The 1998 Network World/Deloitte Consulting Budget Survey:
Begging for bandwidth
While most IT budgets got bigger this year, managers had to postpone some projects or find ways to deploy technology without breaking the bank.
By Elisabeth Horwitt
Network World, 08/31/98
When network managers met with corporate bean counters to carve out their current budgets, many of their line-item requests came down to one thing: additional network capacity.
Network engineers are facing major design and capacity planning challenges as companies implement more distributed, business-critical applications, says Gerry Cunningham, a partner at Deloitte Consulting in New York. In particular, engineers must plan for the increased network demands of enterprise resource planning (ERP) packages now being rolled out globally.
The results from the 1998 Network World/Deloitte Consulting Budget Survey back up Cunningham's claims. The survey shows that IT administrators face the usual budgeting challenges, such as upper management's strong emphasis on return on investment (ROI). More than half the respondents said they had to postpone a major implementation, and many complain about Year 2000 expenditures robbing resources from pet projects.
On the other hand, the management approval cycle continues to shorten, and most managers' budgets increased in 1998 or at least held steady with 1997 spending. Major line-item increases are earmarked for areas such as WAN expansion, switching upgrades, NT servers and network management.
Quick to seek approval
As networks become more critical to business, purchase approval cycles are shrinking. Respondents were asked how many months it takes to get major network expenditures approved today vs. two years ago.
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Upper management may finally be understanding the importance of networking, or perhaps the healthy economy has helped loosen corporate purse strings, but the overall budget outlook for 1998 was positive.
The survey is based on telephone interviews with 200 Network World readers who were responsible for choosing or approving network expenditures. The scope of responsibility varied - 27.5% had purchasing authority for a department, while 66% worked on the corporate level. The remaining 6.5% worked for the government.
Doling out the dough
We asked respondents to name the products, services and network software that received the most significant increases in their current budgets. The question was open-ended to garner more accurate results, and multiple responses were allowed. As such, no one technology received a high percentage of responses.
Internetwork products such as ATM, Ethernet switches, hubs and routers topped the list of products and technologies receiving additional funding.
ATM seems to be gaining slowly but steadily as a broadband technology of choice. A modest 6% of respondents set aside more money in their budgets for ATM, up from 4% last year.
And 6.5% of respondents cited some form of bandwidth, WAN or network expansion/ upgrade as getting significant increases.
Such budget allocations come none too soon for many companies. IT needs to budget for increased network capacity at least a few years ahead of ERP implementations to avoid performance problems down the line, Deloitte's Cunningham says.
Automotive hand-tools manufacturer Snap-on has already tackled an ERP deployment. The Kenosha, Wis., firm just finished rolling out Baan's Triton ERP package to its offices, manufacturing plants and distribution sites worldwide. Bill Sandy, senior purchasing systems coordinator for Snap-on, says the ERP system replaces a hodgepodge of home-grown and multivendor mainframe programs that were difficult to manage and maintain.
The company needed to add several T-1 lines to support the ERP system. Sandy may upgrade some Ethernet hubs on the LAN to Fast Ethernet, but he says the firm's WAN has enough bandwidth to handle the increased traffic.
However, several survey respondents said they're playing a perpetual game of catch-up with their organizations' bandwidth needs.
A growing user community and more server-based applications are driving up traffic at Arizona State University (ASU), says Darel Eschbach, director of telecommunications services for the school in Tempe, Ariz. "Gigabit Ethernet is our next big budget item," he says. He expects to begin installing the hardware this school year.
"We're in the process of upgrading our infrastructure to the point where we should have been three years ago," says a manager in charge of PC, LAN and user support for the investment side of a major insurance company, who requested anonymity.
Server spending accounted for some of the most significant budget increases from 1997 to 1998 for 5.5% of the respondents. Windows NT grabbed a bigger share of the 1998 budget at 9.5% of respondents' companies.
ASU allocated one of its biggest budget increases to Windows NT servers, including hardware, software and start-up costs such as site preparation, Eschbach says. The school also budgeted for a new Microsoft Exchange e-mail system.
Overall, there seems to be more in corporate coffers for network systems implementations. Furthermore, approval cycles for major expenditures are shrinking, according to the survey. Almost 75% of respondents said purchase approval now takes three months or less, as compared to 64% who said their 1996 purchases were approved in the same time frame.
But that doesn't mean corporate management has started handing out blank checks. Indeed, the survey found some of the same projects that got big budget increases at some companies had to be put on hold at others.
Respondents dealt with managements' refusals to fund major expenditures in 1998 in a number of ways. They made do with what they had, chose lower-cost alternatives, spread out purchases over time or pinned their hopes on getting approval down the road. Some respondents received the funding in a matter of months by making a stronger business case or simply waiting.
Postponed purchases
Some 13.5% of respondents said they were forced to delay major expenditures in various network services, equipment and WAN expansion. In addition, 2% needed to postpone client/server software or infrastructure upgrades, and 4% delayed Internet/intranet infrastructure investments. Major network management allocations got the short end of the stick at 3% of respondents' companies, while 5.5% of respondents needed to delay server rollouts.
A more fortunate 44% of respondents said they didn't need to postpone any major purchases this year, the same as the 44% who reported this last year. One-quarter had to hold back on major expenditures two or three times during the past year, while 16% suffered this fate five times or more.
Behind the numbers is a continuing trend toward bottom line-oriented IS budgeting, and the need for network technicians to make a business case for major outlays. In the survey, 36% of respondents said they examine ROI to determine budget amounts for each line item.
"Cost management is a major priority for companies," Cunningham says. "People are still looking at the price-times-quantity equation of what they are spending on networks, and renegotiating their contracts with service providers."
Jesse Rivera, a consultant at Riscorian Enterprise, is doing internal consulting for a major client that put off a big WAN upgrade project this year, largely because "management had little understanding of what the upgrade would do," he notes.
Even with management officially behind a project, a major implementation can still run into trouble down the road when additional funding is needed. At the large insurance company mentioned earlier, upper management a few years ago decided that in order to become a world-class industry leader, it needed to have a world-class IT infrastructure. "But we still can't spend everything we want upfront; plans have to be stretched out and prioritized because of funding," says the firm's PC, LAN and user support manager.
The fight for funding
Many respondents said upper management balked when it came time to shell out money for systems support and maintenance, particularly regarding the issue of staffing.
"It's kind of tough getting enough money turned loose, especially for support," says Joe Burnett, manager of equipment leasing and telecommunications for the state of Arkansas. He's working to obtain funding for anything related to supporting and maintaining existing systems.
In particular, Burnett's group is trying to secure a budget line item for 1999 that would place a support technician in all 85 state government offices. The state is scheduled to complete a network rollout this month and will need additional support to maintain it.
"A consulting company manages the network, but we still have to have someone local," Burnett says. Management is resisting the initiative and says the state doesn't have the job slots available. A similar budgetary approval problem confronts Miles Britten, network administrator at White River Medical Center in Batesville, Ark. Britten asked for money to hire a technician to troubleshoot problems with the firm's AIX, NT and IBM AS/400 systems, and applications such as billing and managed care.
Britten says he may have trouble getting final budget approval because management likes support to come from staffers in the departments where the systems reside. That plan would obviate the need for additional funding, but Britten says that problems would still fall back on his department.
On the other hand, Britten doesn't expect to have trouble putting through a budget line item for Microsoft's Zero Administration for Windows software to manage Windows 95 and NT clients. "That's only $4,000 for 200 seats," he says.
Several respondents interviewed are rolling out systems and desktop management software to minimize the need to hire new, expensive and scarce technicians. "We use network management tools instead of more people," ASU's Eschbach says. Survey numbers bear this out: 10% of respondents listed network management products and services as receiving the most significant budget increases this year.
"Users are turning to enterprise systems management platforms from Tivoli, BMC and Computer Associates to handle the whole end-to-end process of managing networks, servers and applications," Deloitte's Cunningham says. "Of course, there is still a lot of wrestling with management over the business case for that."
And enterprise systems management is still complex and difficult to implement. Consultant Rivera's client, for example, has implemented Cabletron's Spectrum, but like many companies, the client neglected to plan the project. In particular, the company didn't figure out what specific business benefits it wanted to target. "As a result, Spectrum is providing very little benefit," says Rivera. "It's generated some reports, but those reports haven't been too useful."
The tendency to make business-focused budget decisions will only get stronger in the next few years, Cunningham says, as companies increasingly focus on managing network investments globally rather than piecemeal across business units.
The likely result, Cunningham says, is that strong business justification will become even more crucial in the years to come - particularly for technology such as ATM switching or systems management frameworks that adds to rather than replaces what exists today.
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Horwitt is a freelance writer and consultant in Waban, Mass. She can be reached at EHorwitt@ compuserve.com
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