IT Spending Down, but Strategic Sales Could Be Up

By Ericka Chickowski  |  Print this article Print


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While the top spending priority for CIOs this year was cost cutting, a recent study shows that the second reason to spend was leveraging IT for strategic business advantage.

This year may be shaping up to be one of the worst since the dot-com bubble burst, but channel partners and service providers shouldn’t look at dour spending projections with doleful eyes. Though median global spending will drop significantly in 2009, many experts believe there are lots of opportunities to sell into the right kind of enterprises.

Yesterday, channel players likely saw the revised projections from Forrester Research with the same pit-of-the-stomach feel that has become so familiar since the economy took a nosedive last fall. According to Forrester, global IT spending is due to drop 10.6 percent this year and U.S. spending will drop by 5.1 percent.

But another report released this week by Computer Economics shows that in spite of the overall market dip, many organizations are still in the market for big buys. Of 200 IT executives surveyed by Computer Economics, approximately 45 percent reported that they were actually planning on increasing their IT operational spend this year, and an additional 17 percent said they would hold steady.

"When you look at the total market, it is very easy to come to the conclusion that it is very bleak, and the reason for that is in total I have no doubt that there is less IT spending this year than last year," says Frank Scavo, president of Computer Economics. "I think you have to acknowledge that there are organizations that are buying this year; it’s clear that that's happening."

Scavo points out that his firm’s investigation found that even though the top spending priority for IT leaders this year was cost cutting, the second place finisher was leveraging IT for strategic business advantage.

"So even though CIOs are under pressure to cut costs or restrain growth in IT spending, they're also under pressure to make IT more relevant to the business and use IT for strategic advantage," Scavo says. "I think that channel partners should not give short shrift to the need to leverage IT for strategic advantage."

It is this kind of strategic thinking that very may well lead a lot of CIOs to spend more this year as they begin to implement transformative projects for their enterprises, says Bob Dvorak, senior vice president and general manager at Forsythe Technology, a solutions provider headquartered in Skokie, Ill.

Dvorak believes that CIOs and other IT leaders stand at the precipice of a new era in IT budgeting that will lead a lot of organizations to change their cost structures through emerging technology. As he puts it, this latest cost crunch is actually a continuation of what started back in the 2001 when the confluence of the dot-com bust, the hangover from Y2K over spend and 9/11 aftermath all set in.

"All of that was the beginning of the cost optimization and the cost take-ups," Dvorak says. "Really, what’s happened since last September is nothing new."

As CIOs respond to the latest crunch, he thinks that they are separating out into two categories. Category 1 CIOs just view the latest demand for cost cutting as another round of cost optimizations.

"They're still wringing out pennies out of the status quo IT infrastructure that they've been managing for years," he says. "But after doing it for eight years, they're wringing that rag out pretty strong, and there's not many drops coming out anymore."

That’s why Category 2 CIOs have decided to change course. These CIOs see this latest economic slide as a defining moment for IT, Dvorak says. Category 2 leaders have decided to use this as an opportunity to break the traditional IT model in order to define new IT cost curves.

"They’re saying, 'Maybe we need to embrace things like cloud computing. And instead of making virtualization an option, we need to mandate virtualization. Instead of running data centers the way that we've always run them, maybe we need to look at doing a consolidation of data centers,'" Dvorak says. "They’re using the economy and the drive to green out data centers as they run out of power and space—all of these outward catalysts—as a way to change the way IT is being delivered."

By making those fundamental switches of delivery mechanism they are also affecting the budget model.

"When they do that, instead of wringing out pennies, you're changing the slope of the curve, you're changing the starting point of the curve. You've gone from fixed costs to variable costs," Dvorak says.

So what does that mean for channel partners? Well, for one, CIOs in the second category have to spend money to actually make those fundamental changes in their organization. By positioning themselves in such a way that they can help Category 2 CIOs reach their transformative goals, channel partners will set themselves up to pick up business in a stumbling economy.

Secondly, channel partners could also stand to learn a lesson or two from CIOs' financial and strategic planning. Many senior IT staffers already realize that a poor economy is no excuse to simply tread water. Even when times are tough, innovative planning and sane risk taking are what bring organizations through the other side stronger than they were before. Because working in survival mode for too long very often can be the means of ensuring that you don’t survive in the long run.



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