Article

Some IT budgets in recovery from recession

Mark Schlack, Vice President, Editorial
The results of SearchCIO.com's April survey of IT budgets and spending priorities definitely are a tale of two worlds: companies in recovery from the recession, and companies still mired in it:

For 55% of the 282 respondents, the worst of the recession is over and the recovery has begun. A similar percentage -- 52% -- said they expect to spend more in the next three months than in the last three months. Compare that to the only

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35% of IT budgets that were increasing in our survey last November.

More on IT budgets in recession and recovery
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Typical of those spending is Big Geyser Inc., a Long Island-based beverage maker. CFO Rich Richer said in an email that the company will be upgrading its business management package that was last refreshed in 2000.

Big Geyser's reviously scheduled upgrades were a victim of the recession. "Given the economy, we deferred the spend on the upgrade until we had a clear signal that we would participate in an economic turnaround," Richer said of the company's investment of more than $200,000.

In fact, of the shops spending more in the next three months, 72% are tackling projects that were put on hold because of budget constraints, versus 20% of the companies that are still mired in recession doing so.

A majority of the companies coming out of their recession shell cite their three most common priorities as storage, enterprise applications and servers, with enterprise apps clearly leading as most important (32% of respondents). Touchstone Behavioral Health of Tucson, Ariz., is doing all three. The firm took advantage of a depressed real estate market to find a new headquarters at a great rate, and built its data center over from scratch, taking advantage of such new technologies as server and storage virtualization, and going the Voice-over-Internet-Protocol route for voice services.

According to CIO Steven Porter, Touchstone Behavioral will turn its attention next to automating human resources processes through software, starting this summer.

Larger companies are moving forward too. To accommodate growth while containing cost, the Land O'Lakes Inc. IT department is going to replace legacy apps within its four divisions with ones that can meet the needs of all the divisions. This is a complex project that will take from two to three years to complete, but Land O'Lakes officials say that in addition to benefiting the company by modernizing its application portfolio, it will help them negotiate lower maintenance fees on their software.

Finally, companies that are spending more are also hiring more or paying more: Of the companies that are spending more, 27% said they would be increasing staffing budgets, versus 3% of the companies with static or declining budgets.

Given the economy, we deferred the spend on the upgrade until we had a clear signal that we would participate in an economic turnaround.
Rich Richer
CFOBig Geyser Inc.
Life is very different for IT managers who are not feeling the recovery yet. Their top area for more spending is security, and even there, only 45% are upping the ante. Only 23% said their ability to get budgets for projects, products and services will improve over the next three months. Still, even among this group, 45% felt the worst of the recession was over for IT.

The survey suggests 2010 and perhaps 2011 will be somewhat chaotic years for CIOs. During the recession, many concentrated on security and disaster recovery as their must-do projects, given the legal and business mandates to do so. In the coming months, many will be dealing with a pent-up demand for new desktops (and therefore Windows 7) and other infrastructure items, software upgrades delayed by budget cuts, and a host of other long-delayed projects.

CIOs will have to determine whether the emphasis, exemplified by Touchstone Behavioral, on enterprise apps and new areas of business automation will take priority or stand in line behind all that unfinished business.

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


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