Spending IT Budgets wisely

Spending money on technology has become a game of tactics, strategic moves and potential risks for businesses throughout the world. Globally, technology spending has slowed in response to the current global economic downturn.

In Europe, companies are operating in a weaker economic environment than their North American counterparts - European 2002 gross domestic product (GDP) growth is projected at 1 percent to 1.5 percent, versus 3.8 percent in the US. Throughout 2001 and 2002, achieving cost savings was one of the main issues for Western European organisations and remains a major objective through into 2003.

Companies looking to achieve cost savings have reacted by cutting IT budgets and overall, there appears to be little forward momentum in European IT spending, with analyst predictions varying from stagnant to 1.5% growth through into mid-2003, when they project a slightly more optimistic outlook .

'Bare bones' approach creates new buying patterns

For the moment, however, the majority of IT executives are not getting any more money, which means they have to make the most of what they already have and be cautious about further spending. Any request to the Board to sign off new projects will come under close scrutiny for essential value to the business.

In the wake of the slowing economy, a 'bare bones' approach to technology spending has taken over and created new buying patterns, with the focus on selecting the most affordable option that can deliver the quickest return on investment. This is taking the form of smaller, highly measurable projects and, increasingly, an interest in outsourcing IT functions, to boost efficiency and save money.

Technology that keeps a business up and running while also giving it a competitive edge will be most sought after. In reviewing the current business landscape, Oracle recommends a technology progression path for those wanting to stay ahead of the curve yet save money.

Navigating Technology choices

The most crucial step in the process of assessing the value of an IT infrastructure to the overall business is to understand the business requirements and to map technology investment to them. Is a company looking to expand into a new market? Or diversify into a new product or industry sector? Does it need to streamline its manufacturing capabilities? Whatever the requirements, the budget available will have to suffice.

With a bewildering choice of technology on offer and several potential expenditure options for an organisation's limited IT budget, this initial definition of requirements is the most important step in ensuring future success in meeting short term return on investment goals and long term business goals of competitive advantage, reduced IT complexity, etc.

There are three key steps to get on the right path to success in maximising IT spend and which make the most of the IT infrastructure already in place:

Step 1: Consolidate your information
Many businesses operate a disparate array of databases, file or email systems, each needing management and administration. In this scenario, most companies don't actually know what information they have, as their most valuable assets sit in isolated departmental pools of data. Unstructured data is not productive and adds little value to a company's bottom line.

IT management teams should consider consolidating all of the company's data into one single database. Think about it. The name of a customer only ever entered once, regardless of the application being used. An employee's details entered once for human resources, payroll and project management purposes. By moving to a single database model, information is centralised - which maximises availability and performance, reduces administration and ultimately makes life easier for customers and employees. Everyone in the company can have selective and secure access to the same, accurate data. This model offers visibility across the company to deliver an accurate and real-time 360º view of key business areas including financial, HR, customer and supplier information.

With today's affordable database technology, this option is entirely feasible for almost any size of business and can save an impressive amount of IT budget that can then be used to grow capabilities through the next steps on the technology growth path.

Step 2: Exploit your existing hardware to the fullest
Hardware costs traditionally form a largest part of precious IT budgets, and typically individual servers are poorly used. A recent survey of large companies by Morgan Stanley found that 67% of servers are utilised to less than 60% capacity - a shocking waste of IT dollars. Clustering technologies available today obviate the necessity for large expensive servers, and ensure hardware capacity is used to the full.

Real Application Clusters (RAC) is basically a group of low cost machines bound together to run large enterprise applications. This solution to hardware waste has gained momentum as a fault-tolerant, high-performance, scalable technology choice and is also proving to be a viable low-cost alternative to mainframe infrastructures.

BACS (previously known as Bankers Automated Clearing Service Limited) in the UK is an excellent example of a company successfully using RAC technology. BACS processes three and a half billion transactions annually, including an average 13 million direct debits and direct credits daily and more than 60 million transactions on a peak day. It is using Oracle9i RAC as part of a software and hardware upgrade and is replacing its existing telecom network with an Internet-based delivery channel - to provide its customers with efficient electronic payment services, including salary payments and direct debit collections.

With less money spent on hardware, IT managers can look to spend their IT dollars on strategic projects for future needs.

Step 3: Integrate your existing applications
Most companies struggle with a disconnected mix of mainframe, client/server and web applications, and this complexity is further compounded by any merger and acquisition
activity. Web services promise a high return on investment by integrating a company's existing applications and IT systems, and those of suppliers, partners and customers, to enable rapid information sharing and transaction processing. It's cost-efficient, and uses what a company already has.

The birth of the application server began back with transaction processing monitors and has evolved through web servers to Enterprise Application Integration (EAI) and Web Services, which tie together various parts of a company's systems to provide more useful access to information. Web Services and EAI can significantly streamline and coordinate a company's business processes and, according to Meta Group, offer greater competitive differentiation and higher return on investment in a down economy.

In the past, each application was its own central communication station - this meant it needed to know how to link to many other applications the business used as well as to the database. The new breed of application server enables applications to communicate via a central platform, and is an efficient way to centralise data and link all of a business' applications.

The market for this key software infrastructure product is heating up. IDC expects the total market to be worth €1.6 billion by the end of 2003.

Software outsourcing - predictable costs, professionally managed

One further key consideration to maximise IT budgets is the new model of software outsourcing. A first-class software system is critical in delivering strategic intelligence and indispensable in managing the company's greatest asset - information. However, the actual management of the software systems can be a distraction and a burden for a company whose core competence is not related to IT.

Today, progressive organisations in both the private and public sectors, are turning to software outsourcing, the so-called 'utility computing' model, which allows a company to have its software professionally managed either at their own offices, the IT vendors premises, or at a third party's premises - and to connect to their data through a browser. Just as electricity is available at the flick of a switch, their IT system is accessed at the click of a mouse.

The benefits are enormous. Software outsourcing eliminates all the headaches - the sheer administrative burden of maintaining essential business software, the deployment of new IT projects, the ongoing upgrades, the sourcing of scarce IT staff, and the employee or consultant costs. And the uptake is increasing. With Oracle, companies can select to have their software housed at their own premises, at Oracle's data centre, or at a third party's data centre. In all these models, Oracle professionals manage the software remotely - all for a predictable monthly fee.

Outsourcing of the IT infrastructure is not new, but the traditional model is changing. By accessing software applications like a utility, via internet-enabled systems, companies can better manage the distribution of their resources. Mobility of the workforce can be achieved easily and transparently by providing access to the corporate systems any place, any time via a spectrum of mobile devices.


Spending wisely

Today, businesses of all sizes should concentrate on investing their IT budgets in technology that maximises their existing infrastructure, and that allows them to focus on their core business, while taking a longer-term view to ensure that they have the necessary technology in place to emerge from the current economic downturn ahead of the competition. Those who spend wisely today will be well placed to be the winners tomorrow.