaller, or the same as 2010?” results were pretty evenly divided.

The largest number, 36 percent, admitted to smaller budgets. Slightly fewer, 35 percent, said their budgets are larger for 2011, while the remaining 29 percent said budgets are about the same last year to this year.

Dividing the Data Center Budget Invites Trouble

Posted on by gregl

Splitting up company budgets related to their data centers can spell financial trouble, says noted Stanford University consulting professor Jonathan Koomey. He’s also an energy-efficiency expert and author of the landmark 2008 study Worldwide Electricity Used in Data Centers.

“Most data centers suffer from responsibility and authority for the data center being assigned to different parts of the organization,” Koomey told DCIM Advisory in a recent interview. “For example, the facilities department has a budget for electricity and the capital costs of infrastructure; the IT department has a budget to buy computer equipment; the real estate department has a budget for building and landscaping. These separate budgets may lead to a problem if one part of the organization purchases equipment that forces the other part to spend money on energy or buy equipment.”

“It’s the problem of split incentives,” he continued. “The IT department doesn’t care how much power its servers use and may not want to spend $1 on server efficiency, even though spending that dollar may save $5 for the facilities folks.”

“A lack of coordination, borne of not bearing the effects of actions, leads to bad behavior,” Koomey said.

IT Jobs Outlook for 2010

Posted on by Karen Karger

Want to know what the IT staffing/jobs outlook is for 2010? Well, the good news, according to a new Robert Half Technology report — there’s “more than enough work to go around.” In answer to the question, “How would you describe the staffing level of your IT department in relation to current workloads?,” CIOs responded:

  • Very understaffed 10%
  • Somewhat understaffed 33%
  • At the appropriate staff level 53%
  • Somewhat overstaffed 3%
  • Don’t know/no answer 1%

 The report further found that 7% of CIOs plan to add IT staff in the first quarter of 2010, while 4% expect workforce reductions. (The net 3% increase is the strongest forecast since the first quarter of 2009.)

This CIO Update article cautions that executives are “taking a slow and steady approach to hiring,” however. So what types of IT professionals are they looking to hire? Generalists and specialists it seems.

 On one hand, companies are looking for jack-of-all-trades candidates, so these folks can work in many capacities and help with the overall IT workload.

 Demand for certain specialties is strong for applications and database developers, network admins and help desk and support staff.

How Does Your IT Budget Look for 2010?

Posted on by Karen Karger

The Society for Information Management recently polled CIOs about their IT spending priorities and plans for dollar allocation in the coming year. An overview of the results is presented in this slide show on CIO Insight. It’s hard to visualize from the slides so I created these two pie charts to represent their findings about 2009 versus 2010 budgets. It looks like the news is better in the coming year— roughly half of the CIOs surveyed said their 2010 budgets would remain the same.

In 2009, 50% of CIO said their budgets would be lower than in 2008.

50% of CIOs said their budgets would be lower in 2009.

 

45% of CIOs said their budgets would be the same in 2010.

45% of CIOs said their budgets would be the same in 2010.

The Long IT Haul Back to 2008

Posted on by gregl

Yes, it’s been a bad year for IT budgets – the worst ever, in fact – but we should return to the lavish spending levels of 2008 … in 2012. 

That’s the prediction of Peter Sondergaard, senior VP of research with Gartner, who says: “Global enterprise spending on IT is going to decline 6.8 percent this year. And the IT industry – measured in dollar terms – will actually not recover until 2012, to the 2008 revenue levels.”

In dollars and cents, that’s $2.3 trillion spent this year, compared to $2.5 trillion last year, which will be the level we reach again three years from now.

“Spending has actually declined in all markets,” he says, citing hardware, software, telecommunications and IT services. “Compared with previous negative economic cycles, the impact has been felt all across every single vertical industry.”

Recovery will be driven by IT spending primarily in health care, utilities and government. Sondergaard notes that IT budget planning for 2010 is being done “on the background, therefore, of the worst year ever, in the IT industry.”

“2010 is about balancing cost, risk, and growth,” he says, but expects that about half of all enterprise IT budgets will reflect zero growth or even less funding than for this year.

“By 2012 the accelerated spending on IT will begin to drive a culturally different approach to technology that will start to impact product features, service structures and the overall IT industry,” Sondergaard predicts. “Silicon Valley is no longer in the driver’s seat.”

To see Sondergaard’s brief speech on this, click here.

The Data Center as Rising ‘Cost Center’

Posted on by gregl

Wondering where your IT budget is going? Recent tabulations of data center costs show the rising costs of operating one could even threaten corporate profitability in some companies.

A recent report from global management consultants McKinsey & Company says data center capacity currently is growing 10 percent annually as businesses process and store more data. And the resulting cost of this growth is higher yet.

“With this spike in capacity comes a corresponding escalation in data center IT costs,” states the McKinsey report. “Today’s data centers account for approximately 25 percent of the total corporate IT budget, when you take into account facilities, servers, storage and the labor to manage them. This share will grow as the number of servers, the amount of power consumed, and the unit cost of power all increase.”

For example, overall IT spending is climbing at a rate of six percent a year, but data center facility costs alone are jumping 20 percent annually.

“The portion of the IT budget consumed by infrastructure and facilities is significantly reshaping the economics of many businesses,” the report states. “In information-intensive businesses like investment banks, telecoms and business information, data center costs are diverting capital from new product development, making some products and segments uneconomical and materially affecting margins. Without radical changes in operations, many companies with large data centers face reduced profitability.”

You can guess EasyStreet’s take on this: Considering the well-known inefficiencies in most corporate data centers, these rising costs sound like a good argument for outsourcing as a more manageable IT cost structure for more companies.

Device Population Rising, Support Not So Much

Posted on by gregl

IT industry-analyst firm IDC sees a massive growth in the number of devices CIOs must oversee, but far less corresponding growth in services to support the devices, according to a recent white paper on the topic.

As far as device growth, IDC sees a 66 percent growth in the number of devices for which CIOs are responsible, climbing from 1.3 billion in 2007 to 2.2 billion in 2012. Support services, meanwhile, will grow 37 percent, to $728 billion, over the same period.

“While the number of devices that CIOs will be responsible for will increase dramatically over the next five years, most enterprises do not expect to see a dramatic increase in their external spending on support services,” states IDC. “However, focusing on only the external costs neglects the additional costs associated with supporting these devices. In addition to the external support costs, enterprises need to consider the internal staff required to support and manage these devices.”

Outsourcing IT was one of the potential solutions IDC says CIOs often consider.

“To address the concerns of managing and supporting an IT environment, many enterprises have chosen to outsource all or some of their IT operations to a dedicated services provider,” the report noted.

You can click here to download the white paper. (You’ll have to register for the download.)