IT Spending Is Not About Costs

Research shows that IT buyers are looking for long-term value in their purchases in terms of data integration and scalability, and are not making decisions based solely on cost. A new Yankee Group report, "The Future of IT Professional Services," predicts that vendors that fail to make these investments will not rise with the economic tide, but be left out of the recovery, because they lack appropriate products. "The way enterprises choose vendors is changing, with focus shifting from cost to the ability to upgrade the environment in the future," Andrew Efstathiou, Yankee Group technology management strategies program manager, said in the report. "This trend will gather momentum during the next two years, increasing demand for discretionary projects, which will create new business value." The Yankee Group predicts these discretionary projects will drive the adoption of Web services and utility computing to automate flexible business processes, disaggregate horizontal business processes, and support highly distributed work groups. "Within five years, every major IT project will rely on Web services and utility computing to deliver the required functionality," Efstathiou said in the report. "Professional services firms that are prepared to deliver these solutions will prosper. The many firms that have not yet retooled in response to this change will be left behind." The report also says that many professional services firms have begun restructuring to meet new engagement requirements that emphasize technology road maps and delivery capability, and to handle smaller projects with upsell opportunities. According to Efstathiou, in general, IT buying is increasing "at the edges" of the organization. "This means that companies are investing in user interfaces, connectivity, and CRM solutions aimed at the end customer, instead of supply chain management and other solutions aimed at the core of the enterprise," he said. Some markets are still spending more than others in terms of CRM and IT in general, Efstathiou said. Financial services and retail corporations are spending big on CRM, while manufacturing has not gotten back into heavy spending on CRM projects. Vendors looking to take advantage of this spending trend must offer solutions with a heavy vertical focus, Efstathiou says: "They need to help get their customers closer to their customers; help them differentiate from others in the industry, and drive that competitive advantage."