Top five spending priorities for hard times

IT shops to weigh their options carefully, because investments made during a recession often have lasting impact. In these economic scenarios, one got to make a judgment on which technologies will bring you advantage when things turn around and get better



By Tom Sullivan

No company is immune from the economy's ebb and flow. So it's no surprise that, in the face of a fearsome downturn, IT shops are scrambling to figure out where they should cut.

The big three analyst firms; Forrester, Gartner, and IDC are busily slashing their IT spending projections. Just last week IDC predicted that in the United States, IT spending will decline to 0.9 percent, down sharply from a pre-crisis forecast of 4.2 percent growth.

With numbers like those, IT might feel inclined to panic. But now is the time to stand tough, advises Andrew Reichman, Senior Analyst, Forrester Research.

At brokerage and investment banking firm Morgan Keegan, for example, CIO John Threadgill acknowledges that he has to come up with better reasons for the technologies to which he allocates IT resources. But after he eliminates or delays costs where feasible, Threadgill and his CIO colleagues must continue investing in certain areas, no matter how crazily the economy bounces up or down. "We'll continue to spend where we need to," says Threadgill.

So which technologies get funded rain or shine? The five technologies IT shops must continue to invest in despite the recession. "The common theme," says Frank Gens, IDC chief analyst and senior vice president, "any technologies that can save companies money or reduce expenses will continue to thrive."

1. Storage: Disks and management software

"There are some things that just won't go back in the bottle," says Mark Raskino, Gartner fellow and Vice President, emerging trends and technologies. "Storage is one of those."

2. Business intelligence: Niche analytics

As data continues to accrue, the need to glean insights from it grows, agree analysts from Forrester, Gartner, and IDC.

CIOs will keep spending on general business intelligence, but more resources will go toward much focused analytics, explains Andrew Bartels, Principal Analyst, Forrester. The "analytics that help companies identify and retain their most profitable customers will be key," he added.

Fenn adds that companies always need behaviour analytics. In the supply chain, for instance, analytics that trigger alerts when suppliers are running into problems, such as delaying supply or payment, can deliver real value to companies.

The broader range of data sources will lead to greater need for analytics," he further added. "There are many different masters, as companies tap analytics to cut costs, avoid errors, predict behaviour of customers before they lose them and grow market opportunities."

3. Virtualisation: Optimising resources

Virtualisation is the data-centre version of getting the most out of what you already have. Up-front investment in virtualisation tends to be fairly low, but can deliver quick and substantial returns. "Virtualisation will continue to be popular because it allows companies to defer other costs - in this case, that's mostly hardware," IDC's Gens says.

Spec-savers began tapping virtualisation before the downturn. "Virtualisation is a key tactic we've been doing for some time to minimise hardware acquisition costs," Khan says, "and that will continue."

Virtualisation has advantages beyond hardware cost reduction. "Everybody's moving to virtualisation," Forrester's Reichman says. "You're likely to be more efficient with server and storage resources in the long run, and if you have expertise, that return is likely to come fast. A down economy might be the right time to throw down and do it, especially if you can time it with hardware refreshes."

"Converting from a physical to a virtual infrastructure is particularly beneficial during tough economic conditions," Biddlecombe says. "Virtualisation has allowed us to save on power and cooling costs as well as the amount of time our IT staff spends on server admin. It provides us with more efficient use of capital as well as increased flexibility during challenging times."

4. Security: Data and end points

No surprises here. IDC's Gens, in fact, says that security is "always the number one concern of IT. As you see more resources out there on the Internet, there's concern that they're secure."

Companies will have a particular focus on securing network end points, devices, and those applications that serve them, according to IDC's Minton. "Whether you're in a recession or not, no company wants to be on the front page of bad lists because their data was breached," he adds.

Threadgill lists security as the second of Morgan Keegan's top two spending priorities, behind only storage. And Spec-savers' Khan adds that his budget will include security technologies, namely firewalls, tools for securing end points, and data encryption for mobile devices and remote PCs. "There's no reduction in security expenses," Khan says. "If anything we're increasing our security spending."

Gartner and Forrester agree that companies will continue to ratchet up security. Raskino adds that layoffs and, in turn, new hires will be yet another driver. "An economic downturn and recovery create massive churn," he says. "The processes and tools for managing and disabling access are going to be critical."

5. Cloud computing: Business solutions

Analysts from Forrester, Gartner, and IDC say that certain pieces of cloud computing will continue to expand and perhaps even accelerate due to the downturn.

Gens sees many companies moving to the cloud for the applications and services most often sought by business types, who are actually circumventing the IT department to get what they need. These include such business solutions as sales-force automation, productivity, and marketing campaign software. "The more pure IT stuff-infrastructure, infrastructure software and application development; those are tech buyers, so there are fewer potential customers," Gens says.

"Cloud-based data backup and file storage services are a really good idea that can be much more cost-effective than going it the old-fashioned, in-house way," Reichman says.

Gartner's Raskino adds to the list of cloud resources CIOs will find valuable during a recession such services as e-mail, storage, and lightweight productivity apps. "This is a good time to have a cost-centric argument, so IT might even take a risk to get a payoff with cloud technologies, if they're mature enough," he says.

Looking toward recovery

IT spending will make a full recovery and enjoy growth rates nearing six percent by 2012, according to IDC.

Whether such projections hold or not, Reichman argues that IT shops must trim their sails and stay the course. "You cannot stop growing," he explains. "Most companies are already fire-fighting, but you've got keep the lights on, keep things going forward, because the data-centre is always in a recession anyway. So keep moving."