Strategies morph from cost-cutting to growth: report

A new global study by IBM Corp. finds mid-sized organizations are starting to acknowledge the improving economic environment and are shifting their strategic mindset from efficiency and cost control to customers, growth and innovation.


The shift is set to be reflected in growing IT budgets this year, a finding that is significantly different in this year’s results compared to the previous year. “When I talk to customers, the sense I get is people are really getting used to the new normal,” said Leah MacMillan, director of market strategy for IBM’s business analytics group.


“It’s really all about getting that edge. How do they outperform the competition? How do they grow the business?” said MacMillan.

The survey of organizations across 22 countries, conducted in 2010 by KS&R Inc., revealed 53 per cent of respondents expect their IT budgets to grow across the next 12 to 18 months. It’s a notable jump from 21 per cent reported from the 2009 survey. And, thirty-one per cent expect budgets will remain as is while 16 per cent think they will shrink.

The degree to which these expanding IT budgets will grow differs by region. While the global growth average is 53 per cent, mature countries such as Canada and the U.S. report an average 51 per cent. Growth countries such as China, Brazil, India and Korea report 69 per cent.

The survey also found 79 per cent of respondents are concentrating this year on customers, growth and innovation. Again, a marked jump from 2009’s 47 per cent.

Regarding where IT dollars would be allocated, 75 per cent of respondents plan to upgrade core IT systems such as servers, storage and networking in order to improve performance and security. One part of that is adopting cloud computing, a technology that two-thirds of respondents said they are planning to or are already deploying. 

MacMillan has observed expanding IT budgets aligning rather well with how organizations apply analytics. She said the current trend has been toward using analytics to better understand the market in which the business toils, rather than merely identifying operational inefficiencies.

“There is an increase I believe in finding that growth opportunity and a new business model and finding out what your customers think about you,” said MacMillan.

But for those whose budgets that won’t grow or will even suffer a cut, one Gartner Inc. analyst suggests the money-consumptive IT infrastructure and operations (I&O) is where cash can be saved. Gartner defines I&O as everything in IT except business apps.

“It has such a high interest among CIOs because they’re not going to meet their budget goals if (infrastructure and operations) doesn’t meet its (budget),” said Jay Pultz, vice-president and distinguished analyst with Gartner.

Pultz’s list of cost-cutting areas within I&O include deferring projects that don’t meet business needs, re-examining networking costs, consolidating and virtualizing I&O, reducing power and cooling needs, containing storage growth, streamlining IT operations and encouraging user self-service, enhancing IT asset management, and optimizing multi-sourcing.


Of these recommendations, Pultz said organizations have completed a mere third. His advice: benchmark I&O costs with those of other companies to ascertain where one stands.

Follow Kathleen Lau on Twitter: @KathleenLau

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Jim Love, Chief Content Officer, IT World Canada

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