The New Austerity

Flat IT budgets will make 2007 a year of conservative spending with a focus on efficiency.

The hotel industry is hot, and Marriott International Inc. is one of the industry giants anticipating continued profits this year. In the third quarter, which ended Sept. 30, Marriott posted a 9.4% year-to-year increase in its worldwide revenue per available room, or RevPAR — a commonly used performance metric in the lodging industry. And from 2006 to 2009, the company expects diluted earnings per share, excluding its synthetic-fuel business, to rise at a compound annual growth rate of 15% to 25%.

However, the Bethesda, Md.-based company’s technology budget for 2007 is lower than it was last year, according to Susan Zankman, senior vice president of information resources finance and management services at the $11.6 billion hotel chain. But that’s OK with Zankman and Howard Melnick, senior vice president of information resources application services. To them, investing more money in technology doesn’t necessarily ensure success. “It’s spending money in the right places,” Melnick says. “It’s having a tight lens on potential projects and seeing how they map to all the criteria. How does it impact the brand? Fit into the technology strategy? What is the financial impact?”

forecast2007-logo_sm.gif

Rather than seeing the drop in available funds as a bad thing, Melnick and Zankman both expected and welcomed it because they see the coming year as a time to turn inward, drive more efficiencies into their internal processes, lower their maintenance and operating costs, and otherwise help fulfill Marriott’s mantra of continual improvement. And where they do plan on spending, it’s with an eye toward helping the business save money in the long run by adhering to a rigorous portfolio management process that ensures application reuse and convergence of technology investment with business strategy.

Plans include continued server consolidation, building out Marriott’s virtual private network, expanding its use of integrated computer-telephony systems for customer service, rolling out its new Web-based labor management system, and training staffers to improve requirements-gathering and reduce project costs. “It’s not a matter of doing fewer things, but finding different ways to work,” Melnick says.

Conservative Spending

At a time when many companies are cautiously optimistic about the economy and experiencing growth through acquisition or expansion into global markets, even those with the sunniest outlook have adopted a conservative approach toward technology spending, says Andrew Bartels, an analyst at Forrester Research Inc. Some of this is the result of the downturn earlier in the decade, which forced companies to adopt a wiser and more mature approach to technology spending. And some, Bartels says, is the product of the cyclical nature of technology investment, which goes through times of expansion and growth followed by periods of refinement and digestion.

So despite Forrester’s prediction that technology spending budgets will be up 5%, this year “will be a period of persistent austerity, with continued cautiousness and conservativeness in spending,” Bartels says. Meanwhile, Computerworld’s quarterly Vital Signs survey shows that the percentage of IT executives who expect a budget increase dropped from 51% last year to 41% this year (see charts below).

2007 IT budgets

 
gold.gif
 Will increase
orange.gif
 Will remain the same
red.gif
 Will decrease
forecast_pie1.gif
 

2006 IT budgets

 
   
orange.gif
 Will increase
gold.gif
 Will remain the same
red.gif
 Will decrease
forecast_pie2.gif
 
   

Sources: 252 respondents to Computerworld's first-quarter Vital Signs survey 2007, and 338 respondents

to first-quarter Vital Signs survey 2006

1 2 3 4 Page 1
Page 1 of 4
7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon