I was at an event a few weeks ago hosted by a leading IT journalist who made the following opening remarks. “Good times are ahead for IT. A new investment cycle should happen soon as we have postponed infrastructure upgrades for too long.” His tone was upbeat and encouraging. The only thing was that the audience of more than 20 CIOs and CTOs was not buying it.
Seems that they did not see IT’s health based on the capital replacement cycle as something that was sustainabl
That got me thinking, what if we have an IT-Less Recovery?
Everyone is looking for signs of economic recovery and wondering what the recovery will look like. Economists are talking about the shape of the recovery. Will it be “V” shaped, “W” shaped, “U” shaped or “L” shaped? By the way the last shape means that there is no recovery.
Executives are talking about where growth will come from in terms of increased consumer spending, business investment, export demand, etc.
Most people believe that the recovery will be jobless, particularly in its early stages as investment and hiring lag an uptick in economic activity.
The same thing can happen with IT, particularly this time around for the following reasons:
- IT investment levels generally lag an economic recovery by a year in a normal cycle. This may be the case particularly this year as CIOs predicted the recovery to come in the third quarter of 2010 – which means that investments in growth will not play into the IT budget until 2011 or 2012.
- Companies have most of the core IT systems they need to transact business in a growth environment – this limits the need for IT investment in new systems to support growth.
- IT organizations are virtualizing their IT infrastructure to gain greater capacity – limiting the level of required infrastructure investment as server capacity utilization increases.
- Companies have the option to acquire new applications and functionality through alternative delivery models like Software as a Service, which shifts resources from IT and to service providers.
Not all of these things will happen at the same time, with the same intensity for every organization. But its clear that IT is in a different state at the edge of this recovery than its been in the past.
The possibility of an IT-less recovery needs to figure into CIO and business plans and reshape the nature of IT investment and its role in the enterprise.
The leading IT journalist is right, IT investment will increase because infrastructure will wear out, capacity consumed, and failures occur. CIOs should not wait for an upturn in the infrastructure investment cycle. That re-enforces the view that IT is a commodity and begs the question when the infrastructure should move to more scalable solutions.
The potential for an IT-less recovery is real and its potential to persistence into 2011 will confound IT leaders looking for traditional IT investment cycles.
Do I believe that the relationship between business growth and IT is broken?
But, it is changing based on the evolution of technology, the success we have achieved over the last 10 years, and increasing business leverage of information and technology.
Understanding these changes will be crucial in defining the next stage in enterprise and IT evolution.