CORPORATIONS’ IT “SPEND” THIS YEAR is markedly less than last year, yet mid-year changes have yet to surface, according to several sources.
An annual survey of CIOs conducted by Gartner each fall projected flat to less than 3% growth in corporate IT spending for 2007-2008, down from 3% to 5% growth the prior year.
There’s “a sense of interest, not urgency” by enterprise on the continued effects of the current economic downturn, according to analyst Phil Redman at Gartner.
“We don’t see any cutting yet,” Redman said.
Hard decisions on the way
But the analyst said that this fall, should macro-economic conditions continue to pressure corporations on capital and operating expenditures, the enterprise may face hard choices.
Management may wrestle with a basic philosophical question with diverse ramifications: in a downturn, should a corporation invest in productivity-enhancing, cost-saving technology, or simply pare back or delay the cost of such projects?
Mobility costs and initiatives, like any other IT budget item, may well face such scrutiny, several sources said.
“Those vertical, line-of-business applications and users who can show a clear return-on-investment probably won’t be affected,” Redman said. “It’s the horizontal applications where cuts might come.”
The expansion of mobile corporate e-mail to more workers, for example, could be curtailed, possibly affecting related companies such as Research In Motion Ltd., the analyst said. But should serious cuts be made in vertical applications and corporate network-based infrastructure, then a raft of companies such as Cisco Systems, Motorola Inc., Intermec, Aruba Networks and many others could feel the pinch, according to Redman.
These considerations also raise the issue of who should pay for horizontal applications such as voice and e-mail, said Bill Hughes, analyst at In-Stat.
Despite a slight increase in corporate liability for mobile costs, corporate liability only slightly edges out individual liability among American corporations. That makes Hughes suspicious that corporations may push more liability onto employees in a downturn – a move that hurts productivity, In-Stat studies show.
“It’s a highly volatile strategy, whether the company pays more or less,” Hughes said. “For instance, 40% of corporate employees pay for their own laptops. That tells me there’s a game of chicken taking place between employers and employees. Who should pay for productivity? If a company pushes this cost onto its employees, it could adversely affect productivity.”
Challenges on supply side
The supply side in the mobile enterprise space, of course, has an array of answers to any objections raised by cost-cutters.
Vendors already pitch their products and services to enterprise as productivity-enhancing, cost-cutting solutions with a clearly defined ROI, said analyst Kitty Weldon at Current Analysis. The sector’s perennial mantra, regardless of current conditions, is that these offerings are a beneficial solution in uncertain economic times.
On the demand side, however, the choice of whether to invest or cut is not always simple, Weldon said. Fixed-mobile convergence, for example, has been “a hard sell” because it presents significant up-front costs with the promise of long-term cost-savings.
For now, the downturn has not produced visible, draconian measures, the analyst said.
“I haven’t heard anyone say we’re in bad shape and deferring wireless,” said Weldon.
But shakeout among vendors on the crowded and diverse supply side is inevitable and a prolonged economic downturn could hasten that process, according to Weldon.
Making the case for mobility
Addressing future uncertainty, however, is forcing more corporations to quantify, consolidate and control their mobility spend, according to Jay Burrell, VP for business mobility sales in North America for Nokia Corp.
“We’re seeing more and more corporations with line-item mobility spend than in the past,” the Nokia executive said. “We’re in an environment where there’s continuous pressure on opex spending. Making a business case for mobility spend is important. We get a lot of customers who are asking, ‘Are we alone? What are other companies doing?'”
The various macro-economic pressures – always present, but ratcheted up in a downturn – include the cost-per-square-foot of providing office space (“a huge driver”), the cost of behind-the-firewall infrastructure and the cost of fuel for employees, Burrell said.
Thus, Nokia and other vendors increasingly make the case for mobility spend in consultation with their customers, identifying productivity gains, cost efficiencies and ROI, Burrell said.
The fact that many mobile technologies have ripened – devices, networks, security have leapt forward in recent years – keeps the door open to discussion, he said.
