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Budget tips for the new year

Follow the IT money in 2010, and it will lead to yet more projects designed to cut the cost of doing business. You'll also find a slew of smaller-scale initiatives that have a relatively quick payback or are laser-focused on a wider enterprise business goal, such as improving customer service or product quality. Moreover, an increasing portion of what are shaping up to be relatively flat IT budgets at most companies will be devoted to streamlining and offloading rather than bulking up internal IT infrastructure.

At $3.5 billion Sunoco Inc., for example, CIO Peter Whatnell explains that he is in the process of evaluating Google Apps and other so-called cloud offerings in conjunction with an overall desktop virtualization initiative.

“Our immediate goal is to reduce internal costs,” says Whatnell. “Sunoco has 8,500 users, but 50% to 60% of them only need access to two or three office productivity applications. We're looking to see if there's a way to provide those without the support costs associated with Wintel on their desktops.”

As part of the same cost-cutting initiative, Sunoco plans to move several hundred users to thin clients on the desktop, which will be connected to “everything virtualized on the back end,” Whatnell says.

“If there's a problem, we have UPS deliver a cardboard box with a new [thin-client] device,” he explains. “The user plugs it in and gets access to back-end applications. The mailroom becomes our desktop technician. It's the long-term ownership costs we're looking to take out.”

IT executives are feeling the squeeze. A little less than one-third of the 312 respondents to Computerworld's 2010 Forecast survey said they expected their organizations' IT budgets to kick up in the new year. Most are dealing with flat budgets. And 37% said budget constraints and economic pressures are the No. 1 management challenges they will face in the next 12 months. Therefore, removing long-term IT costs is the main goal and will remain so throughout 2010, CIOs say. The key rationale for technology investments will be to save even more money down the road.

Sharp Eye on the Future

Bargreen Ellingson Inc., a restaurant supply and design company in Fife, Wash., is in the midst of a $5 million, multiyear ERP implementation project that it started in February 2008 — smack dab in the middle of the recession. This year, with the foundational elements of the ERP system in place, the company will begin leveraging the system's business analytics capabilities. Also high on the IT agenda is collaborating with the business to streamline various processes, such as managing inventory, to take full advantage of the new IT capabilities.

“A couple of years ago, we knew the current economy was on the horizon and that we were headed into a recession,” says Bargreen CIO Jeffrey Greenaway. “We purposely decided to take on a new ERP system because we wouldn't be going at 110% and we could bring in the necessary business people who can't afford to dedicate themselves to this kind of project during busy times.” In 2010, he says, it's all about taking out costs by finding and implementing ways to make the business more efficient.

In 2010 and for the foreseeable future, getting things done faster, better and cheaper will involve more and more consumerlike technologies, including cloud-based IT infrastructure capabilities, SaaS applications, netbooks and iPhones, CIOs say. The reasons are simple: They work, they're less of a support hassle, and yes, they're cheaper. In fact, more than half the respondents to Computerworld's survey said they're likely to look to cheaper technologies and homegrown applications to save money this year.

“We now consciously consider [application service providers] or other cloud solutions as valid competitors to hosting our own solutions when we need an application, because of the reduced cost,” says Eric Cowperthwaite, chief information security officer at Providence Health & Services, a system of hospitals and clinics based in Seattle. Cowperthwaite predicts that 2010 will bring “a significant rethinking of Providence's end-user desktop environment. IT will be looking to answer questions such as, 'So we really need $700 or $800 worth of software on every computer?' ” he says.

Greenaway says he will be integrating several consumer devices into Bargreen Ellingson's IT infrastructure.

“Commoditization is driving better technology into smaller, cheaper devices. I see a real [support] benefit in that,” he says. “For years, IT has been conditioned to accept a high level of fixing things as a requirement — more so than any consumer would tolerate. Now, when folks come in and want to connect their iPhones into the corporate infrastructure, I'm much more likely to do it because I'm not going to have the same level of Tier 1 help desk support issues with it.”

Pressure on the Big Guys

Mike Twohig, CIO at Clean Harbors Environmental Services Inc. in Norwell, Mass., has deployed some cloud applications and open-source software as a means of keeping a lid on costs in his nearly 100% homegrown IT environment. He also consciously seeks out up-and-coming vendors to supply his enterprise with hardware and software. The strategy pays off in two ways: He saves money because the lesser-known vendors' products are less expensive, and that makes the big guys, such as Microsoft and Oracle, far more responsive about renegotiating licensing contracts.

For example, Clean Harbors has deployed server virtualization software from Addison, Texas-based 2X Software LLC that Twohig says costs “15 cents on the dollar [compared] to Citrix and has all of the same functionality.”

He has also deployed an inventory application from a less well-known vendor. “The reality is that for the investment in time and dollars, I became a bigger fish in the pond to the [smaller] vendor. I use that to drive down costs,” he says.

Next year, Twohig will continue to play by this strategy as Clean Harbors strives to make more of its applications accessible to mobile users in the field. “We will have a big push on mobility and productivity to the workforce,” he says. The goal, he adds, is “to touch data once,” similar to the way car rental companies are able to process transactions and issue customer receipts via mobile units operated by employees roaming remote parking lots.

The bottom line, IT executives say, is that 2010 will be a flat budget year in which they continue with projects that already have demonstrated at least some payback. Sunoco, for example will use in-place business intelligence and analytics tools to dive even deeper into data. And Mueller Water Products in Atlanta will continue to consolidate and streamline its IT infrastructure so it's easier for customers to do business with the company.

“In down times,” says Mueller CIO Bob Keefe, “everything you do has to contribute to the business.”

That's true, acknowledges Forrester Research Inc. analyst Andy Bartels, but he says he wouldn't be at all surprised to see IT budgets revised upward as the year progresses.

“CIOs' forecasts are a lagging indicator, not a leading indicator,” Bartels says. “CIOs are looking back and planning conservative budgets against the worst economy rather than against an improving economy. It's a prudent course to be risk-averse, but in terms of interpreting the course of things to come, you need to take it with about six grains of salt.” Forrester, for one, is expecting 7% to 8% growth in the overall tech market in 2010.

“The assumption that 2010 is going to be no better than 2009 is not correct,” Bartels says. “While we're not looking at a boom economy, we are looking at a strong economy, and we'll start to see growth.”

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