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Next Gen to Meet New Normal in the Post-Recession Economy, According to IDC

FRAMINGHAM, Mass., October 19 2009 - The global economic retrenchment over the past 18 months has been accompanied by an unprecedented contraction in the availability of capital. Faced with limited capital to fuel business operations and fund business investments, business and IT leaders have slashed expenses and limited capital purchases. With the economy now poised to begin a very modest, multiyear recovery, IDC expects these "new normal" economic operating practices will continue to shape key decisions about IT operations and investments for years to come.

"The changes in business and technology management that were implemented in response to the recession appear to have become part of the permanent ongoing business framework," said Joseph C. Pucciarelli, program director, Technology Financial & Executive Strategies at IDC. "The consequences of these changes are that companies will seek to lengthen the deployed life of their hardware assets, minimize spending on software upgrades, and look to service providers to selectively solve pressing maintenance and technical problems."

At the same time as these "new normal" economic operating practices are taking hold, the IT technology and platforms seem poised for a period of significant change. After an extended period of perfecting and refining the systems, architectures, and technologies that were on the table at the end of the last recession, IDC expects the next few years will see considerable IT platform change as companies are drawn toward the benefits of next-generation datacenters, new software offerings, and off-premise computing options.

As the potential of "next generation" IT comes up against "new normal" spending practices, IDC believes five management practices will emerge at the core of IT organization initiatives.

• Cost and Funding Management: IT organizations will increasingly be forced to develop cost profiles, including the business value of solutions, to support investment decisions. This will not be an easy or pleasant task, and has been a requirement that has dogged IT organizations for years.
• Sourcing and Platform Strategies: As new options become available to achieve an IT or business objective, IT organizations will have more options to experiment, innovate, and change but will also have to justify their choices more conclusively.
• Equipment Leasing and Software Financing: Commercial organizations will return to IT leasing and financing as a means of bolstering their access to IT resources.
• Life Cycle Management: IT organizations have already extended the planned deployment of many major systems, but they still need to develop the tools and management processes to quantify the underlying cost implications of these longer asset lifecycle models.
• IT Financial Management Tools: As IT platforms and business processes increasingly move toward a mix of in-house and third-party provisioning, the need for IT financial management software, tools, and best practices to better enable IT organization operational decision-making will become apparent.

"Contrasted against a technology cycle poised to introduce disruptive innovation, business and IT leaders confront an economic reality of diminished demand and somewhat uncertain prospects. Regardless of the strategy – selective investment in focused opportunities or retrenchment and caution – overall IT spending will be scrutinized, poked, and prodded," added Pucciarelli. "A crystal-clear linkage between business requirements and spending will need to be made and agreed upon by business and IT leaders."

The IDC report, Coping with the "New Normal" – How the Changed Economy Is Shaping IT Practices (Doc #220285), examines the changes affecting IT equipment, software, and services management and acquisition practices, including longer life cycles, rising interest in open source software, and services trends such as outsourcing. The report also relates the business, technology, and strategy views shared by 140 participants at a large CIO conference held in September 2009.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For more than 45 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com