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Surviving and Thriving on a Bare-Bones IT Budget

By Tiernan Ray
Feb 19, 2003 4:00 AM PT

Now is the winter of IT's discontent. Last month, the doomsayers at Goldman Sachs projected a 1 percent decline in IT spending in 2003. This week, they released a new report projecting a 10 percent decline. Some tech spending items -- such as expensive networking and server computer purchases -- have almost completely fallen off the map. And payrolls were slashed by the tens of thousands every month last year, meaning that no matter how you slice it, IT shops, like every other part of the enterprise, have to do even more with even less.

Surviving and Thriving on a Bare-Bones IT Budget

In these circumstances, what should a company that has survived the tech implosion do next -- and how can it make the most of a bare-bones IT budget? The answer is twofold. First, despite increased pressure on IT managers, some newer technologies may make their jobs easier by enabling them to get more work done with fewer staff. Second, as productivity becomes a mantra, the hope is that top management may stop shouting for things to get done, and instead get involved in planning projects from the get-go.

Holy Pink Slips

So, how can technology come to the rescue? Apparently, not from sales of new PCs. For months, the PC market held its collective breath, waiting for a sign of an upswing -- an indication that strapped corporations might finally break down and upgrade their musty computers. 'Twas not to be: Recent data from research firm IDC indicates PC sales this year will rise a mere 8 percent, falling far short of previous expectations, which called for a return to double-digit growth.

As Merrill Lynch hardware analyst Steve Milunovich said in a February 11th research note, "PC consideration is soft; we don't yet see un upgrade cycle." In other words, that sad old monitor, tarnished with the residue of a million Post-It notes, is destined to stick around for a while longer.

Do It Yourself

Souping up corporate networks is also low on the priority list right now. Inder Singh, who follows Cisco Systems for Prudential Securities, wrote in a recent report that in today's economy, most companies will pay only for networking equipment that will produce ROI within a year. For example, he said he thinks voice over IP is a good candidate for growth because it can increase productivity in that relatively short time frame.

"Voice over IP can reduce total headcount requirements in IT," Singh told the E-Commerce Times, "because you don't need to hire outside expertise to service a PBX (private branch exchange), which is not typically part of an IT shop's expertise." In addition, he noted, IP phones need not be changed manually, further reducing necessary service personnel costs.

Voice over IP technology also has the potential to increase productivity by connecting workers in far-flung locations via phone-driven applications. Some areas that may benefit most from this technology include call centers and other support operations.

Open Like 7-11

In addition to voice over IP, other technologies are garnering attention as productivity enhancers, even in an era of tightfisted IT spending. For example, IDC vice president Dan Kusnetzky told the E-Commerce Times that after the September 11th terrorist attacks, companies focused more attention on data availability, and many budgeted money to ensure their business could keep functioning in the event of another strike.

But instead of buying new hardware -- a hefty expense -- some security-minded yet cash-strapped companies are buying so-called "virtual processing" software that spreads computing across many inexpensive machines.

"There's a goal to reach a fully virtualized environment, meaning the data is always available on some server and the network can route around failure," Kusnetzky said. "The result may be that you get work done more of the time, and that addresses the opportunity cost of when you get things done."

Leadership, Please

In the end, then, this chill environment for corporate spending may produce long-term benefits -- especially if tighter budgets mean that business executives choose to play a larger role in IT goal-setting. After all, there is some indication that in the past, IT spending in general has lacked a clear purpose. A report released late last year by McKinsey & Co. entitled "Who's Accountable for IT?" opined that IT has become a sort of ivory tower in which projects lose focus and meaning.

"Business managers have no say in evaluating the developers of applications," said the McKinsey report, "who in turn have no formal reporting relationship with the business units they serve, so they design and develop solutions without fully understanding the needs of the enterprise."

Overnight change to the status quo as a result of greater executive participation in IT departments is unlikely; however, businesses that take a long view and reassess why they are buying technology will be in a good position to move forward when the economy finally kicks into gear. The ongoing shower of pink slips is probably just another indication that companies are looking into the mirror and asking, "What are we in business for?"


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