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Flat Chance

As companies keep IT spending in check, executives have to make some hard choices about what they can live without.

NYK Business Systems Americas, which serves a much larger company, will also have a smaller budget in 2010, calculating in already-announced head-count reductions in application support and a drive to save on server infrastructure. “There is not a lot of capital spend,” Schubert says.

Other companies may be investing, but not in discretionary projects. Nick Caplanson, CFO of Norwich, Connecticut-based Dime Bank, is due to deliver the community bank’s IT budget later this month, and when he does, it will reflect a “loosening up of the purse strings — just a bit.”

But whatever modest increase there may be owes something to timing: when the financial-services meltdown hit in 2008, the community bank postponed projects it had budgeted for in its 2009 tech-spending plan. Now some of them may finally get funding, but the proposed new outlays for 2010 hardly represent a return to normal levels of investment.

Dime will spend more on software licensing and maintenance to support an expanded user population resulting from the opening of a new branch. In addition, the bank will roll out a fraud- and security-detection system next year, which it deems necessary due to an industrywide increase in bank fraud that has coincided with the recession. The new system can be justified by its focus on keeping losses low, protecting customers, and helping Dime maintain high ratings during regulatory exams, Caplanson says.

Priority Areas

Where else might companies plan to spend their limited IT allocations in 2010? The release of Microsoft’s Windows 7 operating system could lift spending on PC hardware and software, says Andrew Bartels, an analyst at Forrester Research. “For many companies, it’s time to buy new PCs,” he says, “because they have desktop computers that are three and four years old.”

But corporate customers typically delay buying Microsoft’s latest OS until its durability is proven, so the bulk of that spending might not take place until after 2010. Indeed, Dime Bank will likely do a major network and desktop infrastructure upgrade pending the release and broad acceptance of Windows 7, says Caplanson, but not until 2011.

“Virtualizing” servers by installing software that allows one server to do the work of many is another spending wave that could up the level of investment in 2010. In the next 12 months, IT managers surveyed by Goldman Sachs expect to increase the percentage of installed servers that are virtualized to 54% from 37%.

Schubert at NYK Business Systems Americas is trying to optimize server infrastructure at two North American data centers. “We’re trying to replace servers coming off lease with fewer boxes to cut down on maintenance costs,” he says.

Funding for technology that addresses regulatory requirements and enhances data security will also trend higher in 2010. “Audits are not going away, and in some cases they are more intense than ever,” says Bernie Wedge, leader of the Americas IT risk and assurance practice at Ernst & Young. Automation of governance and compliance processes is likely to pick up as head-count reductions put stress on companies trying to implement and adhere to controls, Wedge says.

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