Budget busters are looming

Changes on the horizon threaten to continue wrecking havoc on IT budgets

Over the past few years, Sarbanes-Oxley Act compliance, as well as privacy and security regulations, have wreaked havoc on IT budgets. Despite the difficulties, many companies have made good progress in these areas, and their CIOs are looking forward to more budget flexibility in the next few years. Unfortunately, new budget busters looming on the horizon will continue to affect IT spending.

Start planning now for these approaching costs:

Vista. While many IT organizations are planning extended evaluations of Microsoft's new operating system, most will probably install it within two years, since the company claims that Vista offers significantly enhanced security. Unfortunately, few PCs are powerful enough to support Vista. In addition to paying licensing costs, most organizations will also need to replace most of their PCs.

E-waste. Disposal of PCs, printers, copiers and phones is becoming more difficult and expensive. The European Union's Restriction of Hazardous Substances regulations mandate strict disposal methods for lead and other hazardous electronic waste. Congress is considering similar measures, including the Computer Hazardous Waste Infrastructure Program Act and the Electronic Waste and Recycling Promotion and Consumer Protection Act. In addition to hardware recycling, companies would be responsible for completely erasing disks to ensure that company data is not compromised and that software licenses are protected. Proper disposal could easily cost US$60 to US$100 per PC.

Major application suite upgrades. Oracle and SAP are developing major new releases of their software. Although both companies promise to support current versions for several years, most customers will likely migrate over the next two to three years (or eventually face operating their businesses on unsupported applications). The inevitable migration process will be large, complex and costly.

Electronic records retention (ERR). Most organizations have records-retention policies for customer data, employee records and corporate data such as memos, presentations and spreadsheets. But fewer retention policies cover e-mails, instant messages, chat room exchanges, blogs, cell phone voice messages or voice mails embedded in e-mail. Capturing, organizing and storing this data is expensive, but it can be critical when legal issues arise. In the event of litigation, IT must be able to produce the electronic data and show that it is authentic and unmodified. (The stakes can be high.Morgan Stanley client Ron Perelman recently won a US$1.45 billion judgment against the firm when it was unable to turn over requested e-mails to the court.) These newer forms of electronic data are growing at rates of more than 50 percent annually and are located across a wide spectrum of devices. Most large companies will need to design ERR programs, implement far more extensive archival procedures and provide far more storage capabilities than before.

VOIP. Low operating costs are speeding the migration to voice over IP. This technology supports a host of tools, including videoconferencing, unified voice mail and e-mail, and presence awareness (the ability to state one's availability and willingness to communicate). According to Bill McNee, president and CEO of Saugatuck Research, 70 percent of Fortune 2,000 companies will have at least one location that uses VOIP by the end of 2008. Implementation costs are high, however, and the process requires more time than most companies allocate. In addition, there are unresolved questions regarding security, reliability (such as dropped calls) and incompatibility because of a lack of standards. These issues can cause problems that require large amounts of technical resources to resolve.

Web 2.0 capabilities. Consumer-oriented Web capabilities (wikis, podcasts, social networking, mashups, etc.) are becoming increasingly important avenues for understanding and communicating with your customers and your workforce. Most IT organizations have not integrated these Web 2.0 capabilities into their corporate architectures. Many of the products are free, but integrating them into your infrastructure can be expensive and problematic.

Infrastructure. Over the past few years, IT organizations have focused on bringing down the cost of their infrastructures but not on reviewing their overall architectures. In fact, many companies haven't examined their architectures closely since Y2k. New systems and the issues discussed above will have a tremendous impact on the cost and effectiveness of your infrastructure.

As you anticipate IT spending for the next few years, include funding for these budget busters. Even if the actual costs won't appear right away, start planning now for the financial impact. Use the lead time to educate your executive team about the big-ticket items. With good preparation, you will need to do less explaining -- and less arguing -- at future budget reviews.

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