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IT Budgets Pointing to the Cloud Expansion

When debt collection agency Deca Financial Services, LLC was formed last year it had two IT paths: It could buy its own servers, software licenses, and hire an administrator, at a total of cost of about $700,000; or turn to a cloud provider with first year cost of about $60,000.

At first, James Hefty, director of operations at the Fishers, Ind.-based company, didn't believe a cloud provider was a possible option. It had financial compliance rules and concerns such as a client audit.

But the provider, in this case BlueLock LLC in nearby Indianapolis, said it could meet all the security rules, service levels and disaster recovery needs. "We very quickly realized with a little bit of analysis that everyone benefits from it," Hefty said.

Deca has its own network, router and firewall and server in an HP blade system and VMware environment.

Brian Wolff, vice president of sales and co-founder of BlueLock, said Deca is getting cloud services, even though it has dedicated resources because it can scale on demand, is virtual, fault tolerant, and available through the Internet.

As a new company, Deca had options. Larger companies are unlikely to make a wholesale shift to the cloud services, but they are setting budgets toward on-demand services and the cloud and away from capital expense, said analysts.

"We have never had the ability to run hardware on a software operating model," said Robert Whiteley, an analyst at Forrester Research Inc. But now that IT manages do have the ability to buy hardware as an operational expense, budgeting for it, he said.

IT managers have typically set aside about 70percent of their infrastructure budgets to ongoing operations and maintenance, with the balance for innovation.

But a Forrester survey of some 2,600 in companies ranging from SMBs to the enterprise found that IT managers intend to reduce IT operations and support spending to 50percent. The innovation share of the budget will remain at 30percent, but the balance will go to expansion of capacity to support business growth.