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Finding a Happy Medium

By Guy Currier  |  Posted 03-04-2009 Print

Think companies are cutting costs by reducing IT spending? Nope. They’re using IT to reduce expenses and looking past short-term investment costs to the next best place for savings: the medium-term. By Guy Currier

See a slideshow of the top 60 spending priorities for 2009.

Add this to the list of things that could not have been predicted a year ago: Mainframe purchasing was robust in 2008.

Or: One-third of companies planning to invest in voice over IP (VoIP) didn't. Or: IT security buys would slow down faster than any other nonequipment category. (Actually, some of us predicted this a year ago, but not too many believed it.)

And who would have thought that storage spending would remain so strong with commerce levels falling--and with that, presumably also the demand to store transactions, data and images?

A year ago, despite the looming uncertainty, IT executives told us they expected their budgets to rise from previous spending levels. It's hardly a shock to see today--at least, in large companies--the reverse is expected: Budgets are falling. But the results of our annual IT Spending study do show a few surprises.

For example, last year's finding that IT spending growth was actually higher in companies cutting costs could have been a statistical fluke. But this year's results deepen this trend: IT budgets are expected to rise by 5 percent in 2009 in cost-cutting companies, while only a 2 percent increase is expected in companies focused on revenue growth.

In other words, companies that are now battening down the hatches are increasing their IT investments to help them do it. While this development has been much discussed, it was a surprise to see it so starkly validated in this year's study.

This evidence of IT's role in reducing costs is critical to understanding the IT market today. While it's still true that many more firms are focused on revenue growth than on cost-cutting, the number in the latter camp has increased dramatically since last year. CIOs in these organizations are being asked to spend--but to spend in ways that will net savings.

Behold the new era of medium-term planning. A company could lower IT spending and get a short-term cost-savings benefit, but it would risk incurring ultimately higher costs. Meanwhile, in the current economic climate, most companies can't wait for long-term savings. So they are forgoing short-term goals and focusing instead on investments that will begin to pan out soon--just not immediately.


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