Units may take just-in-time approach to IT spending

Business units will gain control over most discretionary IT spending this year, as project funding is doled out to IT departments after predetermined milestones are met. That was one of seven predictions that Gartner Inc. analysts made at the company’s Symposium/ITxpo conference here Monday.

Why are business units gaining control over IT spending? Disillusionment among senior executives over Y2k and e-commerce spending and the inability of tech-focused CIOs to communicate the business value of IT investments has led to a “credibility gap” that CIOs must address, said Carl Claunch, a Gartner analyst who discussed the predictions made by the Stamford, Conn.-based market research and consulting firm.

As such, business unit leaders will increasingly “co-opt” IT budget management with IT departments, said Claunch. In addition, IT departments will receive project funding on a just-in-time basis only after other project milestones have been reached.

By 2005, 65 percent of companies will finance more than half of their IT projects using that approach, he said.

Another Gartner prediction hits close to home for IT managers: The current short-term focus on cost-cutting will lead to higher IT costs later. According to the company, cost-cutting pressures are leading organizations to “mortgage” their futures by “underfunding” IT infrastructure and application upgrades today, which will cost more in the future when the economy improves and demand for IT products and services increases.

Five other predictions made by Gartner analysts include:

– The market for pure portal products will whither away, particularly as functionality is delivered in broader software categories such as application platform suites and collaborative technologies.

– Radio frequency identification (RFID) tag use will sharply increase. RFID tags, the successor technology to bar codes, can be embedded in products, scanned at a distance and be designed to withstand high degrees of heat. Prices for these technologies are dropping to the range of 5 cents each and can be used by retailers and manufacturers to provide after-sales information about how, when and where products are being used by consumers.

– Public wireless LAN “hot spots” will quadruple in 2003, creating widespread connectivity for people in hotels, airports, public buildings and restaurants. This includes a mix of free and commercial services. By 2007, the public WLAN industry should grow to more than $9 billion in sales.

– IT as a utility will gain momentum. By 2006, 30 percent of IT work will be done through this model, where organizations pay for storage, server and other requirements on an as-needed basis.

– Online bill payment with banks will continue its sharp growth this year. Although only 12 percent of U.S. bank customers do any form of online banking today, Gartner is anticipating 50 percent growth in customer adoption by year’s end.