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CIOs Slowly Pry Open Dusty Wallets

By Jack M. Germain
Mar 25, 2010 5:00 AM PT

The economic hardships hitting businesses worldwide over the last several months have compelled may an IT department to steer costly new initiatives into indefinite holding patterns. However, these stalled technology upgrades are beginning to find new corporate support. A new survey by Robert Half Technology reveals some organizations are finally planning to implement projects that earlier had been shelved due to the recession.

CIOs Slowly Pry Open Dusty Wallets

More than one-third (37 percent) of CIOs interviewed said they were moving forward with post-recession plans to implement software and hardware upgrades that had been deferred due to a soft economy. Other CIOs foresee moving forward with virtualization projects (16 percent) and Web site design initiatives (16 percent) as conditions improve.

The delayed upgrades will occur over the next year. These plans to fund delayed projects are also bringing returned business to third-party vendors. Job seekers as well are finding renewed opportunities from companies eager to take on more staffers to carry out the upgrades. These new positions range from outright new hires, contract to hire and project consultants.

"CIOs have a choice of when to do operating system upgrades to Windows 7. But they have no choice but to do it. Managers didn't cancel these projects but deferred or delayed the upgrades. We never heard the word canceled," Dave Willmer, executive director of Robert Half Technology, told the E-Commerce Times.

Survey Highlights

The national survey results are significant because it shows a corporate trend as companies start into a recovery mode following 18 to 24 months of cutbacks of staff and equipment resources, Willmer explained. An independent research firm conducted the IT survey based on telephone interviews with more than 1,400 CIOs from companies across the United States with 100 or more employees.

Pollsters asked CIOs, "Which IT projects, if any, did you put on hold in 2009 due to the economy that you plan to implement post-recession?" In order for the survey to be statistically representative, the sample was stratified by geographic region, industry and number of employees. The results were then weighted to reflect the proper proportions of the number of employees within each region.

Software or hardware upgrades marked the largest category of upgrades put on hold at 37 percent. Virtualization and Web site design upgrades shared a distant second at 16 percent each.

The third most prevalent category put on hold was projects involving internal collaboration and/or technology tools, at 12 percent. Nearly the same result occurred for cloud computing upgrades, at 11 percent.

Company-branded social media sites tallied 9 percent. CIOs also listed a variety of other technology-related projects for an insignificant 1 percent.

Technology Swap

Key to the upturn in upgrades is the delay many companies have experienced in dealing with replacing aging equipment, suggested Willmer. Typically, hardware life cycle is three or four years. When things get tough, they can defer 12 to 18 months, he said.

"The PC vitalization will see hardware upgrades along with OS upgrades," said Willmer.

The economic slump has led some companies to turn to alternative operating systems. He does see some companies exploring Mac or Linux migration, but SMB companies are his company's client base, Willmer said.

"At the end of the day, it's still a Microsoft environment," he concluded regarding the amount of OS upgrades to Windows 7 taking place.

Work Underway

Catching up to mobile trends is a primary necessity for many firms. For example, many of his customers need support for mobile devices such as Windows Mobile and BlackBerry, according to Joel Bomgar, CEO and founder of Bomgar, which develops remote support software. However, unlike Willmer, Bomgar sees a larger shift to alternative OSes taking place.

"We've also seen a significant uptick in the need to support both Mac and Linux in the enterprise. It definitely isn't a Windows-only world out there anymore," Bomgar told the E-Commerce Times.

The survey results may also contain some hidden gems that were not anticipated. For example, the information portrayed in the survey does not reveal changes in the way organizations buy their services.

"It demonstrates where we see the greatest areas of CIO interest. For example, our pipeline has been building for the past six to 12 months, fueled by an increased interest in managed services over pure staff augmentation," Beni Lopez, CEO of tech support firm Softtek, told the E-Commerce Times.

Financial Pipeline Swelling

His customers are increasingly more interested in paying for deliverables and compliance measured in Service Level Agreements (SLAs) than in paying for time and effort, noted Lopez. This increased interest, however, has come with longer sales cycles. He sees this occurrence as a natural consequence since moving from staffing to SLA services implies a deep assessment of the portfolio of outsourced services.

Catching up on technology upgrades poses other benefits. These include huge opportunities for increased productivity and cost efficiency in times of recession, according to Lopez. These opportunities tend to be overlooked in times of economic abundance.

"In the financial services sector, the focus has traditionally been on time-to-market. However, by paying more attention to productivity, the financial services industry can recover losses and maximize their IT budgets," he said.

An Opposite View

If an IT organization has had an infrastructure upgrade on hold for the past two years, its executives may want to rethink things before diving in. Plans made that long ago may not be the best direction to take now. Better options from technologies such as cloud computing may have changed the upgrade landscape.

"Chances are, the capacity demands that much IT Infrastructure was under has been reduced through cost-cutting activities," Scott Archibald, a consultant with Bender Consulting, told the E-Commerce Times.

Many aspects of cloud computing are still maturing, he noted. That process could take three to seven years. Still, cloud computing should cause any IT organization to re-examine and even re-think their long-term strategy.

"Hopefully, during the past couple of years, IT organizations took the time to work with their vendors, become more efficient with their own infrastructure and processes while also evaluating the technology landscape," said Archibald.

Take His Tips

CIOs might consider a list of tips Archibald offered before moving forward with delayed upgrades:

  • Quickly re-examine the company's strategy and the impact that cost-cutting, cloud computing and other variables may have had on that strategy over the past couple of years.
  • Question whether the company really needs the upgrade after two years of operating well without it. This is true for both software and hardware.
  • For capacity upgrades, check recent demand trends.

Many business leaders believe that the economy is not out of the woods yet. So upgrades should be planned in manageable phases where you don't get caught in a no-man's-land before the project is 100 percent complete, according to Archibald.

"Depending on where your software vendors are in their release schedules, you may want to wait for the next release. I have a rule of thumb to never deploy a '.0' release -- too many bugs," he said.

No Hiring Heyday

The survey also revealed some good news for job seekers. It showed a increase in fourth-quarter contract, full-time placement and true hiring, according to Willmer.

"It's not yet a floodgate but a steady, healthy increase in hiring activity. There is no blank check as companies take on the upgrades," said Willmer. "It is a process of efficiencies. It starts costing you money not to do it. You need staff to do the upgrades. A lot of companies are looking at contract to hire and project work."

Bomgar has added significant headcount in the development, QA, enterprise client management and support divisions. All of these are functions that are impacted when more enterprise deals are in pipeline, pilot and implementation, explained the Bomgar CEO.

Outsource Reinforced

"There's been a movement outside the IT environment to outsource services," Ron Burns, CEO of ProtonMedia, told the E-Commerce Times. His firm develops virtual collaboration platforms.

In part, this trend is resulting from what Burns called a disconnect between business goals of leaders in an organization and their expectations of the last round of upgrades.

"'Unfulfilled promises' is the term I hear all the time," said Burns. "The traditional selling point of the IT function now is going to outsourcing."


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