Vendor management key to ‘cyclical’ IT purchasing

IT managers and CIOs can look forward to a year of spending dominated by emerging technologies but vendor vigilance is always necessary to maintain value, according to The Communications Group’s general manager of IT, Derrick Wheeler.

“Budgets for infrastructure items will increase, I think,” Wheeler said. “If companies haven't already replaced their Y2K purchases, they will be [ready to] now; so it's time to upgrade again.

"Desktop budgets, though, will stagnate as people are still holding off decisions (for example Office XP) to see what happens with low-cost desktop solutions.”

Such “upgrade cycles” will be one of the main drivers of IT purchasing in 2004, Wheeler said, adding that users should demand more flexibility from their vendors.

“I'd like to think vendors will be more flexible in terms of payment schedules. For example, allow monthly or quarterly charging to help IT budgets become flatter,” Wheeler said. “Even ideas of taking purchases off Capex and making them Opex-based. This would help overcome the high initial charges which kills some projects.

"We see this with some of our vendors.”

Wheeler also recommends anything that shares risks between customers and vendors such as part payment during development of projects and then full payment based on successful returns for the customer.

The Communications Group is a conglomerate of specialist marketing firms including George Patterson Partners and Zenith Media, of which IT has been given a strategic position in its running.

“The perceived value of technology is cyclical and the perception is always good when technology is applied to reliably solve a very specific business problem,” he said.

“Perception is always poor if the technology is seen as being there for its own sake. ‘Perception is reality’, and IT has to work harder on selling applied technology.

"Also, senior business managers still have a long way to go in their understanding of technology and how they can apply it," Wheeler said. Companies where this happens, invariably perform well, he said.

One of the technologies he's unsure of for this year, Wheeler said, is voice over IP (VoIP. "It sounds good, but apart from some in-house deployment, I’m not convinced on this one. I’m still sceptical on reliability, quality, and infrastructure upgrade costs.”

On the technology front, it will be something of a bland year according to Meta Group Asia Pacific research director Kevin McIsaac, who said 2004 will be a year with no “earth shattering arrivals”.

“There will be no ‘must have’ technologies,” McIsaac said. “However, technologies with growing deployment rates will include VoIP, wireless, and mobile data. Also, there'll be continued growth in Linux, given impetus by commodity Intel servers.”

McIsaac said 2004 will herald an era of “penny pinching” where people will expect a lot for little or nothing.

“In a year when IT budgets will grow 3 to 5 per cent, [there will be] careful attention to IT financial management and a focus on enterprise architecture and program management,” he said. “[There will be] some renewal of desktops and servers as they reach the ends of their lives.”

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