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                                    Monday, December 13, 2010

                                    IT spending outlook for 2011 and implications for enterprise software

                                    Over at Computer Economics, our end-of-year update on IT spending and staffing trends is showing some incrementally positive good news.

                                    IT spending outlook

                                    First, based on our Q4 survey of US and Canadian IT end-user organizations, we are forecasting IT operational budgets to increase 2.0% at the median. This might not seem like a big jump, but if it holds (and we'll know when we conduct our annual survey in Q1 2011), it will be an improvement over the past two years, when budgets were flat at the median.

                                    Figure 1 shows the trend for this metric since 2006.

                                    Median Annual Change in IT Operational Budgets: 2006-2011

                                    However, don't expect big increases in IT staff hiring, at least in early 2011. Although 27% of IT shops say they've been adding to headcount over the past three months, 14% were cutting headcount, for a net gain in only 13% of IT organizations, as shown in Figure 2.

                                    On the other hand, on a positive note, those IT professionals who are employed are already seeing an increase in their work hours. Over the past three months, a net 47% of IT organizations have been allowing their staff members to work more hours, which could include overtime or cessation of furlough days.

                                    On another positive note, nearly half of all IT organizations have been increasing their work on major projects over the past three months. That, of course, could be a large part of what is driving the increasing staff hours.

                                    Finally, in welcome news for IT staff augmentation firms and contract service providers, a net 31% of IT organizations have been increasing their use of contractors and temps over the past three months. Again, this may be tied to the renewal of major project work.

                                    Percent Increasing Minus Percent Decreasing Each Expense Over Past Three Months

                                    Implications for enterprise software

                                    For customers and vendors of enterprise software, what does it mean? First, the overall trend for IT operational spending may be moderate, but it is positive. The news on the capital spending side is likewise positive, with over half of our respondents expecting to spending more for IT capital investments. Our full report has details.

                                    Second, the underlying dynamics in IT organizations are shifting. Whereas last year, and the year before, many of our respondents were canceling or deferring major projects, laying off IT staff, and cutting work hours, the picture over the past three months is exactly the opposite. New project work is increasing, new hiring is exceeding layoffs by a small amount, work hours are being extended, and IT contractors are getting the nod. All of these are positive signs.

                                    Bottom line

                                    I wouldn't expect 2011 to be a boom for IT spending--not only in comparison to the late 1990s, but even compared to the 2006-2007 time period, which was sort of a mini-boom compared to today. Still, after the last two to three years, any improvement is welcome.

                                    We know from our previous years' surveys that many organizations cut back dramatically on major new initiatives, including enterprise software projects. As a result, many needed improvements were put off, and users are clamoring for relief. While economic recovery is still weak, organizations that make those investments now will be in much better shape when business conditions improve. In addition, most vendors of enterprise software are still in a deal-making mood: prices for software and for services are still a buyers-market.

                                    Therefore, now is a good time to be making those investments.

                                    The full report, Outlook for IT Spending and Staffing in 2011, is available on the Computer Economics website.

                                    Related posts
                                    Computer Economics: IT Spending and Staffing Benchmarks 2010/2011: IT Ratios and IT Cost/Budget Metrics by Industry Sector and Organization Size

                                    Wednesday, December 08, 2010

                                    First impressions: Salesforce.com far outgrows its name

                                    I'm here in San Francisco covering Dreamforce 2010, the annual conference of Salesforce.com (SFDC).

                                    Over the past several years, and especially from the keynotes given thus far, it is apparent that Salesforce.com needs a corporate name change. With roots as SaaS provider of salesforce automation system, the firm's services have expanded to a broad set of applications and applications development platform services.

                                    More on that in a minute, but first, check out the energy and enthusiasm on display here at Dreamforce--from CEO Mark Benioff's on-stage cheer-leading to the vigor of the exposition floor. For example, one small developer told me last night that on the first day of the expo, he walked away with 75 good sales leads. I shot some quick video, which can give you a little window into the vibe, in spite of the dreary, rainy weather outside.



                                    Okay, back to the issue: does SFDC need a name change? Just consider the following:
                                    1. SFDC's own functionality has been expanded to include customer service applications, bringing its footprint further into complete CRM territory.

                                    2. Back in 2006, the company opened up its development platform to third-parties, allowing them to build their own commercial applications and sell them via its AppExchange marketplace. The platform itself has since been renamed Force.com. Since then, independent software vendors have developed something like 1000 products on AppExchange, either as extensions to or in addition to Salesforce.com's own products.

                                    3. Earlier this year, SFDC announced its intent to acquire Jigsaw Data Corp, which provides current data on businesses and contact information, putting SFDC into the data services business.

                                    4. Earlier this year as well, SFDC introduced its Twitter-like capability, dubbed Chatter, which provides a secure, private social/collaboration environment from within SFDC's services and systems built on Force.com.

                                    5. Building out its platform-as-a-service (PaaS) capabilities, SFDC earlier this year launched a joint-venture with VMware to provide Java development capabilities as part of its Force.com platform, allowing third-party developers to use Java instead of SFDC's own proprietary development language. Furthermore, just yesterday, SFDC announced its agreement to acquire Heroku, a PaaS provider for the Ruby-on-Rails development platform. Ruby is an increasingly popular development platform for rapid application development, including many social and mobile applications.

                                    6. Another announcement during the conference this year: SFDC is introducing something called Database.com, which gives developers a cloud-based database capability, even if they are not building on SFDC's own Force.com platform.
                                    This is just a partial list of the ways in which SFDC has moved far beyond salesforce automation to become something of a cloud-based development environment. So, as I said, at some point, I think a name-change would be in order.

                                    For a deeper dive on the Heroku acquisition and the Database.com announcement, see the post from my colleague, Dennis Howlett, Salesforce's Database.com as a game changer now they've acquired Heroku?

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