Enterprise Disruption

A number of factors have changed in the business climate, and they are all dulling the appetite for new products in the enterprise. The most pressing factor is that companies today have a fundamentally different view of how much cash they need to have on the books. We live in a post-9/11 world where anything can happen, and executives feel they need large amounts of cash on hand to weather any sudden world event. So an improving bottom line doesn't translate directly into more funds available for IT.

Beyond that, IT budgets don't tend to change midyear. The 2004 budget was set in 2003. That number is typically a percentage of the company's overall revenue. So, if revenue was down in 2003, then the IT budget was set lower in 2004. Furthermore, many corporations actually have cut the percentage of revenue dollars allocated to IT, thereby creating a double- whammy effect on IT spending. And remember, 95 percent of the IT budget in an enterprise typically is dedicated to paying for ongoing licenses and support, so the percentage dedicated to new technologies is relatively small.

That's why making sense of overall trends in IT spending is difficult. But if you look across a number of product categories that are doing well, a pattern starts to emerge. Those products that help IT by cutting spending and doing more with less are doing very well. This accounts for all the interest in, for example, blade servers, virtualization software and KVM switches.

The only way for solution providers to get around this paradigm is to become closer to the business leaders at their customers. It is impossible to make a meaningful business decision today without kicking off some sort of IT event. So, a change to a business process is now the catalyst that creates all the downstream IT spending. That means the only way anything will change is if solution providers get out there and start constructively disrupting those business processes.

How disruptive are you? I can be reached at (516) 562-7477 or via e-mail at [email protected].