Budgets Are Up; Now The Pressure's On

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Art Wittmann

Many of you are just finishing up your budgets for 2011. For most of you—76%, according to our October survey—it should be a relatively happy experience this year, as you're seeing either flat or increasing budgets. A bare majority of survey respondents are expecting 0% to 5% growth, and a quarter are expecting budget increases of more than 5%. That's in contrast to recent years, when most IT organizations saw cuts in line with revenue shortfalls at their companies.

In that same survey, we asked the 15% of respondents who are non-IT line-of-business managers what they think of their IT department's performance. Good news here, too, as only 13% say they're somewhat or very dissatisfied with IT. The unrest, it turns out, is within IT itself, where double that percentage say they're dissatisfied with the budgeting process.

Whether or not you're happy with your budgeting process, chances are that a modest budget increase won't be enough to sustain current modes of IT operations. Spending on storage needs to continue increasing at a faster clip than the overall IT budget, and even for those who've virtualized everything in sight, server demands typically still outpace Moore's Law, so there will need to be new spending on servers. Software companies will continue to exact their pound of flesh, and you can add in raises for IT teams whose compensation probably hasn't budged in a couple of years.

There's no doubt that you've had to change your thinking about what makes a reasonable deployment of applications, particularly internal applications. Lots of customization of high-end, best-of-breed systems that run on in-house hardware will have to at least occasionally give way to modified business processes supported by software-as-a-service providers or at least cheaper in-house alternatives—but only when the numbers show real long-term savings and you're convinced that the new apps will integrate adequately with both your infrastructure and your other applications.

But most important is to work through what IT's strategy is—how will it change and what benefit will that change have for the rest of the company? Then work through the tactics of the proposed changes, application by application and change by change, with business-side process owners. As much as IT may want to drive change, the data and the apps still belong to the lines of business, so you need LOB buy-in. IT is the tail, not the dog.

But that's not to say IT can't lead. There will be ideas about how to use data and technology that could come only from IT professionals, or at least only become reality if IT molds others' good ideas into actionable strategies. Seeing budgets level out and even increase is a welcome relief, but it leads to a new set of tough decisions. In some cases, where maintenance has fallen to a bottom priority, you'll have no choice but to use new budget dollars to maintain existing systems better. Some of the comments in our survey spoke to that reality.

It's easy to look at your current budget and see no room for discretion—some CFOs will see to that. And at least according to our survey respondents, most of your business-side colleagues will be OK with that. But smart IT leaders will carve out at least one or two projects that let their companies find new customers or better serve existing ones without busting the budget—and they'll work on those. Even if you can only begin to lay the groundwork this year, finding ways to execute on those projects will spell the difference between IT organizations that lead and those that just manage.

Art Wittmann is director of InformationWeek Analytics, a portfolio of decision-support tools and analyst reports. You can write to him at [email protected].

To find out more about Art Wittmann, please visit his page.

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