IT spending: Maintenance down, Web 2.0 up

Even as Forrester Research predicts a 3 percent drop in global information technology revenues, as reported by The Register, investment bank Goldman Sachs is piling on the woe it promulgated in an earlier report that CNET covered with a new report entitled "IT Spending Survey: Mapping 2009."

As detailed in the report, incumbent vendors are about to see their sacrosanct maintenance revenue streams get pillaged:

Where enterprise IT spending is likely to lag in 2009

(Credit: Goldman Sachs)

Accounting for more than 50 percent of revenues at vendors such as Oracle, this is going to be painful, indeed, though the report also calls out that some of the bigger brand names are likely to weather the downturn better than most.

Even so, my company, and others that I advise, are seeing a flight from expensive maintenance contracts to open-source alternatives. At least half of my pipeline is filled with existing customers looking to dump their maintenance contracts with incumbent vendors.

Why? Because a solid open-source product can easily cost 10 percent of a proprietary vendor's maintenance contract, while delivering equivalent or better functionality. While any change will likely necessitate some third-party consulting--the No. 1 target for the budget ax in 2009--the cost advantages of doing this can still be substantial.

That said, any benefits from new projects must be near-immediate:

ROI Now for 2009 IT spending

(Credit: Goldman Sachs)

Open source is advantageous here, too, because enterprises can experiment with the open-source project long before deciding to buy it (if they buy it at all, rather than simply using a free version). This shortens the post-sale honeymoon, allowing enterprises get into production much faster. I'm aware of one large Web property that went start to finish on a Drupal-based Web site in one month. That is powerful.

Of course, one thing on which open source does not have a lock is collaboration technology, which Goldman expects to be a bright spot in 2009 IT spending, as enterprises seek to do more online rather than on the plane. Who gets most of those dollars? Microsoft, and nearly all of it in the form of SharePoint licenses:

Who gets Web 2.0 dollars in 2009

(Credit: Goldman Sachs)

CIO spending plans for Microsoft SharePoint fell from 75 percent in 2008 to 53 percent in 2009, but it's still a hefty chunk. Microsoft's share of collaboration IT spending isn't alone in falling: every vendor on the survey besides Cisco Systems went down since 2008. Still, at least the CIOs continue to plan for collaboration spending.

The same is true of cloud computing. It remains a bright spot for technology spending, with big vendors like Cisco (29 percent), IBM (28 percent), Microsoft (24 percent), and Google (17 percent) getting the biggest percentage of CIO votes.

It's not a pretty economy, but it's the one we have. Open source should fare well, but so will a select group of the larger, proprietary vendors that can deliver integrated solution offerings, particularly in the areas of collaboration and cloud computing.

[ITRebel]

This all assumes that these are the only costs associated with open source code. If it is the type of proprietary open source code traditionally developed internally at a company and marketed as proprietary code, then this is a safe projection for the IT Manager.

However, if it is the type of open source code that has been potentially developed by every other hacker through the GNU GPL license, then this cost could be substantially higher for the poor IT Manager if the code must be yanked due to legal reasons. The problem is that you do not know what part of the code has been developed legally and what part is hacked code in code developed with the GNU GPL. Many who develop under the GNU GPL openly brag about their ability to hack proprietary encrypted software; the legal basis of their hacking is very questionable. Please see a very good article in the Cornell Law Review that reviews recent law cases that raise this problematic issue with the GNU GPL based code. The legal scholar who writes this article is very sympathetic to open source GNU GPL development, but gives an honest assessment of the major legal problems that are likely to face it in a coming "Ice Age of Open Source Development". Here is the link:

http://www.lawschool.cornell.edu/research/cornell-law-review/upload/CRN504Hwang.pdf

[MSSlayer]

Still parroting this BS?

You don't seem to know anything about programming.

[someguy999]

Wow... I wrote previously how this guy was all propoganda and now he's traight up talking about his sales pipeline... wow... I love the last part "its a tough economy ... but my company which co-incidently, in case I didn't mention... oh wait I did ... but I will again... sells collaboration... and you should use us... this report says so!"

I didn't realize that CNET News had become straight up an advertisement article set like the back side of a cheescake factory menu.

I really don't have a problem with the right hammer for the right nail... but this guy is rediculous in his over the top statements and gratuitous self company promotion (in what I thought) was a news organization.