Spending Growth Slows, But No Panic
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FINDING 2
Strategic Investments Continue
On average, this year’s IT budgets are 4.3 percent greater than actual 2007 spending, but few of the 50 technologies and services on this year’s list are increasing at a lower rate. Companies are not skimping on technologies that will help them achieve their most important goals.
Application software and systems: Creating or improving strategic applications is the top technology priority for 2008, according to our December 2007 Top Trends Survey. So after investing in Web services and infrastructure, a perennial priority in recent years, technology spending appears to be moving to applications; about two-thirds of the 20 technologies receiving the biggest spending boost are in this category.
The top two business priorities for IT in 2008 are delivering better customer service and improving business processes. Companies, therefore, have increased their investments in customer self-service technologies, collaboration, business intelligence and content management, database systems and business process management software by 12 percent or more. The large increase in open source reflects the high quality of this software and the hopes, especially among smaller companies, that it can help reduce costs.
Architecture, infrastructure, tools: Virtualization is seen as one of the best opportunities to reduce IT spending. And that helps make it the hottest technology in this study—the one with the largest increase in actual spending and the greatest increase in companies that budget for it. The adoption rate for voice over IP—an inexpensive alternative to conventional telephony—also is accelerating. But spending grows more slowly for application development tools, despite the increases in spending on applications, perhaps in part because low-cost open source tools are making inroads.
Security: Commitment to security does not translate to increased spending. Spending on security tools is growing at a slower rate than spending on most other technologies, and fewer companies are budgeting for anti-virus software. Those dollars go instead to security management services and network monitoring services. As was the case last year, spending on disaster recovery/business continuity services is rising faster than spending on security software.
Hardware: Corporate IT budgets include fewer PCs and networking equipment this year, but dollars continue to flow to other kinds of hardware. An analysis by our sister publication Baseline of our January Customer Strategies Survey found the amount of customer data companies store is increasing by 43 percent a year. That forces companies to increase spending on storage equipment and it drives storage virtualization as well. The push for consolidation may be the reason mainframe spending is increasing by 10 percent. Price competition and corporate wariness about Microsoft Vista are helping to keep PC spending down.
Consulting, outsourcing and training: Many CIOs turn to strategy consultants to help them create strategic applications; spending here is up by more than 10 percent. That’s twice the spending increase for technical training. Large companies are the culprits here: Tech training spending is rising just 2.7 percent among companies with revenues of more than $1 billion. Some of those training dollars go to outsourcing and services.
Managed services and telecommunications: Though average spending by software as a service users is up nearly 13 percent, the number of IT budgets including SaaS adoption is increasing slowly. Spending on most services is increasing by less than 7 percent. Services are one of the first places companies rein in costs when times get tough, as our September 2007 Cost Management Survey revealed, and that appears to be the case now.
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