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The deep freeze in IT spending is starting to thaw as IT organizations shift from cost-reduction mode to cost containment.
Earlier this year, Enterprise Strategy Group (ESG) published its 2010 IT Spending Intentions Survey, an in-depth study of 515 senior IT professionals regarding their midmarket and enterprise organizations' IT spending plans and priorities for 2010. This year's survey finds cautious optimism reigns among IT shops: Most organizations are moving out of cost-reduction mode, but are likely to characterize themselves as being in cost containment, not growth, mode. That's good news for technology vendors as budgets begin to free up again. On the spending front, survey participants indicate virtualization, security and storage as their top areas for investment.
Among those organizations surveyed -- in the United States, Canada, France, Germany and United Kingdom -- 52% will increase general IT spending this year vs. only 43% in 2009. More importantly, spending on data storage equipment looks promising: 54% of those surveyed will increase their spending on storage hardware this year, up from 38% in 2009.
Storage spending in 2010 corresponds to the ongoing need to manage explosive data growth, which is perennially identified in ESG's spending surveys as a top-five IT priority. Plans for increased spending on new raw storage system purchases -- whether SAN or NAS -- might well indicate that equipment purchases postponed in 2009
For the second year in a row, respondents cited trimming operational costs as the top criteria for justifying their IT spend. As users shift to cost-containment mode from cost-reduction mode, it seems they're poised to spend capital dollars to save operationally. While reducing capital expenses was second on the justification list in 2009, and tied with business process improvement, it dropped to fifth on the list of justifications for IT spend in 2010 behind reducing operational costs, business process improvement, improving security/risk management and return on investment (see chart below, below). This also aligns with the shift to cost-containment mode from cost-reduction mode.
Click here to get a PDF of the list of justifications for IT spend in 2010.
Storage is a good place to begin looking for areas to reduce operational costs. Many IT shops make storage buys to support each new application as it rolls out. As application environments grow and more data needs to be stored, we often see users leveraging spreadsheets to map what application data lives on which storage devices. As the environment changes, new capacity comes online, or storage systems are updated or replaced, the spreadsheets need to be kept current so users know where important data is stored so they can ensure it is protected and backed up. It can get very complex, and over time the chance that critical data is left unprotected grows. Often, because of the complexity of the environment, IT is unable to appropriately leverage storage capacity where and when it's needed and ends up with stranded capacity because it either doesn't have the right performance or availability characteristics for the next new application coming online, or it needs file storage capacity but has space only in block storage systems. It's not unusual to see IT environments with sub-50% utilization rates across the storage environment. That's a lot of floor space, power and cooling, and management cycles going toward managing capacity that doesn't directly support the business. And it presents a clear opportunity for reducing operational costs.
There's little question that 2009 was one of the toughest years in recent history for the IT industry, with far-reaching budgetary implications for technology vendors and IT end users alike. While budgetary pressures won't let up in 2010, the shift from cost-reduction mode to cost-containment mode bodes well for the technology sector in general. As users continue to look for ways to reduce operating costs by reducing storage infrastructure complexity, those vendors that offer truly efficient and easy-to-use platforms will benefit. Users have listened to vendors push their storage efficiency message for the past year and a half. But this year it needs to be more than a marketing message. Users should demand that vendors demonstrate what they can do to help address the storage complexity, and associated inefficiencies, that the vendors themselves have had a big part in creating.
BIO: Terri McClure is a storage analyst at Enterprise Strategy Group, Milford, Mass.
This was first published in May 2010