A Leaner IT to Get More Strategic in 2010

Business leaders may be looking to IT as more of a strategic tool rather than just a cost center as we enter into 2010, a year that many believe could bring an economic recovery.

That’s because so many businesses put the clamp down on IT spending in 2009 during the deep global economic recession. And now that lean IT machine that’s been created may be ready to take on new projects that could in turn lead to business advantages.
Those are some of the conclusions of new research on IT leaders’ attitudes regarding spending in 2010, commissioned by Accenture and conducted by the Economist Intelligence Unit.

“There’s been quite a shift if you go back to this time last year when there was a view that we’ve got to cut costs,” says Jeremy Oates, managing director of Accenture's UK and Ireland Technology business, talking about the global survey.

“There has been a significant reset in the way the world works,” says Oates. “Leaders know they have to reduce the cost base, and at the same time they need to do things to grow the business.”

Business leaders aren’t greeting the new year with an abundance of optimism. Rather, given the way business and the economy has been trending recently, they are taking a conservative but hopeful approach to the business environment in 2010.

Forty-seven percent of respondents to the survey say they plan to increase investment selectively in the next year, while 24 percent say they will keep investment levels steady. Fifteen percent said they would reduce investment selectively and 10 percent said they would increase investment across the board.

Overall, Oates says he expects IT spending to remain relatively flat, but is looking for some of the operational spending that has been reduced to shift to strategic projects.

Accenture’s research shows that strategic areas for IT spending in 2010 will include server virtualization and consolidation, business analytics and intelligence, and more customer self-service e-business automation projects.

“What we’ve seen over the last few months is business leaders looking to use IT to help cut costs in the rest of the business,” says Oates.

Specifically, 36 percent of respondents said they would invest in server virtualization and consolidation, 34 percent said they would invest in customer relationships and service, 31 percent said they would invest in e-business including online selling and supplier portals, 28 percent said they would invest in finance/performance management and 28 percent said they would invest in service oriented architecture. Business process engineering will be a focus for 24 percent, and 22 percent will invest in business analytics.

“There’s a continuing focus on getting customers to do the work that was previously done in the corporation,” says Oates. “Customers are doing more things online.”

Many enterprises have looked to simplify their software infrastructure, taking a hard look at the number of applications that essentially perform the same tasks and contain the same information. Together with server virtualization, these enterprises have focused on reducing the number of applications they run.

For large enterprises, Oates believes that the move has been to reduce operational expenses in IT, cutting down the ongoing cost of running IT but at the same time freeing up funds for strategic projects.

That may seem to run counter to the trend for cloud technologies and software as a service, which add operational expense while eliminating capital expense. Oates contends that SAAS and the cloud is largely a factor for small business and midsize business, but not so much for large enterprises. Yet.

“Smaller businesses can dematerialize their IT altogether,” says Oates. “That’s an emerging approach and I think we will see some businesses going down that path.

“However, I think it will be a while before we see enterprises going down that path,” he says. “In larger enterprises there’s much more of a legacy estate. It’s a bigger decision for them, and it’s not entirely proven yet if it’s the right way to go for an enterprise.”

The Economist Intelligence Unit surveyed 557 executives in the August to September 2009 timeframe. Fifty-five percent of respondents were C-level executives such as CIOs, CFOs and CEOs, and two-thirds of the respondents hold an IT function, with the remainder executing other functional roles. Fully 62 percent of the companies surveyed have annual global revenue of more than $500 million.

 

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