IT spend to increase in 2012

As 2012 fast approaches, many companies are looking ahead to ensure the next year is a successful one for their businesses. According to Simon Campbell-Young, CEO of Phoenix Software, next year will see an increase in IT spending, but managers will continue to keep an eagle eye on the bottom line.

"On the one hand, IT is tasked to reduce overall costs, but they are also expected to invest in new things that will give the company a competitive advantage. Meeting this two-pronged goal will involve cutting operational costs while shifting spending to new development," he says.

“Despite the uncertain economic recovery, businesses are cautiously increasing IT investments for next year, and they want to do more than just keep the lights on - they want to see business returns, such as revenue growth and competitive differentiation.”

Achieving this, he feels, will involve taking real steps toward private and public cloud initiatives to reduce costs in some areas. It will also require a serious look at eliminating little-used, redundant and costly systems. "There's a difference between budget cutting and being lean and efficient. Businesses have realised they need to be lean, and either they do that by taking advantage of newer technologies like virtualisation and private clouds, or you look at some of these new, emerging sourcing alternatives, like software as a service (SaaS) or completely outsourcing business processes themselves."

Virtualisation and the cloud promise to radically remove costs from operating models, but are still in their infancy in terms of uptake. Campbell-Young points out that while things like SaaS will remain a small percentage of overall IT expenditure next year, it will grow as a percentage of total IT operating expenditure, and infrastructure as a service and platform as a service will also grow. Still, he says businesses will mainly continue with their traditional IT infrastructures, with only small forays into the cloud. "There's nothing I've seen so far that tells me the cloud is suddenly going to become the answer," he says. "I'm cloud-wary and believe what we are seeing is the hype cycle."

When companies do spend on technology next year, those expenditures will be geared around projects that promise to grow revenue, increase productivity and produce short-term return on investment. This includes customer-facing systems such as social media, marketing and Web applications; business intelligence (BI) and analytics; and collaboration and knowledge-sharing capabilities.

“The 'I' in IT is coming back into play. Information is key. Companies will be combining social media and predictive analytics to provide customers with more personalised experiences,” Campbell-Young says. The Internet has changed everything - we want it now, and we want it our way; and companies need to think about that in every service they create and infrastructure they build."

This is often referred to as the "Sunday night/Monday morning syndrome", where people have grown to expect the same simplicity, functionality and personalisation from all of their digital encounters as they get from using Google, Amazon and other popular Web sites. "Customers want personalised, specialised types of experiences, and companies are willing to spend money on that because it directly correlates to increased revenue and market share," he adds.

These investments will extend to mobile channels as well. "Company employees all have smartphones and are always online, so there will be investments in that area. Mobile devices can both reduce costs and increase frontline insights into customer preferences,” he explains.

However, the key management challenge for 2012 remains with budget constraints and economic pressures. While modest technology spending will likely characterise 2012, the focus will be on IT delivering competitive advantage and not suffering Draconian cost cuts. "There's a higher level of expectation on the IT organisation," Campbell-Young says. "We're getting to the point where the business is expecting them to come up with more elaborate ideas than in the past. Rather than cutting costs in IT, they are investing in IT so they can reduce costs in other places, improve the business and create competitive advantage."