IT Managers Are Under Pressure to Cut Costs, Says IDC

Published: May 5, 2008

by Timothy Prickett Morgan

Only a few weeks ago, a report issued by Gartner based on surveys of chief information officers and other executives in charge of IT spending suggested that budgets for computers and related software and services are holding up, more or less. The word from IDC for the IT sector in the United States only a month later is a little less sanguine.

Of course, IDC only did in-depth interviews with 27 IT shops as part of a recent presentation it put together, and while depth is always appreciated, breadth is necessary to determine a trend, too. That said, information is information, and the study IDC has put together is meant to provide a leading indicator for possible future trends, which is why IDC is focusing on depth instead of breadth in gathering IT budget data. IDC's findings were divulged in a report called IT Executive Views: IT Priorities and Investments, and they show some of the issues that chief information officers are facing as 2008 gets rolling--or, in some cases, doesn't.

According to the respondents in the survey, many companies are already facing reductions in the IT spending for 2008 because of the adverse conditions in the U.S. economy. More than half of those taking part in the interviews said the economy was having a negative impact on their budgets, most of those in the other half who said there has not been any effects to date, said they expected a negative impact in the future. The respondents also said that companies are trying to consolidate their IT spending, with 70 percent of those polled saying they were in the process of centralizing IT budgets. (How much of the increase in IT spending for the past two decades has resulted from the ever-decreasing expense of servers and software, which can be acquired through general departmental budgets without IT approval but which end up being supported by the central IT organization even if they did not give approval for the purchase? I don't know the number, but I think it is probably quite high.)

As you might expect, the IT shops polled by IDC for its leading IT budget indicator said that data center consolidation, server and storage virtualization, and application consolidation were all key drivers in the area of improving infrastructure and cutting costs. Almost all companies--92.6 percent, or 25 out of 27--were engaged in legacy application modernization, with many of these applications being coded in COBOL, Visual Basic, and other older languages and having very industry-specific features that make it hard to just unplug them and start over. On the skills front, IT managers in the United States say that they are facing skills shortages for .NET and Java programmers, developers for SAP applications, and VoIP implementers; they also cited shortages in business analysis, security administration, and project management.

"These in-depth interviews show a significant shift towards cost reduction rather than revenue generation as a driver for IT investment," says Henry Morris, senior vice president of software and services research at IDC, who put together they survey and the resulting study. "Being able to deliver IT services more efficiently, as a response to the economic downturn and to recent mergers and acquisitions, is setting today's IT agenda. Responding to compliance and industry structural changes, such as the popularity of generics in the pharmaceuticals industry, are also key factors in deciding which IT projects get funded and which get deferred."

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