IT budgets at midsize firms: A look ahead

Will the recession lead to massive budget cuts or simply slow IT spending growth? The situation is dynamic, but some recent data may point to a relatively soft landing.

Now that the election is behind us, we tech industry insiders can refocus on IT investment. Will the recession lead to massive budget cuts or simply slow IT spending growth?

The situation is dynamic, but some recent data from my company, Enterprise Strategy Group, may point to a relatively soft landing.

In a survey of more than 500 midsize organization, or those with 100 to 999 employees, more than half the respondents said they expect modest growth (i.e. more than 4 percent) in their IT budgets in 2009. The survey was completed in the summer, and certainly things have gone downhill since then. But those were the companies' intentions at the time.

Where were/are these organizations planning to spend their money? The top four areas include:

• IT initiatives focused on improving business processes. Examples here include business process automation and collaboration.

• IT initiatives that help lower business costs. Think server virtualization, SOA, and green IT.

• Security and risk management. This runs the gamut from data discovery and classification to DLP, encryption, and enhanced network security.

• Improved business analytics. This makes sense as it supports the other three priorities.

It's likely that these midsized companies will pull back, eschew new big projects, and take extra time to make purchasing decisions. Still, economic uncertainty does offer a few hidden benefits for IT vendors. For example, during recessionary times, organizations are more likely to purchase from an alternative vendor. Yes, no one ever got fired for buying from Cisco Systems, but the price/performance and operating cost advantages of a vendor like Extreme Networks may be too attractive to pass up during hard times. IT managers are also far more open to reducing costs and extending internal skills by working with service providers rather than recruiting and hiring new full-time employees. That's good news for companies like IBM, Symantec, and Verizon.

We are facing a fairly extensive global recession. IT vendors should plan accordingly. But with the right focus and customer-centric approach, the Enterprise Strategy Group data indicates that there is still business out there.

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