Bright Spots in a Dismal IT Spending Outlook

With the chaos of the financial markets imploding over the past few weeks, it is easy to imagine a crunch in information technology budgets and associated spending in 2009.  The analyst community has quickly revised their spending forecasts downward.  According to Peter Sondergaard of Gartner, IT spending will rise 2.3% in 2009, down from an earlier projection of 5.8% with the US and Western European markets being hit the hardest.

However, even with this doom and gloom, I’d like to point out a few areas that I believe are bright spots of IT growth and innovation for the year ahead:

Spend management & cost management applications

If you are delivering value that helps shrink the spending of IT, you are in a great position.  This includes vendors and consultants who focus on optimizing IT configurations, reducing hardware and software license costs, and manage standards to control renegade spending.

Maintenance contracts

While the number of large contracts for ERP, CRM and ITM software will decline substantially in the year ahead, those vendors have been very successful in negotiating long term and lucrative maintenance arrangements.  These contracts might cost 15% - 25% of the original cost of the software license, and are paid every year that the software continues to be used.  For many vendors, these fees account for 50% or more of their annual revenues.

IT applications sold on a per seat per month basis

The world of SOA has begun to shake up software licensing for big and small vendors alike.  Look at the impact that the Salesforce.com per user licensing model had on disrupting the CRM marketplace.  I’d expect to see this trend accelerate in 2009 across a broad array of IT offerings.  While it is painful for an established IT vendor to switch from a large license model to a per seat per month model, the end result rewards firms that provide real value (as opposed to shelf ware) at a time when buyers are looking for any excuse to delay a large purchase.

Free IT applications

While we have seen the development tools stack embrace open source technology over the past 5 years, almost all of the applications that “run IT” are still costly and proprietary.  But now, we are beginning to see new firms emerge that are challenging this assumption.  Here in Austin where I am based, we have an innovative startup called Spiceworks (http://www.spiceworks.com/) whose tag line is “Free IT Management”.  You can bet that that will peak the interests of procurement agents everywhere!