John Parkinson: Budget Blacks and Blues

In the final quarter of every calendar year I send out a survey to my private research panel asking them about their (or their company’s) technology spending plans for the coming year. The respondents—a 30-year collection of just over 600 friends, acquaintances, ex-colleagues, clients and other contacts in the technology world who are willing to respond to up to four surveys a year—aren’t selected statistically. But they are interestingly representative of the technology landscape in North America. Generally, I get around 400 responses, and this last survey was no exception: I got 422. I’ve been looking hard at their answers for about a month now (I’m writing this just after the 2003 holidays), and I saw some patterns that were intriguing enough that I decided to make this the subject of my first column for 2004.

The most obvious finding: Almost no one expects to be spending more on technology in 2004 than they did in 2003. By playing with the analyses a bit, I’d estimate that the most optimistic overall prediction for a budgetary increase is plus 2 percent, the median is flat and the worst prediction is down about 6 percent. Just as interesting, however, is the fact that almost everyone also expects to be starting up major new projects in 2004 after a couple of years of deep drought. Respondents stated two main reasons for this: They still have too much old infrastructure that’s at or close to the end of its useful life; and they have been able to save enough operational costs after three years of belt-tightening that they now have some investment headroom, even after fairly significant budget give-backs to their corporate parents.

But what exactly are they going to be spending their uncommitted dollars on? Here the picture (as always) gets less clear.

Quite a lot of budget is going to go into a rolling platform refresh aimed at retiring older technologies and replacing them with new ones—as long as the new technologies both save money on an absolute basis and are relatively more productive than what they will replace (note that’s and not or). By continuing with moderate to aggressive simplification, standardization and consolidation strategies, including renegotiating service-level agreements with service providers and better quality-of-service measurement, my respondents think they can squeeze between 12 percent and 20 percent annually out of their operational costs in 2004 and 2005 while improving reliability and availability. Lots of interest in resource virtualization strategies and operational automation.

Quite a lot of budget—and quite a lot of those operational cost savings—are going into rationalizing the application suite, updating it where possible, encapsulating old functionality where updates are not viable and integrating it (especially the data, but access, UI and security are all in play) everywhere. There are lots of plans for corporate portals of various kinds: business analytics, data rationalization and lightweight enterprise- application integration via Web services. A fair number are planning to retire old custom-developed back-office systems and replace them with ERP packages.

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John Parkinson is chief technologist for the Americas at Cap Gemini Ernst & Young.

Illustration by John Kascht