IT budget ’09: Spending down, contingencies at the ready

Network World Budget Survey shows IT spending is down, but enterprise IT executives say their contingency plans are ready.

When the economy turned sour in late 2008, IT executives responded as you would expect - by scaling back their 2009 spending plans.

Flip through a slide show of results from our reader survey on IT spending and budgets

In a survey of readers, roughly a third said they will keep IT spending at 2008 levels, while 43% said they will spend less.

Bar chart showing spending

The situation isn't pretty. Of the IT pros who said they are cutting back, 43% are chopping 5% to 9%, but a whopping 40% are slicing 10% or more. Spending reductions, of course, are not always a bad thing. When IT is done right, lower business expenses can result. More than half of the respondents, however, say their budgets this year will fall short of business needs.

Business-critical projects are still getting the green light, albeit timelines might be stretched, but discretionary spending is getting squeezed, and many shops are in contingency mode, IT execs said in follow-up interviews. (Listen to a podcast as Strategic Oxygen CEO Michael Gale shares his 2009 IT spending outlook, based on interviews with 10,000 + IT executives.)

That's the case at Robert Bowden, says Lowell Wright, telecom manager at the building materials supplier in Atlanta.

Had the economy not tanked, all employees would now have new PCs on their desktops, Wright says. Instead, IT has elongated the refresh cycle, rolling out new workstations to 25 users at a time. The good news is that with vendors pricing desktops so aggressively, the company isn't suffering from the loss of volume discounts, he says.

Curbing discretionary spending also brought Robert Bowden's virtualization project to a standstill, Wright says. Designed to increase server utilization rates and deliver application efficiencies, virtualization isn't really do-or-die for the company, so Robert Bowden has backed off its deployment timeframe. Buying the necessary servers for testing just isn't feasible now, he says. "We're just taking a step back. We're not harming the business."

Indeed, "do no harm" might well be this year's mantra as IT executives try to make do.

Budget numbers

Stephen Fugale, CIO at Villanova University, certainly has applied that logic in his planning for the next fiscal year, which begins June 1. He doesn't intend to back off strategic initiatives, but a contingency budget he's crafted squeezes spending by 10%. On a current budget of $15 million, that means finding $1.5 million worth of cuts at the school, a large Catholic university just west of Philadelphia.

Untouchable are the university's student-recruitment application (equivalent to CRM software in the corporate world), portals and collaboration. "These speak to our competitive ability, especially given the decline we'll likely see beginning next year in the number of high school seniors applying to private institutions," Fugale says.

Still important but subject to a slower deployment pace will be projects aimed at bringing such enhanced capabilities as podcasting and videoconferencing into the university's 150 classrooms. On the upside, Villanova already has 475 commodity Internet connections, is 80% wireless, and has a new phone system and some recent network upgrades - so Fugale will be able to "hold the fort" on the physical infrastructure, he says.

On the chopping block is spending on consultant work, certain types of maintenance, PC and laptop refreshes, and new or replacement hires.

Spending on process improvements is key, IT execs say. More than half of the IT professionals surveyed by Network World said such spending can help offset the impact of the business downturn.

Pie charts of budget numbers

And with a tough market that probably will get tougher as 2009 unfolds, companies are going to need all the help they can get. As Fugale says, "It is gloomy."

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