Businesses See Silver Lining In IT Spending

End users may be worried about the value of the dollar, inflation and the prospects of a long-term recession, but at the same time, nearly three-quarters of businesses either expect the business climate to remain steady for the next 12 months or they are adjusting their sales/earnings upward, according to a new Everything Channel IT Spending Forecast Survey.

The findings illustrate the sales situation many solution providers find themselves in: convincing customers that even in an unstable economy they should spend money on IT to help them reduce operating costs.

"I would say demand is steady and strong," said Audrey Levi, president of Altek Computing Group Inc., Miami. "I see it down in specific [vertical] markets like real estate, mortgage, construction. Those companies are not spending."

She added that more companies are "smart spending," that is, buying IT solutions that can help them become more efficient.

The survey also captured end users' IT spending priorities (backup and recovery, PC refreshes), what technologies they're looking at implementing for the first time (VoIP) and what capabilities they're looking for from solution providers (technical support).

Small businesses were the most optimistic on the economy. More than 80 percent expected their companies' business climates to remain steady or improve. In addition, 76.1 percent have either increased their earnings and sales projections or not adjusted them. Large companies were more pessimistic as 30.8 percent expected business conditions to improve while 23.1 percent expect conditions to worsen. More large companies adjusted their earnings/sales projections downward, 25.3 percent, than upward, 20.9 percent.

Spending Strategies
The results mirror what solution providers who gathered at this month's TechSelect Conference in Las Vegas said they see.

"IT is now a key business division. You have to justify what you're doing. You can't be spending money on your favorite vendor or a pet project. If it fails, then you have failed," Levi said.

Bob Dutkowsky, CEO of Clearwater, Fla.-based distributor Tech Data, believes businesses holding off on IT purchases because of economic concerns are creating a self-fulfilling prophecy.

"If you believe it's bad, it's bad. You can't be nave about it, but tech spending last year increased 6 percent. This year, even if it's up 2 [percent] to 4 percent, it's not going to be minus 5 percent. People still need to spend on technology," he said. "Demand for this stuff never goes away. It's about how businesses prioritize. They're still planning, they're still considering to implement. They may defer it. But some things you can't push off. You might need more storage to remain compliant, so you buy that."

For example, Tech Data recently brought in a consultant to analyze its high availability for online ordering systems, Dutkowsky said. The consultant determined that Tech Data needed to upgrade its storage infrastructure.

"It wasn't in our budget, but we did it. We had to do it. We can't get to the end of the quarter and have our sales systems not work. We reprioritized spending on something else," he said.

Tech Data, a $23 billion company, certainly qualifies as a large enterprise end user. For such companies, enterprise storage solutions were the No. 3 priority for the next 12 months, behind backup and recovery and business intelligence.

Meanwhile, small and midsize companies each chose new desktops, notebooks and entry-level servers as their top IT spending priority for the next 12 months.

Sam Ruggeri, president of Advanced Vision Technology Group, a Hauppauge, N.Y.-based solution provider, said IT spending is being helped by economic stimulus programs, including one by IBM Global Financing that offers short-term free financing and leasing options.

"For organizations that don't have the budget today, that can push the sale along," Ruggeri said.

Advanced Vision Technology Group now talks to customers to engage them in long-term IT spending strategies. The initiative is a success, Ruggeri said. "We're taking care of clients differently. We're preplanning projects. If a customer has 100 PCs, we'll phase out 40 this year, 40 the next year, maybe 20 the year after. We're trying to control whatever economics we can."

Next: 'A Smarter Spend'