Survey: On-Prem Data Centers Lowest Investment Priority for IT Shops

Christine Hall

August 22, 2017

4 Min Read
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In this photo illustration, network cables are plugged in a server room on November 10, 2014 in New York City. U.S. President Barack Obama called on the Federal Communications Commission to implement a strict policy of net neutrality and to oppose content providers in restricting bandwith to customersMichael Bocchieri/Getty Images

Investing in private data centers isn’t as much of a priority for IT organizations as it was just several years back. That’s a takeaway from IT researcher Computer Economics’ annual IT Spending and Staffing Benchmarks report, which for 28 years has taken a deep-dive into the financial and strategic management of information technology. For this year’s study, more than 200 IT organizations were surveyed during the first half of 2017.

According to the report, data centers now have the lowest priority for new spending among a list of five categories. Top priority is given to the development of business applications, a category in which 54 percent of respondents plan increased spending. However, only 9 percent have plans to increase data center spending, which the study attributes to increasing reliance on cloud infrastructure, cloud storage, and SaaS, a conclusion borne out by 32 percent of respondents indicating they plan increased spending on network infrastructure.

“As a sign of the data center’s demise as a priority, end-user technology, including PCs and printers, has passed the data center, and for the first time data center is the spending category with the lowest priority,” the report said.

“Demise” might be an overstatement, as there’s nothing in the summary to indicate this to be permanent, although it’s pretty much a certainty that the percentage of IT spending going to private data center infrastructure will never be as high as it was in years past.



For the time being, budgets are focused on operations, with capital spending pretty much flatlining. Although 49 percent of the IT organizations surveyed indicated they will be increasing their spending on infrastructure, equipment, or major system development and implementation — with 23 percent saying their spending will decline and 28 percent indicating no change — the increases won’t be enough to make much of a difference.

“While this is the best outlook for capital spending in several years, it is not enough to tip the scale to capital spending growth. For the most part, organizations appear to be spending just enough to maintain normal equipment refresh cycles, not growing their on-premises infrastructure.”

In fact, while capital spending is increasing slightly in terms of total dollars spent, it’s declining when considered as a percentage of the IT budget, which the survey puts at a five-year low of 18 percent — down from 21 percent during each of the last two years and 24 percent as recently as 2013.

Again, a primary mover behind this decline is the public cloud:

“Virtualization, the cloud, and other technologies are lessening the need for capital expenditure growth even when times are good. While existing equipment must still be refreshed, the years of large capital expenditures in order to handle growth are likely gone, due to the elasticity and efficiencies of newer technologies.”

So what are the biggest spending priorities? No surprise here: security and the cloud. According to the survey, 70 percent of the organizations responding said they plan increased spending on security this year, followed by 67 percent that will increase spending on cloud applications and 52 percent on cloud infrastructure. These are followed by business intelligence/data warehousing (51 percent), mobile devices (41 percent), and disaster recovery/business continuity (38 percent).

Interestingly, although cloud applications are the second largest priority, Computer Economics said their research indicates that cloud apps account for less than 25 percent of the total application budget for most organizations.

According to the survey, there might be some cause for concern for those working in tech — especially for those with lower level skills. Although total tech spending is expected to rise this year by about 3 percent, staffing levels are expected to remain even, due mainly to improved productivity.

The employment news isn’t all bad, however:

“Although IT staffing levels are flat at the median, it does not mean that IT organizations are not adding staff for some positions. While hiring is slowing for lower level skills such as computer operations, scheduling, and lower-level tech support positions, higher-level skills show increasing demand. Examples include business analysts, project managers, data analysts, and IT security professionals. As cloud applications and cloud infrastructure take up a larger percentage of IT spending, there is also a need for IT staff with skills in procurement and vendor management.”

Computer Economics does not accept research sponsorships from technology vendors.

About the Author(s)

Christine Hall

Freelance author

Christine Hall has been a journalist since 1971. In 2001 she began writing a weekly consumer computer column and began covering IT full time in 2002, focusing on Linux and open source software. Since 2010 she's published and edited the website FOSS Force. Follow her on Twitter: @BrideOfLinux.

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