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Banking on Change: Software IT Spending Predictions for 2012

By December 12, 2011Article

Editor’s Note: We asked our sponsors and several of our frequent content contributors to share their expert opinions on where large enterprises, midsize, and small companies will focus their IT spending on software, cloud and mobile solutions in 2012. They also provide insights on the biggest potential spending mistakes that IT buyers will make in 2012.

“For large enterprises and midsize businesses, many new strategic projects will combine both cloud and mobile functionality. Social media as an IT expense is relatively low, but employee participation in both business and personal domains (of social media) will continue to explode. Enterprise collaboration will continue to expand as a strategic application solution and service. One segment of Big Data is a technology solution for managing massive unstructured content. This segment primarily serves business to consumer SaaS social media providers. Other segments featuring large, data storage-intensive applications remain in high growth mode including mapping, location based services, medical imaging and all forms of video.

For small businesses, the increase will be highest in SaaS applications. Small businesses can readily afford powerful applications delivered in subscription and/or pay-per-use models. They will continue to achieve operating efficiency at low cost by leveraging the economies of scale from SaaS and cloud computing.” – Russell Hertzberg, VP of SaaS/ISV Solutions and Certified ScrumMaster, SoftServe

“Cloud solutions and Big Data to support cloud implementations will continue to be a key trend as customers move toward implementing both private and hybrid cloud environments in support of desktop transformation to universal clients. Consumerization of IT and Bring-Your-Own-Device trends will continue to increase, shifting costs of consumption of mobile purchases to the user to cap costs increase of users carrying multiple devices. However, the infrastructure to support licensing, consuming, and reducing risks across these devices will need to be built out and planned carefully.

Key government directives not only in the United States but abroad around cloud and personal information acts will be primary drivers for adopting solutions that balance user-centric computing with protecting risks for companies. Licensing as a Service to broker the handshake between the Enterprise, ISV, cloud service provider and cloud service broker will become top of mind. This is supported by the 2011 Key Trends in Software Licensing and Pricing Report” published by Flexera Software and IDC, which found that, looking ahead two years, software budgets will be increasing. According to the survey, 43 percent of enterprises report that, looking ahead two years, they expect their software budgets to increase – up from 33 percent in 2010. Twenty-four percent also report that those increases will be more than 20 percent.” – Jeanne Morain, Director Strategic Alliances at Flexera Software

“Smart large enterprise IT and business decision makers will take advantage of proven cloud-based solutions that can improve every aspect of their corporate operations. They will insist that these solutions include mobile and social capabilities to encourage better communication, coordination and collaboration across the enterprise and with their customers and partners.

Midsized businesses will be primarily focused on the basic cost savings derived from cloud and mobile solutions but will have less need for Big Data solutions and will be less comfortable with social media.

Mainstream small businesses will be the slowest to adopt cloud, social and mobile solutions because they are less knowledgeable about these alternatives and more risk adverse. Star-ups will be the most aggressive in adopting social, mobile and other cloud-based solutions.” – Jeff Kaplan, Managing Director, THINKstrategies, Inc.

Large B2C enterprises will focus very acutely on mobile as it opens a green field for new sales (witness market leader and perpetual innovator and how they leverage Kindle Fires to sell more of everything, especially high-margin digital content). Large B2B enterprises will invest in marketing and sales enablement tools linked to public Big Data systems. (B2B suffers from long sales cycles and expensive promotions, and reducing costs while speeding sales is their best opportunity outside of innovating their products.)

For midsized businesses, cloud computing will be significant. SMBs have always suffered from inflexible and expensive growth spurts in IT. Cloud computing offers a strategic path to smoother growth.” – Guy Smith, Chief Consultant, Silicon Strategies Marketing

“Increases in IT spending in 2012 for large enterprises will be concentrated in cloud, mobile and Big Data solutions. As enterprises realize the power of a cloud infrastructure combined with Big Data solutions that can use this infrastructure, new analytical solutions will be possible and will be pursued. Mobile solutions will continue to have an impact on large enterprise IT, and spending will increase as more new solutions are deployed.

The enterprise governance issue will emerge as a significant concern with enterprise IT. They now realize that they can’t stop the cloud, SaaS, and mobile and will look to tools to manage the proliferation of solutions. Governance tools that help with solution life cycle management, solution selection, user authentication, etc. will be of much greater interest in 2012.

Mobile and cloud solutions will both be areas of increased IT spending for midsized businesses in 2012. New and standardized application areas that take advantage of mobile will continue to be developed, and midsized businesses will be in a position to make use of these where they previously may not have been cost effective. Midsized businesses will also look to take advantage of cloud solutions that previously could only support small businesses.

Mobile solutions will be a significant area of growth for small businesses in 2012 as continued penetration of tablets and sophistication of small business solutions help them understand the flexibility and power of mobile.” – Paul Ressler, Principal, the Cirrostratus Group

“For large-sized enterprises, the spending focus will be mobile solutions. This will be in response to an increased proliferation of mobile devices including tablets that have increased adoption. Internal customers are buying and using these devices on their own. A centralized investment in managing and supporting these devices will be needed. This is very similar to what happened with the proliferation of personal computers a generation ago. Big Data solutions and social media spending will increase. However, it is more likely to be led and influenced by a line of business rather than IT.

Midsized businesses will increase spending on cloud solutions. The current generation of cloud-based solutions can address most of the essential requirements of the midsized enterprise. Social media is another area of spend. However, similar to large enterprises, these will be led by lines of business and not by IT.” – Shirish Netke, Executive Vice President, Business Analytics Solutions at Saama Technologies What is the biggest potential mistake IT buyers will make in 2012 due to a spending mindset, and what do you believe they should do to eliminate this risk?

“IT needs to be careful not to be misled between legacy hosted solutions masquerading as cloud versus true multi-tenant solutions, as true cloud solutions are typically more cost effective over the long term.” – Paul Turner, Senior Director Product Marketing at NetSuite


“The biggest potential mistake is to continue to write large checks to legacy vendors for status quo IT systems that can be unplugged, refactored quickly or enhanced by replacement…at a much lower cost.” – Russell Hertzberg, VP of SaaS/ISV Solutions and Certified ScrumMaster, SoftServe

“Taking a myopic price focus would be the biggest mistake. Initial purchase price dominates the decision-making process for over 64 percent of buyers (DCS-2011); however, initial purchase price reflects less than 20 percent of the cost of owning a typical IT asset over its useful life cycle. Focusing on who provides the lowest price or biggest discount might make the IT buyer a short-term hero but a long term fool, as the initial savings are quickly consumed by higher support, maintenance and upgrade costs over time.

Overload is epic. Forced to do more with less, buyers are currently consumed with maintaining and supporting ongoing operations, currently consuming 70 percent of total IT budgets for 2012, which leaves scant resources to address new opportunities and explore potential solutions. Although overloaded, IT executives need to reduce the burden of ongoing operations and find ways to allocate more budget to innovation.

In times of economic uncertainty such as the past four years, many organizations freeze in place, afraid to change / spend for the future. But it is during these tough times that the future leaders spot the next big wave on the horizon and begin paddling to be in just the right spot to catch it to success. There is a real cost of doing nothing and missing the next wave. Savvy organizations continue to invest in short- and long-term projects to not only optimize current operating efficiencies but also have a platform to capitalize on the next big wave.” – Tom Pisello, Chairman and Founder of Alinean, Inc.

“They will delay (again) a migration of non-power users off Microsoft desktops. Investments into infrastructure management and personnel will be the typical argument against adopting web/cloud office tools. The net savings (pun intended) of migrating vanilla users are strategic and long term, but require starting the process. Current economic conditions will cause many to pause.” – Guy Smith, Chief Consultant, Silicon Strategies Marketing

“Failing to take advantage of the rapidly expanding array of Cloud-based alternatives to traditional on-premise systems and applications because of concerns about their viability, scalability or security will be the biggest mistake.” – Jeff Kaplan, Managing Director, THINKstrategies, Inc.

“The biggest mistake that IT buyers will make in 2012 will be to continue to focus on short-term cost savings from IT technology. Many of the solutions in mobile, cloud, and SaaS require time and an organizational learning curve to implement effectively. Focusing on the short term will cause longer-term investment opportunities to be ignored with serious consequences in two to three years. Companies and IT organizations could find themselves in the position of not having the basic cloud and mobile infrastructure in place to rapidly deploy new solutions. This will likely put them at a serious competitive disadvantage. To eliminate this risk, IT buyers need to focus on technology, which will accelerate solution selection, development and deployment not purely on short-term cost savings.” – Paul Ressler, Principal, the Cirrostratus Group

“It would be a mistake to maintain the 80-20 thumb rule of budget allocation, which states that 80 percent of the budget be spent on running the business and 20 percent be spent on growing the business. This has led to overspending on legacy-line items that have persisted in budgets and under investment in business-impacting technologies. Non-investment in growing the business can leave the company at risk of being non-competitive. A zero-based budget approach, which questions every expense and its impact on company competitiveness frees up monies to spend on innovation and growth.

Be watchful of Big Data. Within five years, it will change the way information is stored, managed and consumed by decision makers. Big Data projects will most likely be led and funded by lines of business in 2012. IT will need a plan to incorporate this technology within the enterprise.” – Shirish Netke, Executive Vice President, Business Analytics Solutions at Saama Technologies

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