by Dave Pepperell

2010 will begin to see new approaches to IT spending

Jan 18, 2010
Cloud ComputingEnergy IndustryIT Leadership

The CIO of one multinational corporation was quoted as saying that during 2008 he invested to save, but in 2009 he stopped investing and just saved. So what will 2010 bring? For most CIOs, budgets are unlikely to increase. Capgemini Consulting’s Global CIO Report for 2009 shows that 70 per cent of respondents experienced reduced budgets, with the average drop being 15 per cent. The pattern is set to be downbeat again in 2010 with most analysts forecasting zero change. As a result, we will start to see themes emerging which will become significant to IT budget holders in the following years. First, the current ratio between the amounts allocated for new development to those allocated for existing system support will come under attack. Currently, many IT departments spend as much as 80 per cent of their budgets on legacy service support, leaving little for the implementation of new systems, but CIOs are already starting to extract savings in service budgets to spend more on new developments. Second, the growing maturity of cloud services is showing how CIOs can realise some of these savings. CIOs are considering deploying cloud-based solutions to take costs out of commodity infrastructure services, including email and backup. And even where CIOs are not able to use public cloud services, they are implementing private cloud techniques such as virtualisation to improve server efficiency. This also has direct benefits for organisations planning on meeting their Carbon Reduction Commitments from April 2010. Third, there will be even more pressure for IT projects to demonstrate short-term payback. Implementing virtualisation is one example, as is replatforming legacy systems onto newer, cost-effective hardware, the replacement of old systems with commercial products and software-as-a-service packages, and the rationalisation of websites. Fourth, CIOs will expect suppliers to propose more creative service offers and commercial models. These could include combinations of utility-based pricing, where costs are linked to resource usage, or output-based pricing where costs are linked to results achieved. CIOs will come under pressure in 2010 to show improved support for their businesses while maintaining already reduced budgets. We will start to see steps like these becoming standard in IT departments as a precursor to the more radical cloud-based changes that will be evident from 2011 onwards.