You: Spending on your networkÕs future

Heartened by signs that the economy may be on the mend, network executives hope tight spending restrictions will ease soon. But until then, they're continuing the strategy of doing more with less, and living with the reality that they need to make tough decisions on how to divide up the budget pie.

The competitive edge

Squeezing out funds

Tips for showing a return

Resource: Advice in stretching IT budgets

One of those tough decisions should be to keep spending on the future, according to analysts. Network executives must not shortchange investments in new technologies to concentrate only on current needs, experts say. Doing so risks missing out on business opportunities that will emerge as the economy improves.

Still, that's easier said than done. Network World's annual IT spending survey of 598 IT professionals, conducted at the end of last year, showed that IT budgets for 2002 were expected to increase only 3.9% from 2001. Nearly two-thirds of the managers (65%) said their 2002 financial resources wouldn't be adequate to handle the tasks at hand.

But that doesn't justify a knee-jerk reaction to halt investments in newer technologies such as wireless communications, voice over IP, biometrics and quality of service (QoS). IT budget experts say no matter the economy, between 10% and 15% of IT spending should go toward new technologies.

The competitive edge

Carlos Leon, network operations manager at Contractors Register in Jefferson Valley, N.Y., stands as an example that spending on new technologies needn't decline in tough economic times. His company has continued to devote its typical 10% of IT spending to new technologies, he says. "There are risks of falling behind our competitors if we don't stay abreast of the latest technology," Leon says.

Contractors Register, which publishes building and construction directories and operates a Web portal for the construction industry, has continued to spend on QoS and remote monitoring services for its Web portal, Leon says. These technologies help to enhance security and ensure the site is always up and delivering timely information to customers and business partners.

"We need to be proactive in getting remote monitoring, even on an hourly basis, so we can make quick decisions about how to improve the site based on the information we gather," Leon says. "If companies are going to partner with you, they want your site to be available all the time and they don't want it to be compromised [by security breaches]. That's critical if you're going to keep your credibility."

Another case in point is Countrywide Credit Industries, a financial services firm in Calabasas, Calif. Mark Brubaker, senior vice president of enterprise network services for Countrywide, continues to green light testing programs because "technology changes so rapidly that if you don't keep a steady pace [of investing] you fall too far behind the curve and it's very difficult to catch up," he says. "It costs an incredible amount of money to augment your staff or to bring in consultants" to help get the company up to date in new releases or new network services, he adds.

Countrywide is looking at wireless for LANs and WANs - at least in alpha test programs - even though the technology is still in the early stages of development. "Wide-area wireless will provide immense value because we have a substantial outbound sales force," Brubaker says. "The technologies aren't at the level that we believe justifies a high expenditure, but we'll continue to look at wireless because it makes an incredible amount of business sense."

The financial services company also is integrating voice and data networks to reduce costs and gain scalability. "Larger pipes will allow us to run voice, data and video [on one network]," Brubaker says.

Tips for showing a return
Getting the money you need in these tight times means showing a great business case.

The U.S. economy may be on the upswing, but by no means have companies returned to the robust technology spending days that characterized much of the mid to late 1990s. When companies invest in network technology - whether it's been around for a while or just emerging from the lab - network executives must be prepared to show returns on the investment. more..

At Contractors Register, demanding users also keep IT plunging into new technologies, Leon says. The company has deployed wireless technology at its headquarters and has given field salespeople wireless handheld devices, largely because the representatives insisted they needed wireless access to important customer data stored in servers at the main office.

Leon also says investing in new technologies will keep IT staffers adequately trained on the latest developments.

This, in turn, will help you retain your top people, says Barbara Gomolski, research director at Gartner. "If you do boring stuff, you're not going to hold onto your hot talent. Most of the technology stars get bored and leave. It's worth staying with leading-edge technologies because they are what the best people are intrigued by."

Among the technologies Gomolski says are worth investing in are those for wireless networks; security, including biometrics; business continuity; distance learning; streaming video; and telecommuting. "You want diversity, like you would with any investment portfolio," she says.

Despite these days of tight budgets, if you view IT as strategic, then you are not only justified, but obligated, to dedicate funds to what Gartner calls "frontier" technologies - those likely to benefit the company in the future. Certainly, your competitors are continuing to invest, albeit not always at the recommended ideal of 10% to 15% of the IT budget. Still, a survey of 600 large companies Gartner conducted in mid-2001 showed that, on average, companies were devoting 7% of their IT budgets to frontier technologies. A similar study showed average spending of 11% on frontier technologies in 2000. "That's a small percentage to put toward emerging technology," she says.

Squeezing out funds

Network executives "need to squeeze operating expenses as much as they can so they can finance new technologies," Gartner's Gomolski says. "For example, by squeezing money out of telecommunications services, they can fund new software development."

The goal is to make short-term, budget-conscious decisions that will see you through tight spending periods while preserving your ability to research and deploy new technologies.

Start by looking for creative ways to cut existing costs or trim rising expenses. Countrywide purchased burstable circuits rather than fixed bandwidth from its ISP to slash Web access costs. "Rather than pay at the high water mark all the time, we're paying on a usage basis," Brubaker says. "We're doing similar things with the rest of our infrastructure wherever appropriate." (He declined to specify the amount Countrywide has saved through these measures.)

Good network-usage forecasts also can have a positive budget payback. They can help identify ways to slow or stop rising expenses. "We try to determine what our core network should look like in 12 months by looking at trends from the past," Brubaker says. "We also keep in close contact with our [software] developers to see what they're doing with applications. Can we redesign an application to limit having to buy additional bandwidth and components?"

Other users say they continuously look for ways to drive infrastructure costs down, such as using less-expensive alternatives to wide-area frame relay and shifting the cost of remote access to the Internet for employees who work at home.

Contractors Register's Leon advocates due diligence when making decisions on how much to invest in new technology. "Approach things that have brought you success in the past, from a budgetary standpoint and a timing standpoint. If you've been successful up to now and your approach has been sound, continue doing the same thing," he says.

Violino is a freelance writer covering business and technology. He can be reached at bviolino@optonline.net.

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