Survivor's Guide to 2005: Business Strategies

For Jim Speer, director of IS at Talley Defense Systems, money will be the hardest to come by, at least until there is an upswing in customer demand. "The economic climate will be the same next year as this year," he says. "Our business is still being impacted by the economy."

Other IT executives say the biggest challenge will be security. "We will consume a great deal of time and other resources in improving our security structures," says Charles Tuite, operations coordinator at Ball State University. "It will involve a total re-evaluation of the users' needs, the system requirements and the overall architecture."

Still others say that 2005's greatest challenge will be a shortage of trained IT staff. Nearly all the IT administrators we interviewed for this story agree that projects tied to compliance with HIPAA, Sarbanes-Oxley and industry-specific regulations will divert people from day-to-day operations and new business projects.Most IT organizations will spend more in 2005 than they did in 2004, but just barely.

The good news: Some 66 percent of IT organizations plan to spend more in the coming year, according to a Forrester Research survey, though the average increase is only 6.4 percent. IDC and Gartner forecast IT spending to increase by around 5 percent. Our own Network Computing survey, published in November, finds that 44 percent of respondents plan to increase IT spending next year, but only 16 percent say their budgets will increase "substantially." On the flip side, in Forrester's most recent survey of CIO confidence, 12 percent of IT executives plan to cut spending. About 19 percent of Network Computing's survey respondents say cuts are in the offing.

So what does all this mean for your organization? If you're lucky, your IT budget is just barely staying ahead of inflation, and you have enough money for one or two new projects--if you're willing to postpone some others.

Jeff Swenson, network administrator at Philadelphia-based Recon Automotive Remanufacturers, says his organization will spend much of 2005 improving its technology-management processes--including network monitoring, desktop management and incident management--and further aligning IT projects and business strategies. But the company will postpone a scheduled server and storage upgrade until later in the year. "The business environment is still very fragile," Swenson says.Speer says Talley Defense Systems will also make trade-offs. The company will invest heavily in facilities expansion, adding a remote business office that will support voice over IP and several other new technologies. But it's cutting back on consulting and professional services, making do with in-house staff.

While most IT departments will have enough budget to do the basics, an unexpected problem or a tougher-than-expected project could sap many organizations of cash.

Many IT executives say they had sufficient money to fund most of their scheduled projects in 2004, but not enough people to complete them. "We are ready to go on a shopping spree," says one IT exec whose organization couldn't get to every project, "because we want to spend the budget before the end of the year."

The staffing problem won't improve much next year. Some 27 percent of respondents to Network Computing's reader poll say they expect IT head count to decrease in the coming year; about 61 percent say head count will stay the same. A study conducted earlier in the year by Gartner indicates that 62 percent of IT organizations plan to increase head count in 2005, but most of those respondents expect the increase to be only in the 1 percent to 5 percent range, and that figure includes outside contractors. Other studies arrive at the same conclusion: Don't count on the cavalry to charge over the hill in 2005.

With short budgets and even shorter staffs, many IT organizations are looking to consolidate technology and people. Roger Walls, IT specialist for the 3rd Brigade of the 75th Division of the U.S. Army, says his unit will consolidate 250 different server domains into a single network. The consolidation will help the unit cut the cost of redundant resources and make better use of available staff, he says.For other IT organizations, "consolidation" could mean staff cuts, analysts say. Bottom line: IT is not out of the woods yet. More reorganizations and layoffs could be in the works for 2005.

Who's Riding Shotgun?

With people and money in short supply, many IT organizations should look to protect the investments they've made. The obvious priority is to upgrade security, through improvements in access control, virus/worm prevention and patch management. In our reader survey, 54 percent of respondents say security will be their organizations' first or second funding priority next year. But there are less obvious "investment protection" priorities. The most frequently cited is SOX, which requires public companies to scrupulously collect, document and disclose data that might impact their financial performance. So far, SOX compliance has been a nightmare because there are no detailed guidelines, leaving IT organizations to guess about auditors' requirements.

Rising IT costs may also threaten investment plans. "It will be harder to strike deals in 2005, as a lot of competitors have closed their doors and the remaining vendors are not as hungry," says one director of IT. Several other IT executives agreed that their vendors are less desperate to negotiate than they were a year or two ago, and that the days of deep discounts and fire sales are over.Packing Your Gear

Even for those fortunate companies that have ample budget, staff and investment protection, there's still plenty of work to do next year. Aside from security, most organizations have picked one or two projects that will get most of their attention and funding. Among the emerging-technology projects cited most often are VoIP and wireless. Others will be working on IT processes, including server consolidation, network optimization and patch management.

2004 was tough but bearable, and we expect the same in 2005. Just remember: When you're digging for gold, survival is the first step toward the big strike.

Tim Wilson is Network Computing's editor for business technology. Write to him at [email protected].

Business Strategy

1. The following statement best describes my IT budget situation for the coming year:

2. The following statement best describes my IT staffing situation for the coming year:

3. The following statement best describes my economic outlook for the coming year: