Recently in IT budgets Category

It seems inevitable that IT budgets will face greater scrutiny as the global economy comes into question. After all, if increasing corporate costs and slowing or uncertain spending impacts revenue, then budget cuts will become a fact of life in the quest for profitability.

Proven cost-reducing IT measures (i.e. layoffs and investment cuts) will be no-doubt be adopted, while less traditional areas like SaaS, virtualisation and outsourcing should all flourish even more from this turn of events. Indeed in its recent “The State Of IT Services: 2008”, Forrester reported that while budgets have been slashed, demand for outsourced services remained high.

However IT is done, whether in-house, in the cloud or otherwise, it needs to be done with minimal cost. But while hardware and software costs have consistently fallen throughout ‘IT history’, operational costs like salaries have consistently increased. One benefit of business service management, is that it automates time-consuming processes like root cause analysis and it can project the potential effects of change on IT services. The attraction of such automation becomes particularly apparent when considering the looming squeeze on budgets as it presents a clear way of circumnavigating the predicament.

What is clear about this period of economic uncertainty is that businesses are demanding even more transparency over IT, both in-house and outsourced and IT downtime is likely to be scrutinised at a far higher level for far more firms than in the past. With IT downtime presenting potentially business-threatening cost, IT operations will increasingly find themselves mandated to take a more strategic approach to preventing downtime.

Jason Stamper’s recent blog post “10 best technologies to beat the downturn,” highlighted some ideas for IT professionals to streamline budgets by using affordable technology rather than cutting back on IT resources. The economic downturn potentially represents a great threat to IT -- yet to businesses which are dependent on IT (and this is increasingly the case); any unexpected or ill-conceived cuts to IT resources may have a profound and adverse impact on IT services.

Business survival, particularly in certain sectors, will necessitate cost-reduction; one of the quickest ways of realising such an objective is by reducing workforce. This puts a greater strain not only on the people who remain, but also on the quality of the IT services. Because of the business’ increased dependence on IT, a drop in service quality in today’s environment will likely result in more severe business impacts than in the past.

Consequently, many quick cost-cutting fixes to the ICT infrastructure may prove more attractive than worthwhile. To truly understand how to reduce cost, IT professionals need to change their approach more fundamentally and adopt a service perspective. Rather than buying seemingly cheaper hardware/software for their network or laying off staff, IT leaders need to focus on how the different parts of IT relate to service and what value those services derive so that the consequences of decisions, particularly in terms of business impact and potential risk to quality of service are always thoroughly understood.

Only then will they be in a position to identify the areas worth investing in and reduce spending to others accordingly. To put it simply, when they understand what tools they have in the box and can map the dependencies of their IT machine, they will be well placed to be that ever-beneficial step ahead of the CFO. As one author opined, “Careful With That (IT) Axe, CFO!”

- Jim

Analysts in both the US and UK have been anticipating Microsoft’s move to extend its IT management capability into the Linux and UNIX platforms. For example last fall at Gartner’s ITxpo, one analyst theorized that if application vendors moved into the IT management space, it would be game-changing.

There is little doubt Microsoft’s move will make ripples in the market. The company has incredible influence in so many aspects of IT, that if this proves a serious commitment to IT management, there is a high probability for success. That success will likely come at the expense of incumbent vendors – mainly by way of taking market share from the Big 4.

By expanding beyond the realm of Windows it is conceivable that customers might find it attractive to extend their existing MOM implementations to other platforms. However, this does not guarantee gentle westerly winds nor smooth sailing since there are several market dynamics and competitive factors that will influence how – and how quickly – Microsoft’s initiative evolves.

First, cost reduction and cost containment are perhaps the most substantive pressures on IT decisions today. As such, it’s reasonable to expect the Big 4 will respond to this event with more aggressive pricing. In this approach, Microsoft will essentially be trading space for time, and slowly chipping away at Big 4 revenue streams. This will weaken the Big 4 over time.

Secondly, there will remain some doubts in the market as to Microsoft’s credibility. For example it will have to prove it can manage mission critical environments as well as the incumbent vendors. This means IT decision makers will see tremendous risk in migrating to a Microsoft management platform – which can prove to be a difficult and time consuming sales objection to overcome.

At the same time, the Big 4 are investing in two key product functionalities that will extend the vast distance among product innovation that Microsoft, despite its prowess, will find it challenging to cover. Mainly these investments are in behavioural logic – the detection of unusual activity that provides predictive capabilities – and data centre automation.

Perhaps then, Microsoft has long range plans to move into the BSM space given it’s newly found operating system independence. BSM is still very much a level playing field with the Big 4 attempting to buy (rather than innovate) their way into a space with more agile pioneers, like Managed Objects, where our vendor neutral approach and pervasive integration is proving a difficult capability for them to match.

- Jim

As the saying goes, all politics are local. This adage seems to be true, even for Global 2000 companies with thousands of IT components cast around the globe.

In the second part of a blog series that examines future directions for IT, Arthur Cole commented, “…rather than simply deciding which box to plug in where, more and more CIOs are finding themselves at the crossroads of competing strategic influences.” I contend that strategic influences sometimes clash with local politics.

IT organizations invest big money in consultants to develop the perfect criterion by which to evaluate a short list of vendors. Features and functions, ROI and even compatibility or integration with the existing environment, usually top the list. However, unlike the binary or rules-driven logic of the technology so central to our livelihood – whether a consumer or supplier – as humans, there is always an element of subjectivity in any decision.

Political influence extends far beyond the classic case – where an enterprise architect by way of design mandates what tool IT operations will use for monitoring – to the affinity individuals develop for specific brands or products. Some have invested so much time and effort into a given tool or project, in many ways their careers are intertwined, even dependent on its success.

As a result, over the many years I’ve been selling software, I’ve sometimes won and sometimes lost as a result of this phenomenon. In some cases prospects with a bias towards a rival product have effectively killed deals – and on the other hand, I’ve observed some of my customers rise quickly through the ranks based on the results they were able to achieve with our product.

In either case, politics is most certainly and dynamically linked to IT.

-- Randy

Oh, what doom and gloom. The forecasts for IT spending seems destine for more cuts. The Incredible Shrinking Tech-Spending Forecasts laments the headline from The Wall Street Journal. While the Journal is technically correct, several IT research firms have indeed lowered their IT budget forecasts, it overshadows some important details.

As our CTO pointed out in a recent article, AMR Research reported that IT departments plan to spend 9.3% more on performance improvement than in the previous year, which contrasts with plans for an overall IT spending increase of 5%. One pundit’s well-reasoned analysis is that IT thinks it “can deliver almost twice as much bang this year for each new IT buck compared with their colleagues in the wider business.”

This jives with other analyst forecasts including Enterprise Management Associates. EMA has a soon-to-be released report indicating that spending on Business Service Management (BSM) is “poised to surpass” is more mature precursor of Service Level Management (SLM).

All this goes to show that IT simply spending its pennies more wisely in an effort to meet its two lasting, if not dichotomous, priorities to improve service quality and maintain or lower costs.

- Randy Jones

In 2001, when the tech bubble burst, I had just graduated with a Computer Science degree, and was looking for work. To say that things weren’t exactly peachy back then is an understatement. Luckily for me I happened on an interview with a company that was privately funded and which understood that in times of recession some excess fat needs to be trimmed – but not the muscle that drives a company. That company went on to produce very strong results less than a year later due to a superior product – a direct result of continuing to invest in hiring exceptional talent while avoiding the overindulgent tendencies of richer times.

Unfortunately in times of economic uncertainty such wisdom is uncommon. With all the recent talk about a recession being around the corner there is a lot of fear in the tech industry, especially among startups which are struggling to compete with new attractants for venture capital such as the likes of alternative energy exploration. The problem with this approach is that when the economy slows or stalls, some corporations think only of near-term. This usually leads to cost cutting across the board, but most prevalently in initiatives such as technology, software and IT staff that are not perceived as necessarily contributing directly to the bottom line.

This is a mistake for the simple reason that these cuts inevitably lead to a less motivated workforce that finds it self stretched beyond its means as a result of trying to maintain the same level of service, less budget and therefore with less tools and less people.

Technology is a key driver of business these days, so dramatically cutting IT budgets can actually cost more in the long-term than the benefit of savings achieved in the short-term. This long term loss manifests itself in many ways, but most immediately in the loss of knowledgeable IT staff and the shaky infrastructure that accompanies a departure from IT maintenance.

This takes us back to the title of this post. In times of financial uncertainty it is necessary to tighten belts and trim some fat off an organization. This can be achieved by cutting back on unnecessary items like kickoff meetings in exotic locations, business class travel when coach suffices and so on. But to trim the muscle that drives an organization by failing to maintain infrastructure and letting go qualified staff that will only need to be rehired and retrained once the economy turns around is a long term mistake.

If we have learned anything from the first tech bubble, it is that these are the times to consider projects like automation, integration and federation, as some of the highest costs of running an IT reliant company are in the high levels of obsolescence that accompany the good times. Corporations need to use a slowdown in the economy to their advantage and build a stronger, more resilient, infrastructure that will help them overtake the competition when the economy turns around.

-- Jonathan