When it comes to IT spending in the next 12 months, it appears that SMBs are being cautious. They’re fairly evenly split between expecting their IT spending to remain flat or decline in the next one year (45 percent) versus expecting it to increase (55 percent). The fact that 55 percent say they expect to increase spending is generally positive and encouraging given that this percentage has increased from the same time last year.
Organizations in finance/insurance and government demonstrated the highest purchasing power, spending as much as three times the average. The former especially has recovered quite nicely from the credit crisis with the help of government incentives to boost lending and credit availability. Healthcare businesses have planned for the greatest increase in average annual IT spending in the next 12 months despite having the lowest average annual revenue.
SaaS, managed services and virtualization are likely to become more strategic in the next 12 months because all of these technologies have the ability to scale with the business, outpace total cost of ownership, and work within tighter budgets thus eliminating the need for formal IT personnel or upfront investments. Of the initiatives being taken to generate and drive revenues, business solutions that enhance customer-facing interactions have gained in importance in the last 12 months and will continue to be relevant in 2010.
Managed IT Services Make Inroads – The biggest change the IT channel is likely to see in 2010 is the increased delivery of technology solutions via managed services. Companies delivering managed IT services weathered the storm better than most during the Great Recession. Managed services providers (MSPs) were better able to generate cash flow, avoid wild quarter-to-quarter fluctuations in income and generally out-performed traditional technology resellers, according to a 2009 survey by CompTIA. The top MSPs also tended to hold their profits longer even as the economy headed downhill and began their recovery sooner.
From the customer perspective, reliance on MSPs continues to grow at the small businesses, mid-sized company, and enterprise levels. MSPs are coming in and managing wireless phone networks, voice networks, print systems, desktops and servers, network integration, IT consulting, help desk functions, security, network and firewall monitoring, e-mail management and storage/backup. Because MSPs ensure customers get the service they need in an affordable and predictable manner, they’re just scratching the surfaces and have probably penetrated only a small percentage of customers who have not made a wholesale transition to managed services.
The first of three core business drivers for the end customer is managing cost. Business reality necessitates that a business control its expenses and IT is an expenditure that needs to be managed. Due to the inherent efficiencies of the managed services model (economies of scale, use of remote technologies, aligned business interests between the MSP and customer that reward cost reduction, efficient use of experts, etc.), the cost of providing IT―when done right―is lower. The solution provider can choose whether to pass these savings on to the customer.
Regardless of whether the cost reduction is passed on, a business under managed services also benefits from price predictability. Since MSPs provide service to an SLA at a fixed rate, the customer benefits from a “no surprises” cost structure and this predictability allows them to accurately forecast the cost of IT services and plan accordingly.
The second core business driver for the end user is the predictability of service. When you are looking for a doctor, what is foremost in your mind? It’s certainly not “Where can I find the cheapest doctor to provide my treatment?” While cost is a consideration, far more important is the quality of service and whether or not the physician can successfully treat your condition.
An IT services provider relationship to business is akin to that of a doctor and patient. What the business really wants is reliable IT services that continue to work and meet the organization’s needs. Because MSPs provide a long term relationship that aligns the MSP’s interest with that of their customers (the MSP wants a trouble free network to reduce expenses), it inherently provides a better service to the end customer. Additionally, because an MSP supports many customers, it can afford to make resources available to its customers that they could not justify on their own.
The last business driver for the end user is managing chaos and complexity. A small business does not want to be preoccupied with myriad IT decisions. An MSP helps a small business navigate the difficult world of technology decisions, upgrades, architecture strategies, etc. Their expertise and single-minded focus on IT frees the customer to focus on what matters most to them―their business.
Up in the Cloud – There’s been a lot of talk lately about “the Cloud”. Pick up just about any tech journal, business publication or even the newspaper and you’ll find articles and analysis discussing everything moving to “the Cloud.” What does that really mean? Is the end of the desktop/laptop, as we know it today, coming sooner than we thought? Is it all about being connected 24/7 so that no applications reside locally anymore?
According to the recently issued definition put forth by NIST (National Institute of Standards and Technology, Information Technology Laboratory): “Cloud computing is still an evolving paradigm. Its definitions, use cases, underlying technologies, issues, risks, and benefits will be refined in a spirited debate by the public and private sectors. These definitions, attributes, and characteristics will evolve and change over time.”
Vendors are telling customers that everything’s moving to the Cloud: “It’s better, faster, stronger, cheaper, and able to leap tall buildings in a single bound. It’s the best solution for every IT problem, regardless of industry, and why would you even think of using anything else? … Oh, and everybody’s using it.”
If hype is to be believed, customers can soon ditch all their owned data centers. After all, who needs them anymore? And, of course, it’s hard to find a vendor that hasn’t added “Cloud-ready” or “a Cloud service” into their marketing to capitalize on the trend.
Customers, however, are leery and have a right to be. Security and privacy issues loom large, as do service delivery concerns, legal ramifications and regulatory directives. Many enterprises are testing Cloud offerings in a limited capacity, but anxiety still reigns. Knowing exactly what each “Cloud vendor” offers has gotten more and more difficult, making it very tough for IT managers to evaluate competitors and make informed decisions.
On the plus side, Cloud computing allows even the smallest organization to access enterprise-class technology with minimal up-front costs and easy scalability. By allowing a large number of networked computers to share an IT infrastructure, Cloud computing eliminates the constraints of relying only on local or remote computers. It’s also financially attractive to many organizations, which can reduce their in-house IT infrastructure investment costs and use Web-hosted services, paying only for what they use.