Software budget spending getting boost in 2014

Software budget spending is increasing more than in other areas such as hardware and cloud, according to TechTarget's 2014 IT Priorities Survey.

TechTarget's 2014 IT Priorities Survey found that 59% of more than 4,100 respondents planned to spend more on their software budget this year compared to last. That topped hardware at 52%, cloud services at 38% and other facets of the IT budget including maintenance and staff. Respondents took the survey in fall 2013.

Experts said the results signal that companies are starting to increase spending on software upgrades and other projects around big data and business analytics that have been on hold the past few years due to tight purse strings.

"When you're talking about new initiatives like big data, predictive analytics and the like, software typically accounts for a much larger share of spending, particularly in the early phases," said Dan Olds, principal consultant at Gabriel Consulting Group, Inc. in Portland, Ore. "When successful projects begin to scale past the testing and 'dip our toes in the water' stage, you then see hardware spending ramp up more."

Sometimes it just depends on how one defines various parts of the IT budget. DeKalb County, Georgia is increasing its software budget for 2014, but much of that is going toward Software as a Service (SaaS). Chief Information Officer John Matelski said the county conducts return on investment and total cost of ownership (TCO) studies for all its technology projects, particularly because its IT budget has shrunk. The county views software as a long-term investment, and as it compared five-year models for on-premises versus cloud, it found that cloud provided the best TCO. But Matelski still considers that in the realm of software.

"Software solution spend is going up as we endeavor to modernize a number of our systems," he said. "Having said that, in most cases, we are leveraging SaaS."

Floyd Teter, a senior project director at Io Consulting based in El Segundo, Calif., has observed a slightly different trend. The longtime Oracle applications expert sees "many customers looking at upgrading current software or purchasing new software -- much of it, surprisingly, on-premise."

Teter added that there is "lots of interest in cloud services, especially subscription and service models, but not so much actual adoption." He thinks that the transition for enterprise software from on-premises to cloud is still in its infancy, and that many enterprise software customers are still wary of the cloud due to fears of losing control of their data, technology platform and security architecture.

Other thoughts abound. Bill Bradford, a senior systems administrator for a Houston-based energy services firm, said that his company is in the middle of a big data center move this year, so there's a lot of budget money going into facilities. On the flip side, Michael Bain, an IT specialist at a company in South Africa, said his company recently changed its accounting package, so software spending has been up. Yet another CIO who declined to be named said he thinks of IT in terms of business services and outcomes, so he doesn't break it down on the back end by hardware, software and so on.

Business analytics seeing big spending

Of all the enterprise software budget spending going on, business intelligence (BI) and analytics is the most popular. According to TechTarget's 2014 IT Priorities Survey, 41% said BI, analytics and data warehousing when asked which software initiatives their companies will deploy this year.

Richard Winter, CEO of IT consultancy WinterCorp in Cambridge, Mass., said his impression is that spending in analytic data platforms, tools and services is "on the upswing" this year.

"I think there is going to be a healthy spend on data management, data analysis, data visualization and business intelligence software," he said. "This spending occurs in connection with increased spending on underlying platforms to store and manage the data." Winter named data warehouses, Hadoop and other analytical data software as those underlying platforms.

Winter thinks the investment is driven by the influx of data and opportunities for a company to profit from better business decision-making by gaining insights from that wealth of information.

Trailing business analytics in popularity was mobile applications with 37%, custom application development with 36%, and business process automation and management with 28%. That last one is an area that R "Ray" Wang, principal analyst at Constellation Research, Inc. in Monta Vista, Calif., has seen come up recently.

"We see an increase in software spending in general," he said. "Companies are investing in technology, especially software to drive automation and productivity. They are willing to invest more in technology than people."

Mark Fontecchio may be contacted at mfontecchio@techtarget.com.

This was first published in April 2014

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