Tightfisted Budgets Loosen a Bit

Yet the economy continues to cast a shadow of uncertainty over the best-laid tech spending plans.

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IT as a growth engine

Other companies will see upticks in their IT budgets as a result of business expansion, either domestically or overseas. For instance, in mid-2008, Sharp Healthcare, a San Diego-based nonprofit health care organization, plans to open a new 300-bed hospital that will be what CIO William Spooner calls "as near paperless as possible, or 'paper-light.'" As a result, Spooner saw his IT budget rise for '08, following an even bigger increase in '07. The increases may continue, as the systems to make the near-paperless environment possible are rolled out to the rest of Sharp's hospitals in 2009.

That's not all Spooner will be overseeing. In Sharp's ambulatory care area, its IT organization will aggressively work to move all of its physicians online for order entry, e-prescribing, billing and document scanning. Meanwhile, other areas of the health care organization are growing. For example, it's opening a couple of new medical office buildings and undertaking smaller expansions of existing facilities. "We've got a pretty healthy appetite for expanding our facilities and implementing related infrastructure," Spooner says.

The budget increase will also help offset increased labor costs that Spooner anticipates, as a result of hiring people and paying the salaries those new hires will command. "We'll be hiring about 20 people to support the expansion of our ambulatory project, and the cost of labor is going up," he says.

Competition for talent is mounting because the health care industry is "starting to get it in terms of where we have to go with automation," he says. Another factor is a nationwide nursing shortage, which has created a smaller talent pool than health care firms are used to having.

Another organization with growth on its mind is Hilton Hotels Corp. After acquiring Hilton International in 2006, it set out to globalize its proprietary system, called OnQ, as well as accompanying support services, to work in 78 additional countries. Correspondingly, its IT budget has seen continued growth, up 32% in 2007 and 18% for 2008.

"When you look at '07-'08, you'll see a continuation of that same strategy as we extend OnQ into more hotels in more countries," says Tim Harvey, CIO at Hilton, which operates more than 2,700 hotels around the world. OnQ combines CRM, revenue management, property management, back-office capabilities and business intelligence functionality into a single enterprise system.

Hilton's IT budget increases are also related to pent-up demand that grew during the hospitality industry's downturn from 2001 through 2004, Harvey says. In 2007, Hilton also started providing its own high-speed Internet access service for guest rooms. In addition, it is enhancing the scope of OnQ to include integrated sales and events features previously provided by an external vendor's system.

Despite Hilton's growth plans, Harvey says the company still remembers the lessons of budget austerity. "We have steering committees that help us prioritize what we're investing our dollars in," he says. "That leads to trust and credibility."

Smith echoes that conservative approach. Even for CIOs planning budget increases, he recommends preparing a contingency budget in case macroeconomic forces derail IT budget growth. He also warns that IT should continue to look for efficiency improvements in delivering day-to-day services.

With a dubious U.S. economy, the IT budget increases forecast for 2008 are not yet a harbinger of a wholesale IT industry turnaround, Bartels agrees. The mood, he says, should be one of conservative optimism. "With overall demand generally moderate," he says, "CIOs can still expect to drive hard bargains with vendors."

Brandel is a Computerworld contributing writer. Contact her at marybrandel@verizon.net.

Forecast 2008: IT Trends & Predictions for the New Year

How'd we do in '07?  See last year's Forecast 2007.

Copyright © 2007 IDG Communications, Inc.

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