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SMBs may be smarter spenders in '05

SMBs might not be spending as much on IT in 2005 as the big boys, but there's more to a budget than dollars. CIOs aren't short-changing sense this time around.

The analysts with Forrester Research Inc. have spoken: IT budgets aren't bulging, but they're not necessarily shrinking either.

In its recent Governing IT in the Enterprise report, the Cambridge, Mass., research firm polled more than 1,300 IT business and decision makers in North America and Europe. About 37% indicated that they will spend more on IT during 2005 than in 2004. Only 15% said they will spend less next year.

There won't be the abundance of money coming in that will allow people to get sloppy again
Jay Gardner
CIOBMC Software Inc.

Analysts also said that big companies will be opening their wallets the widest. Nearly half of the firms with at least 20,000 employees will invest more in IT in 2005.

For small and medium-sized businesses (SMBs), though, 2005 doesn't look to bring monsoons of money to IT.

Dow Corning Corp. is looking at flat IT spending for the next five years, said CIO Abbe Mulders. The Midland, Mich.-based company, which has about 9,000 employees, may see some small IT spending spikes for variable compensation, but that's about it.

"This same pattern is true for all of our units in the company," Mulders said. "We are on a track to improve our overall profitability and thus are being asked to hold all spending flat."

Same holds true at Trimble Navigation Ltd., a 2,000-employee firm based in Sunnyvale, Calif. CIO Bob Denis said that IT will be mostly flat next year on both operational and capital expenditures.

"Our main focus will be the continuation of our conversion program from old MRP [material requirements planning] to our Oracle base," he said. "We have been using a phased approach to converting rather than a 'big bang.' [It's] a lot easier on the wallet and the heart condition."

It isn't the dot-com boom. And that's not necessarily a bad thing, according to BMC Software Inc. CIO Jay Gardner. "I think the late 1990's IT freewheeling spending is gone and won't come back, which is good for companies that are doing it the right way," Gardner said. Houston-based BMC has about 6,000 employees.

Still, the fact that SMBs evidently aren't tightening their IT belts should be reason enough to see the proverbial glass as half full.

"There are definite opportunities in the SMB market," said Forrester senior analyst Nick Wilkoff. He added that SMBs are focusing on core IT initiatives and spending money in "catchup" areas like business intelligence, content management and data warehousing.

"They're further behind in 2004, but are more likely to be purchasing those types of products than large enterprises," Wilkoff said.

The IT budget for The University of Oklahoma Libraries won't be ready for another month or more. But library systems director David Corbly is hoping to have enough money to upgrade network switches, servers and PC monitors. He's also hoping for enough money to fund major software purchases.

For more information:

Read more about the Forrester study

The budget is your credibility factor, says one CIO

Who wins the budget battle, the CIO or CMO?

Can SMBs save money by offshoring?

Microsoft's CIO also says it's important to focus spending in the right places

"We are optimistic that there will be increases, and we do anticipate additional technology spending in my division," he said.

There is something different about IT spending increases this time around -- something behind the numbers. More SMBs and big boys appear to be measuring IT investments in dollars and sense -- a practice that may have been absent during the last spending spree (can anyone remember that far back?).

"I think that IT spending is going to continue to focus on investing in the right places," said BMC's Gardner.

"The focus will shift to how we spend our money like upgrading servers for the right reason and automating in the right place," he said.

"There will be a lot of spending on these types of initiatives, [but] there won't be the abundance of money coming in that will allow people to get sloppy again."

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