Article

Economic downturn hits IT budgets

Mark Schlack, Vice President, Editorial

The economic downturn has arrived in the data center. According to a survey of 275 members of SearchCIO.com and SearchCIO-Midmarket.com, many shops will work with smaller IT budgets this year, and few will see large increases. The economic downturn appears to have many shops scaling back infrastructure expansions and focusing more tightly in 2009 on delivering business applications, dealing with security and meeting compliance and disaster recovery (DR) mandates. The infrastructure boom of recent years is likely to give way to a second wave of consolidation.

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In large enterprises (companies with more than 1,000 employees), 42% of respondents are reducing IT budgets from 2008. The pain isn't restricted to any one industry, either, with traditional spenders like computer manufacturing and financial services taking their lumps along with manufacturing and retail. In fact, manufacturing and retail are also represented among those spending more or holding the line. The bottom line: Businesses of all stripes are being affected by the economic downturn, but the impact on IT is not uniform. In every industry, there are cutters and increasing spenders, as well, which suggests that a company's particular outlook and strategic plan may be the decisive factor in IT budgeting.

In surveys conducted during the past several years, decreases in IT budgets at more than 5% of companies have been unheard of. Yet the cuts are not being made across the board. Security and compliance budgets are not only rising at most companies, but they're also claiming larger shares of the budget as well.

The most common areas for security investment are in data protection, endpoint security, threat management and vulnerability assessment. Just more than 50% of large enterprises reported that they intend to spend in those areas this year. The largest drivers of security spending in the enterprise are preventing external and internal data thefts.

The ability to prevent data theft and demonstrate that capability is intertwined with compliance mandates such as PCI. The survey puts to rest the notion that the economic downturn would result in companies ignoring compliance in favor of more lucrative endeavors. Only 18% of enterprises cited decreasing compliance spending, with 56% increasing, making compliance one of the most robust spending areas for IT in 2009. No single law or regulation is driving this activity -- respondents reported "industry-specific regulations" most commonly, followed by the Health Insurance Portability and Accountability and Sarbanes-Oxley acts and the usual suspects.

As for where compliance spending is going, no surprises there, either: backup; data protection; log management; governance, risk management and compliance; and archiving were all cited by more than a third of enterprise respondents.

As for IT's core mission of delivering applications to the business, the picture there is mixed:

  • Business software budgets are increasing at 36% of shops, with 32% holding the line;
  • Business intelligence is the biggest software winner, with spending at 57% of shops; business process management was the second-highest priority at 38%;
  • Only 27% reported reducing their development efforts; and
  • Software as a Service will see a gain at 21% of IT departments.

Consolidation rules the data center

The adoption of networked storage and the migration to large, consolidated virtual machine farms has fueled steady spending on storage and servers throughout most of this decade. The downturn has put a stop to that in some shops, but not in all. In manufacturing, for example, 52% are cutting server and storage spending, and only 19% increasing.

Businesses of all stripes are being affected by the economic downturn, but the impact on IT is not uniform.

The major difference between those increasing or maintaining storage/server spending and those decreasing it seems to be that many of the former group are building a new data center, expanding an existing one and/or implementing a DR plan. Cutters are behind in virtualization efforts as well, but both groups have the same expectations for virtualization 12 months out: 35% expect to have most production servers virtualized, 45% forecast significant production deployment, and 20% anticipate limited deployment.

As for what hardware budgets are going to, large companies are buying rack servers (and, as always, more storage). Rack servers + virtualization software + storage = consolidation, and that is indeed the plan at most enterprises, respondents indicate.

Companies are definitely in a go-slow mode with new technology. Only 11% of enterprises reported plans for significant production deployment of desktop virtualization, with 31% having no plans and 33% focusing on evaluation. As for cloud computing, 10% plan to use cloud servers and 8% cloud storage. Usage is spread mostly between noncritical business applications and development and testing.

Let us know what you think about the story; email Mark Schlack, Vice President, Editorial.


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