IT Spending And Staffing Show The Effects Of Managed Services

December 12, 2016 Dan Burger

Last week, an email from Computer Economics advised me of an updated report on IT spending and staffing. CE has cranked out these reports on an annual basis for many years, which is useful for long-term comparisons. These days, however, the short-term comparisons are almost microscopic. There are times when it is wise to expect the unexpected, but this isn’t one of them.

IT spending and hiring leaves a faint mark on the chart that maps business growth. The indistinct spending growth that is revealed in the CE report, indicates cloud computing has the best potential for “long-term growth and increasing value from IT.”

Other areas that are expected to attract bigger investments in IT include security, networking, business intelligence, and mobile applications.

In what may seem like a paradox, bigger investments do not translate into bigger IT budgets. The answer to that riddle, according to the report, is that IT is delivering more for less. IT executives are squeezing water from the stone and delivering cost savings that are paying for new initiatives and new technology. That magic act can only last for so long though. The percentage of IT executives who describe their budgets as “somewhat inadequate” or “very inadequate” is rising, especially among smaller organizations.

High on the list of budget busters is the broad category of IT services, the domain of managed service providers and consultants. Another factor on the list is staffing.

“Headcounts may not rise significantly, but look for IT organizations to spend more on talent, especially managers and developers who can lead the transition to cloud, mobility, and big data solutions,” Computer Economics says in its executive summary.

Developing new business applications is the most likely recipient of increased IT spending.

If staffing doesn’t rise significantly, yet IT organizations are willing to spend more on talent, where will that talent come from?

I called Patrick Staudacher, a recruiter of skilled IBM i professionals, to discuss staffing issues in IBM midrange shops located in the Midwest. Most of the companies he works with are looking to hire full-time employees with a combination of development skills and business system skills. But he is also witnessing a rise in companies contracting with consultants to get specific jobs done. He brokers those arrangements for companies inclined to operate that way.

The amount of business being done with small consultant groups is increasing, Staudacher says. Integration skills are in demand.

“Companies have a business reason to keep the i. Often it’s a matter of getting data to the Web using the i and they don’t have the skills in house to do the integration with other systems. Whether a company hires a full-time employee to do the integration work or hires a consultant depends on the company mindset,” he says.” It’s a real valuable skill.”

When application modernization is the primary project, Staudacher sees the ISVs taking on a lot of this work for their clients. But otherwise, the small consultancies are becoming increasingly important in fields such as business intelligence, security, and open source software.

But the hired guns don’t completely overshadow the other alternative, which is to “hire full-time people to do everything and keep IT inside the walls.” Staudacher believes there are increases in both hiring full-time employees and hiring consultants.

Contracting for services may be keeping a lid on decisions to increase staff, according to the CE report.

“At this moment, I’m seeing a bigger need for hiring for full time employment. But you have to take into account that’s a reflection of how I run my business,” he says. “I see companies replacing people who are retiring. That’s a good sign. It indicates an investment in the platform. I also see some hiring due to business growth. Within companies, I’m hearing the discussion shift from how do we get off the platform to how do we keep moving forward and do some of the newer things.”

Computer Economics offers the executive summary of its IT Spending and Staffing Benchmarks study as a free download. The full report provides IT budget and staffing metrics by industry sector and organization size for businesses and government organizations in North America. It’s based on the research firm’s annual survey of more than 200 IT executives. The full report, now in its 26th year, includes 25 chapters and is priced at $26,995.

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