Microsoft Says Time Ripe For IT Spending

It's no secret that the grinding economic downturn is causing companies to slash budgets, but those that don't maintain a sufficient level of IT spending risk falling behind competitors once the economy does recover, according to a new Microsoft-commissioned study by Harris Interactive.

In a recent poll of 1,200 IT executives at enterprise and SMB organizations in the U.S., U.K., Germany, and Japan, Harris Interactive found that 55 percent believe the recession has changed the role of IT, and 51 percent identified budget constraints as their primary barrier to innovation. All of this suggests that for many firms, innovation is taking a back seat to just getting by.

The trend toward curtailed innovation is especially pronounced in the U.S., where companies are devoting just 29 percent of their budgets to innovation, as opposed to simply "keeping the lights on." This mentality is also affecting investment in green IT: While 84 percent of survey respondents take into account green IT when designing data centers, only 44 percent use green IT as the basis for final decisions.

Despite the glum outlook, the survey did find that companies are spending more on virtualization, security, identity management, and cloud computing, all of which represent IT investments that will help companies recover quickly when the economic outlook brightens, said Bob Kelly, corporate vice president for Microsoft's Infrastructure Server Marketing, in a Tuesday conference call.

"Those companies that invest in IT today and focus investment on efficiency rather than cost cutting are setting themselves up for faster return to growth," Kelly said.

The line between improving business efficiency and cost cutting is a thin one, and American companies have a well established pattern of focusing on short term profit at the expense of long term health. In fact, this type of thinking helped contribute to the current economic malaise, notes Dave Sobel, CEO of Evolve Technologies, a Fairfax, Va.-based Microsoft Gold Partner. That's why he's advising his primarily SMB customer base not to pull back too far on technologies like security and virtualization.

"Companies that invest now are going to win down the road," said Sobel. "Profit is important, of course, but I'd rather sacrifice one point of profit by investing in IT and make up ten times that number over the next decade."

Another common mistake that companies make during recessions is to take responsibility for technology buying decisions away from traditional decision makers and move it higher in the management chain, says Michael Cocanower, president of Phoenix-based Microsoft solution provider ITSynergy.

"This creates a really bad situation, because now you have people making technology decisions that traditionally have never had anything to do with technology strategy or decisions," Cocanower said. "That means long term vision isn't being taken into account, and you have executives making decisions about areas that they haven't taken the time to fully understand."

It's tempting to dismiss the survey as a statement of the obvious, or as Microsoft's effort to seed doubt in the hearts of downturn-hardened companies in order to loosen their purse strings. However, few would argue that in previous recessions, companies have made the wrong decisions about where to cut and how deeply to cut, and that there are always success stories that emerge from times of economic difficulty.

This phenomenon is by no means unique to the technology industry, said Cocanower. "Just as there are extremely good deals in real estate right now, the same is true in the technology industry, and those that take advantage will really propel themselves to the front of the class."