Paying for IT 2001
By Steve Ulfelder
(Dec. 18, 2000)
Computerworld recently interviewed 100 IT managers at organizations with at least 400 employees. The subject: money.
We asked about IT budgets in the coming year. For the most part, IT leaders will have more to spend: 59% of the respondents said their budgets will increase next year. The average increase for those who expect to see a budget boost is 10%.
Only 9% said their budgets will decrease next year, while 29% said they don't foresee any changes.
You wanna do things, do things, do things, GOOD things with it.
Indeed. But what good things?
Here's what we found out.
With no end in sight for the IT labor crunch, it's at least a mild surprise that while 37% of the respondents said their budgets for new hires will increase, 45% said they expect their recruiting budgets to hold steady. Kurt Potter, a research director at Stamford, Conn.-based Gartner Group Inc., says recruiting eats up a whopping 52.8% of the IT budget at a typical company. Training expenditures, too, are expected to rise: 46% of respondents said they'll spend more on training - the biggest percentage increase among a list of budget items presented in the survey.
Click image to view By the Numbers
With privacy and security also chief concerns, many IT managers anticipate spending more on security: 29% said their budgets for security projects will increase 10%, on average. If there's a surprise there, it's that more IT organizations didn't foresee a budget boost. Analysts say security and data privacy are top-level issues for IT. Yet they speculate that much of the additional money spent on security is covered in other areas cited in the survey, including software applications, which have strong security folded into them, as well as consulting expenditures.
Staff dedicated to security, consumer-focused e-commerce, data warehousing, data center management and wireless technology should stay constant next year, the survey showed. Meanwhile, business-to-business e-commerce and intranets will likely eat up more resources.
So, what are the do-or-die items for IT? When asked which two projects will be most critical during the next 12 months, business-to-business e-commerce came out on top, chosen by 29% of respondents.
Gartner figures show that e-business is consuming 12.7% of IT budgets this year, and that number is expected to rise to 15.5% next year. Moreover, "we think that number is understated," Potter says, because managers tend to "be in denial for a year or two" when a major new expenditure, such as e-commerce, affects their budgets. Potter says most of the IT budget increases during the next several years will be attributable to e-commerce.
Would it be prudent, then, for IT leaders to reexamine their e-commerce budgets and perhaps revise them upward? Both Potter and Bob Kraus, an analyst at Boston-based AMR Research Inc., say it would.
E-business is driving much of the increased spending for next year. Paula Hinchliffe, a network administrator at Seal Master Corp., a manufacturer of rubber products in Kent, Ohio, is one IT manager who plans to staff up - in her case, because Seal Master is beefing up its Web presence. She says Seal Master's decision to increase its Internet footprint means "we've got inside people designing graphics, outside people working with the servers, and a guy focused on the network and security."
Web Hype?
But not all IT leaders are plowing money into e-business. Greg Walton, vice president and CIO at Roanoke, Va.-based Carilion Health System, says that in his industry, "there's a lot of hype around the Web. The smart companies will adopt the Internet with rifle shots, not shotgun blasts." For this reason, Carilion's increased spending on e-business will be incremental rather than dramatic next year, Walton adds. "We're not going to turn our budget inside out for it," he says.
>A large pack of choices follows business-to-business e-commerce on respondents' lists of their two most critical projects: Security, intranets, enterprise resource planning (ERP) and data center management were each cited by about 18% or 19% of respondents.
Yes, ERP. Though its major vendors have had a rough 18 months and ERP tools are increasingly diffused and fragmented among customer relationship management and e-business software, "ERP is far from dead," says Kraus. North American companies this year will have spent 32% of their application budgets (not to be confused with the broader IT budget) on ERP, according to AMR. The research firm adds that e-commerce applications are moving up fast, consuming 23% of application budgets.
To many experts and IT leaders, one area that appears ready to absorb a larger share of IT budgets is wireless technology: 40% of survey respondents said their budgets for wireless will increase an average of 10%, with an average projected increase of 3% for all 100 people surveyed. It's important to note, however, that most businesses spend relatively little today on the merging field of wireless, so a 10% increase is unlikely to represent an enormous dollar-figure increase.
Moreover, even most who are bullish on wireless say it won't truly make its presence felt next year. "We've been playing with [wireless] for over two years," says Stephen Smothers, CIO at Medical Center Enterprise in Enterprise, Ala. The health care firm is evaluating Compaq Computer Corp.'s iPaqs as well as other devices as case management tools - replacements for pens, paper and clipboards, to better serve patients. However, although Smothers says the firm is "going to be doing a lot of wireless in the next 36 months," he adds that he doesn't foresee a major budget increase next year.
>Charles Shepherd, group vice president of systems management at the Atlanta-based Arthritis Foundation, says he agrees. Wireless "won't really have an impact this fiscal year," he says, "but we're keeping an eye on it for the future." Walton says that while his company will see "a large percentage increase" in wireless spending (he declines to say exactly how large), the figure is a reflection of how little Carilion has spent in that area to date.
The predicted multiyear ramp-up jibes with findings from Gartner Group. According to Potter, "Wireless may be the next big thing." Wireless now accounts for less than 5% of IT budgets in the U.S., but Gartner sees that percentage rising to 15% in 2005. "Wireless spending is [now] under the radar because it's in the lines of business," Potter says. "It has to be sold to IT organizations."
No Major ASPirations
For more than a year now, there has been much discussion in the press about application service providers (ASP). But ASPs appear to be catching on rather slowly; only 17% of respondents in the Computerworld survey said their budgets for ASPs will increase - by 10%, on average.
This anticipated ferocious consolidation creates uncertainty among larger corporations in particular, Potter says. "ASPs' target right now are small and midsize companies," he says. "Right now, they won't be finding their money from larger companies." Potter adds that Gartner foresees ASPs making major headway in large organizations as part of the "virtual enterprise," but that's five years off.
The Arthritis Foundation reflects many organizations' ambivalence regarding ASPs. It will be "looking more at leasing options" during the next year, Shepherd says. Initially, he says, he will consider adopting the ASP model for the help desk. The success or failure of that project will determine whether the foundation moves bedrock IT such as customer relationship management and ERP to an ASP. "We've looked at a number of [requests for proposals from ASPs] over the past nine months," Shepherd says. Their potential appeal, he says, is "the bottom line, and also to make sure we're flexible." A recent study by Zona Research Inc. in Redwood City, Calif., found that reducing total cost of ownership for a particular application was the top reason cited by IT executives for using ASPs.
But the Arthritis Foundation is still feeling out ASPs and is by no means committed to them. Analysts say this is common, and they don't expect a significant change next year. They cite uncertainty about the future of ASPs as one major reason. "There are about 600 ASPs out there now," says Potter. "In eight years, you're going to see about six." IT managers appear to be hesitant to form a crucial partnership with an ASP that may not last. Today's investment environment, in which both consumer-focused dot-coms and business-to-business start-ups have seen a precipitous slowdown in investment capital, may add to this reluctance.
Other Findings
The Computerworld survey results revealed several other key trends:
¥ Only 15% of respondents said they expect to spend more on consultants and contract labor, while 24% said they expect to spend less in that area; 51% said they'll spend about the same amount. Analysts attribute the slowdown to a relatively stable technology period, with most IT organizations planning few changes in major applications and operating systems.
¥ Network management continues to require a larger share of IT talent than any other function. Respondents said that 10% of their staffers are dedicated to network management this year and that the percentage will remain steady next year. ¥ Data center management, too, is seen as constant, at 5% of IT workers. An interesting increase is in intranets: Next year, respondents said, the intranet will be tended by 10% of the staff, up from 6% this year.
¥ Services are expected to increase - 27% said their budgets will increase an average of 10%.
¥ Knowledge management was deemed critical by only 2% of respondents. |
