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Analysis: IT innovation spending must be earnt

Simon Quicke

Those in the channel that might have been hoping that the customer attitude towards cost cutting IT budgets was lifting as the recession started to appear are set for disappointment.

Although things are improving in the economy the pressure to do more with less is not going away anytime soon and the tight control on technology spending is around for a while longer.

One of the fears is that while there might not be a double-dip economically there will be one mentally as the coalition runs through the public sector waving its axe. Resellers will be hoping not but neither should they expect champagne and big orders to start flowing anytime soon.

According to research undertaken by British software player Micro Focus the pressure on those spending on technology is to continue to control costs and 50% of those quizzed have seen their budgets cut this year.

In terms of sector 55% of those working in financial services said cost reduction was a priority, 46% in healthcare and 46% in the public sector.

But where firms were looking to spend was around the idea of modernising their infrastructure looking to cut costs and waste from existing working practices. A whopping 88% revealed modernisation plans were already pencilled in to be rolled out over the next couple of years.

Stuart McGill, CTO of Micro Focus, said that there was a pressure on IT managers to innovate but do so with less funding.

"Cost cutting remains on the agenda in the UK. What is happening in the public sector is having an impact because it is a very significant part of the IT economy," he said.

But he added that there was an opportunity for those resellers that were able to convince customers that a cut in spending needed to be off-set with investment in innovation in other areas.

"They have to cost cut but they have to innovate so we are managing them together and have to get them to reinvest some of the savings in innovation. The modernisation journey is deciding how some of that happens," he said.

Richard Holway, chairman of analysts TechMarketView, said that the demand customers had made to do more with less had been around for a decade and was likely to remain a buying mentality for the next decade.

But he said that the words 'cost cutting' were wrongly taken to mean that IT would be starved of investment and the channel needed to underline the importance of spending wisely.

"If you can get immediate cost savings then you earn the right to reuse it," he said.

"The big projects have gone off the agenda and small steps forward on a regular basis is what is happening," he added.


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