Posted by Chris Howard
My original title for this post was "Tightening the Belt", but we've already done that. 2009 will be positively Victorian if recent spending surveys are correct. The most recent Goldman Sachs IT Spending Survey, for example, predicts a 1% decline in Global IT spending and presents these highlights (or lowlights, if you prefer):
- The typical Q4 flush — where we suddenly find funds that need to be spent — is likely to be capped. No rushed purchases in "use it or lose it" mode: It's already gone.
- Organizations cut back on outsourced services and in-house consulting. This is especially true when those services are related to discretionary projects. Discretionary projects? What are those?
- Software purchases weaken, although dollars spent with Microsoft are not as affected.
- Networking is softer, with the exception of Cisco.
- Many of the statistics are the worst ever recorded in the history of the Goldman Sachs IT Spending Survey. (You have my permission to stop reading now and go enjoy a beverage of your choice, Lehman Bros. style)
- Large software vendors that offer complete stacks of enterprise functionality (what Burton Group calls superplatforms) will be able to provide deeper discounts for their customers. Smaller vendors, not so much. As a result, expect purchasing decisions to favor the superplatform vendors for cost containment reasons. This will lead to better control of the bottom line, but often not optimal architectural choices.
- Organizations seem to have squeezed considerable savings out of virtualization and data center consolidations already. This shifts the focus more aggressively to other parts of the organization. (Projected) virtualization-related purchases remain strong, however, with notable interest in Windows Server 2008 and Hyper-V from Microsoft.
- Microsoft's relative strength is due to anticipated spending on SQL Server, Windows 2008 Server (with Hyper-V virtualization), and Sharepoint. As mentioned, the first two have significant play in data center consolidation and data management efforts where cost savings can be realized quickly.
- After the last bubble burst, there was widespread jettisoning of excess technology. As a result, the operational environment/enterprise application portfolio is quite lean. OK, so maybe not lean, but certainly the body mass index (BMI) is lower than it was in 1999-2000. This will force organizations to look for savings in other places.
- Reduction of FTE staff ranks behind reduction of in-house consultants, 3rd party external services, and staff augmentation resources. The wholesale and swift removal of non-FTE resources will leave many discretionary projects in limbo: many will be cancelled, others will be delayed until the economic horizon is clearer. Internal FTE staff will have to pick up loose ends and fill in responsibilities, so project and program managers must ensure effective knowledge transfer before the day of reckoning arrives. Too many of us have experienced the Monday morning purge in the past and found ourselves holding the bag.
- There is evidence that CIOs are not jumping quickly offshore to cut costs. Perhaps they are applying the lessons of the past when offshoring returns did not match expectations. There is no appetite for risk right now, and it is better to wait and not spend than to spend incorrectly even on something that appears to offer savings.
- Expect experimental or nice-to-have projects to disappear. Anything that is not intimately connected to core business value will be held off. No-one wants to have to explain the equivalent of highly paid workers rearranging deck chairs on the Titanic. My concern is that this fact will further delay critical strategic work for which immediate benefits are difficult to prove.
- Adjusted for inflation, that Sears Roebuck Catalog corset — note that it comes in either "white" or "drab", just like old CPU towers— would cost $10.72. Now that's a bargain!