IT departments still slashing costs, says NCC

Eighty one percent of IT departments made cost cuts over the last 12 months, according to a study from the National Computing Centre (NCC).

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Eighty one percent of IT departments made cost cuts over the last 12 months, according to a study from the National Computing Centre (NCC).

The study on IT infrastructure, conducted by the NCC’s Evaluation Centre, showed that 28 percent of departments made very significant or significant cost cuts, while 32 percent made moderate cuts and 21 percent did minor cost cutting.

This year’s prospects are also bleak, with 31 percent of IT departments expecting their budgets to decrease in 2010 and two percent expecting a significant decrease. However, 47 percent expect their budget to remain the same, while only 13 percent expect an increase.

The Evaluation Centre interviewed more than 100 companies for the survey, ranging from those in the public sector to IT and Telecoms, and companies of all sizes ranging from those with £5 million turnover to more than £5 billion.

Despite the budget cuts, nearly half (47 percent) of companies are not stopping their infrastructure investment. However, 38 percent of the companies that were making cuts to their infrastructure investment were delaying hardware upgrades, closely followed by 33 percent who were delaying software refreshes. Twenty-nine percent were also delaying upgrades to their network.

Outsourcing has been adopted widely in an attempt to reduce IT costs, with website and e-business (25 percent) being the most popular to outsource and a further seven percent also planning to outsource this in the future. A third of companies also outsource the server infrastructure and another third network infrastructure, while applications support is outsourced by 32 percent.

The security management of IT operations has seen a growth in outsourcing due to the costs of employing highly trained staff to maintain the required protection levels. While 45 percent still manage all their security in-house, 30 percent use a third party to manage some aspects of their security and 11 percent have outsourced the whole of it.

Meanwhile, offshoring does not appear to be as popular as simple outsourcing. Twenty-nine percent of companies would not use offshore providers, while 24 percent have not considered it and seven percent have rejected it. At present, just 29 percent offshore and four percent are evaluating it.

Virtualisation technology has grown rapidly, however, with 83 percent of companies seeing server virtualisation as playing an important role in their IT operations. The reduction in infrastructure cost and physical hardware in the data centre has been cited as reasons for this growth.

In contrast, desktop virtualisation is seeing a slower uptake, though interest is growing. Over half (56 percent) see it as an important technology in the next few years, compared to sixteen percent that see it as of medium importance and fourteen percent as of little or no importance.

The study suggests that cloud computing is rapidly gaining interest, partly driven by suppliers such as Amazon and Google. However, at present, just 11 percent of companies are using cloud computing services. A quarter of companies are looking at the option, but 59 percent have no current plans to adopt it.

Cliff Mills, research manager for the NCC, said: “There are a number of organisations delaying upgrades. This will produce pent up demand [for infrastructure and software spend] and hopefully, when the economy recovers, we anticipate seeing a return in some of these areas.”

“Outsourcing may also be an option, to avoid the initial outlay and we see through 2010 people looking at the area of cloud computing much more seriously.”

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