IT Spending to Hold the Line in 2009

There’s some comfort in a recent survey from Gartner, which says IT spending will neither plummet nor surge in 2009. In short, IT spending will likely remain flat.

As 2009 begins, IT spending gets off to a sluggish start, hamstrung by brutal news from the retail, financial, manufacturing, and housing sectors. There is some comfort, however, in recent market research from Gartner Inc., which projects that IT spending will neither plummet nor surge in 2009.

Gartner concludes that IT spending will likely remain flat: "In 2009, executives face challenging global economic conditions that have not existed for more than 50 years," said Mark McDonald, group vice president and head of research for Gartner Executive Programs, in a statement. "This environment is reflected in IT budgets, priorities and strategies as one third of CIOs reported no change in their budget from 2008, while 46 percent reported a slight increase, and 21 percent reported a cut in IT budgets."

Gartner isn’t projecting an uneventful year on the IT spending front, however, MacDonald stresses that 2009 will be an especially busy time for CIOs, who must perform budgetary jujitsu to fund existing commitments and address emerging costs.

"All CIOs will face the need to restructure their budgets, cutting in some areas and investing in others, including those reporting no change in their overall spending level," MacDonald reports. "Enterprises expect IT to contribute results in an uncertain economy.” He urges CIOs to be “decisive and resourceful in building an effective enterprise that can meet current and future challenges. Leading enterprises recognize the seriousness of economic conditions, but they are not paralyzed by them. Their leaders have confidence in their ability to use IT to achieve results."

The onus will be on IT to deliver, MacDonald and Gartner project: IT must do its part to reduce expenditures, both by trimming its own operational costs and by transforming business processes, workforce practices, and (just as importantly) by changing how the business consumes information.

In 2009, as in previous years, CIOs have business process improvement on the brain. According to the Gartner survey, a plurality of IT chiefs listed “improving business processes” as a top priority -- the fourth time in four years that business process optimization has topped the list. This time around, however, there’s a twist: CIOs increasingly view business process improvement as a means to cut costs. MacDonald also highlights a shift away from IT as a means to support or enable business processes and toward IT as an ongoing engine for process optimization. "It's time for CIOs to develop business process improvement capabilities as part of the core of IT," MacDonald indicates. "This will enable them to respond to executive expectations that see business processes as important to business performance, as closely associated with application systems and as a responsibility of the CIO and IT.”

This year IT chiefs will focus on harvesting the infrastructure investments they’ve seeded over the last several years, according to MacDonald and Gartner. This jibes with what other industry watchers are saying: during the 2005 through 2007 IT boom, companies aggressively pursued pervasive service enablement, enterprise information integration, and other ambitious projects. This year, then, is the year in which IT chiefs will look to these projects to deliver the goods, for good or ill.

“During this time of turmoil in the … industry, you need to leverage an investment that was probably several million dollars to now actually help you reduce costs further, increase your revenues to keep the customers that are still out there shopping … and, of course, to continue to attract other customers or maybe even take customers away from some of your competitors who aren’t doing as well,” says Jim Zalles, a retail business intelligence consultant with IBM Corp.’s Global Business Services unit.

This doesn’t mean that CIOs won’t be spending any money on new technology projects, however. IBM’s Zalles, for example, talks up a need to support analytic infrastructure investments with next-gen analytic front-end tools. It’s a self-serving prescription, to be sure, but it’s one that Gartner and MacDonald also echo, touting a need to invest “in business intelligence applications and information consolidation in order to raise enterprise visibility and transparency, particularly around sales and operational performance.” With the likelihood of new and more rigorous regulation, such investments will serve a dual purpose, Gartner predicts, inasmuch as they enable enterprises to respond more adaptively to “new regulatory and financial reporting requirements.”

Industry watchers diverge, however, when it comes to the question of new ERP investments. IBM’s Zalles, for his part, says that companies have already spent enormous sums of money on their ERP systems; this year, he argues, they’ll instead invest in complementary technologies (e.g., BI, performance management) designed to help get more out of these ERP assets. Gartner has a slightly different take on ERP spending, suggesting that new ERP spending will chiefly take the form of consolidation efforts, with CIOs trying to reduce the number of ERP instances (not to mention redundant licensing costs) they’re running internally.

All in all, 2009 looks to be a year in which IT chiefs take stock, emphasize self-reliance -- particularly with respect to getting the most out of existing assets -- and dig in for what’s coming.

"Some critics might say that CIO technology priorities could be more ambitious, but considering that CIOs have modest resources requiring close management, it's clear why they are looking to derive more value from what they have before making significant purchases," MacDonald and Gartner conclude.