IT Leaders to Face 'New Normal' in Post-Recession Economy

 

“The changes in business and technology management that were implemented in response to the recession appear to have become part of the permanent ongoing business framework,” said Joseph C. Pucciarelli, program director, technology financing and executive strategies at research firm IDC (News - Alert). The global economic retrenchment over the past 18 months has been accompanied by an unprecedented contraction in the availability of capital, IDC officials said.

 

“The immediate impact of these changes is that companies will seek to lengthen the deployed life of their hardware assets, minimize spending on software upgrades, and look to service providers to selectively solve pressing maintenance and technical problems,” Pucciarelli added.

Gartner (News - Alert) officials said that worldwide IT spending is on pace to fall by 5.2 percent this year, with enterprise IT spending expected to be down 6.9 percent. While IT spending will increase next year, at an industry conference this week, Gartner cautioned IT leaders to be overly optimistic.

 

“While the IT industry will return to growth in 2010, the market will not recover to 2008 revenue levels before 2012,” said Peter Sondergaard, senior vice president at Gartner and global head of research. “2010 is about balancing the focus on cost, risk, and growth. For more than 50 percent of CIOs the IT budget will be 0 percent or less in growth terms. It will only slowly improve in 2011.”

 

IDC analysts expect the next few years will see “considerable” IT platform change as companies are drawn toward the benefits of next-generation data centers, new software offerings and off-premise computing options. As the potential of “next generation” IT comes up against “new normal” spending practices, IDC officials believe five management practices will emerge at the center of IT organization initiatives.

 

Cost and Funding Management: IT organizations will increasingly be forced to develop cost profiles, including the business value of solutions, to support investment decisions. This will not be an easy or pleasant task, and has been a requirement that has dogged IT organizations for years.

 

Sourcing and Platform Strategies: As new options become available to achieve an IT or business objective, IT organizations will have more room to experiment, innovate, and change, but will also have to justify their choices more conclusively.

 

Equipment Leasing and Software Financing: Commercial organizations will return to IT leasing and financing as a means of bolstering their access to IT resources. 

Lifecycle Management: IT organizations have already extended the planned deployment of many major systems, but they still need to develop the tools and management processes to quantify the underlying cost implications of these longer asset lifecycle models.

 

IT Financial Management Tools: As IT platforms and business processes increasingly move toward a mix of in-house and third-party provision, the need for IT financial management software, tools, and best practices to better enable IT organization operational decision-making will become apparent.

 

“Contrasted against a technology cycle poised to introduce disruptive innovation, business and IT leaders confront an economic reality of diminished demand and somewhat uncertain prospects. Regardless of the strategy – selective investment in focused opportunities or retrenchment and caution – overall IT spending will be scrutinized, poked and prodded,” added Pucciarelli. “A crystal clear linkage between business requirements and spending will need to be made and agreed upon by business and IT leaders.”

 

As TMCnet recently reported, the telecom expense management market is seeing growth as more organizations learn about the opportunity to improve supply chain management for telecom expenses and reduce expenses through optimizing inefficient processes, according to the Telecom Expense Management Industry Association.