IT in Better Shape YOY

According to the latest IT Spending, Staffing and Technology Trends survey from Computer Economics (CE) IT is doing pretty good in 2007: staffing is up, budgets are up, and IT effectiveness (as measured in spend-per-user) is up.

In its 18th year, CE’s study looks at a range of metrics in a year-over-year comparison to give IT managers an idea of what long-term trends are affecting their day-to-day lives. The biggest surprise this year is the almost across-the-board increase in IT budgets, said CE President Frank Scavo. Although, the median five-percent increase is moderate these increases are being felt in almost every industry in ever sector.

“That’s the highest number I’ve ever seen on that statistic,” said Scavo. “They’re not hitting the ball out of the park in terms of the magnitude like they were in the 1990s … now you’ve got more moderate increases but they’re pretty widespread.”

On the flip side, as a percentage of annual revenues, IT budgets are actually falling slightly. CE found the median budget this year is just 1.8% of annual revenues compared to last year’s 2.0%. But, said Scavo, this isn’t necessarily a bad thing. It indicates that IT is doing a better job at helping businesses grow.

“The only way to interpret that is IT managers are becoming more effective in supporting the growth of the business,” he said. “This is a good thing. IT managers are able to support the growth of the business without increasing spending as fast as corporate revenues.”

The fact that spending per user is flat this year and spending per desktop is actually falling also support this conclusion, said Scavo. The three areas where IT is actually spending more today are: personnel, application software and outsourcing. Coming as no surprise to anyone in the business, outsourcing is gaining momentum year-after-year. But, unlike the big blanket deals of just a few years ago, it seems companies are being more selective in how that utilize their outsourcers.

For example, while 62% of companies outsource some of their application development work, only about a third (32%) of any given project is done by the outsourcer.

This is probably why the IT job climate is pretty good. Experienced staff are still in high demand at most companies in most industries (which may explain why salaries are also on the rise). Fifty-two percent of the 200 companies surveyed said they were adding staff, while only 16% anticipated layoffs.

“This is better than last year,” said Scavo. “So, companies are increasing their IT spending at moderate pace but they’re more cautious in adding head count and that we’ve been seeing for years.”

To make up for lack of headcount companies are, however, hiring more consultants and temporary workers.

On the technology side, the survey found companies spending more on software verses hardware than in years past. This could indicate a number of things (including falling hardware prices) but most likely it indicates most companies have enough computing power on hand. The rise in the use of virtualization technology may also have contributed to this trend but its penetration into the data center is still relatively low with just 1.1-to-1.2 operating systems running on each virtualized server and most Windows servers still running at just 20% of capacity.

Even so, said Scavo, “A technology that did have a substantial impact is virtualization. If you want increase utilization of hardware assets the quickest way to do it is server and storage virtualization.”

For IT executives setting the agenda this year, there will probably be few surprises in the report. While increasing security and disaster planning made the Top Five Priorities list this year, the other three objectives were little changed: developing new systems, improving service levels, and upgrading existing systems. In fact, the report states, “the top five priorities are clustered so closely together that they may be considered in a near tie for first place.”

Basically, the report states it’s a pretty good time to be in IT—depending on your industry, of course. But, overall, things are better than they were and that’s not bad.