Why customers aren’t spending on IT the way they used to

Toronto – Last year’s economic downturn did more than produced awful balance sheets for vendors and solution providers.

What is also did was force IT buyers to behave differently than before. That’s what IDC analyst Rick Villars declared during his keynote address at the Avnet Canada conference held at the Lionhead Golf and Country Club in North Toronto.

Villars a 20 year veteran at IDC is the analyst firm’s vice president of storage and strategic systems. He told the crowd of solution providers that the economic recovery period of 2010 will bring about new opportunities not just with the upswing but with IT transformation.

“There have been changes in the behaviour from the slow down and you need to know how to capitalize on it. Customers are not spending the way they used to before. They will be buying things differently and it will lead to risk and opportunity,” Villars said.

While new behaviour buying patterns and approaches maybe scary to some solution providers, the good news is that 2010 has shown clear signs of a computing recovery. One area that is showing tremendous amounts of growth is in hardware expansion for cloud solutions.

According to Villars, the CIOs and business decision makers have a clear concern over the next five years. There is a strong belief in the market that the mobile device will become the primary user device. “For most end users and consumers this will be how people will want to interact with and the question then becomes how will the infrastructure be built to support this trend?”

In Canada, Villars said that IT spending has grown about three per cent. “It’s not shrinking as fast as Russia and it’s slightly slower than the U.S. but slightly faster than Europe. The recovery is here in software and services. The hardware, however, is flat and that could be because of currency adjustments,” he said.

But even in conservative Canada customers have changed, he added. The credit crunch, for example, brought in an era of cash controled spending. This has had a serious impact at the senior leadership level. “They have done a reset in their thinking on IT acquisition. The focus now is on boosting operations. People have woken up and seen the high cost of migration and converting data from one storage system to another.”

Customers are now looking for better responsiveness. They also want to balance capital and operations costs. This, Villars, believes is the single biggest fundamental change that has happened in the market place. “If you take IT in capital/operations and compare that to inventory it’s clear that IT has gotten out of alignment. Other areas are aligned so reducing that capital part and bringing in solutions that reduces total IT spend is important.”

IT buyers will also be looking for technology choices such as leasing, virtualization and cloud computing in a SaaS model, capacity on demand or in a managed service. “It has nothing to do with who has the best technology anymore,” Villars said.

Many industries are transitioning as well and will have new IT agendas in the next five years. Villars stated industries such as media and entertainment, healthcare, mobile services, legal, and physical security as examples of industry that are influx.

For example, media start ups will not be building a data centre, but can buy four servers in a cloud as a deliver method. There will also be customers who will need temporary solutions such as SQL reporting that is usually run once a month for about two hours. There is no need for a dedicated server for that task. The Amazon Web Services public cloud Villars suggests is a solution for this type of customer.

In legal and healthcare with E-records keeping and eDiscovery has eliminated a lot of paper files. However, these files need to be parked somewhere for the long term.

How do these new buying behaviours impact the channel? Villars believes the channel partners own the relationship. The channel plays a critical role for cloud providers. “It’s like the telephone company. They think they have all these great relationships, but customers actually hate them. Now the cloud service providers are going to resellers to position them as the front end of the business,” he said.

Villars also said that the only drawback currently is the cost model for both are not in sync. “That still needs to be worked out, but the cloud service providers need the channel just as much as the channel needs them. The channel is somewhat in a power bargaining position.”

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Jim Love, Chief Content Officer, IT World Canada

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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