Obama: Hope and Change for IT?

By Dennis McCafferty Print this article Print

How will Barack Obama’s administration affect IT spending in the trenches, where technology decision makers are dealing with strapped budgets and a shaky economy?

President Barack Obama’s official campaign Web site is a model of how 21st century technology tools can boost a candidate’s popularity, building significant buzz via blogs, IM applications and e-merchandising. And Obama’s campaign wasn’t confined to his own site either, because he chose to expand his presence on social networking sites like Facebook, MySpace, Eons and BlackPlanet. His images and words also constantly popped up at outlets such as Flickr, Digg and YouTube.

All these efforts made Obama an accessible, immediate and appealing figure to both younger voters and older ones who regularly connect to the Internet. Ultimately, they energized his campaign and helped secure a decisive victory for the nation’s first African-American president.

Certainly, Obama enters the White House with a reputation as one of the most—if not the most—tech-savvy chief executives ever. For starters, he’s created the position of a federal chief technology officer to oversee the future of information technology for government agencies.

But how will his administration affect IT spending in the trenches — where technology purchase decision makers in midsize and large organizations must deal with strapped budgets and a shaky economic environment? Baseline recently spoke with experts and executives who are on the front lines in dealing with the new administration’s impact on IT spending. Here’s what they had to say:

It’s a good news/bad news scenario. IT purchase decision makers can find both heartening and disheartening news in a recent forecast from INPUT, a Reston, Va.-based market research firm. The good news: Obama’s economic recovery plan will seek to open up the credit market by broadening deposit assurances for banks and guaranteeing loans.

The bad news: Obama’s projected policies could have the effect of adding $281 billion to the federal deficit, INPUT reports, and he’ll seek to close corporate tax loopholes. “There will still be opportunities to spend on IT in 2009 and beyond,” says Deniece Peterson, a principal analyst with INPUT. “But that spending will need to be much more focused and tied to enabling priorities.

Money will be tighter, and there will be more gates to cross in the decision-making process. Those trying to justify a major IT purchase will be asked more than ever what the impact of the purchase will be and how it ties into the overall mission. What are the short-term and long-term effects of buying or not buying it?”

In other words, it will all come down to figuring out which technologies are considered must-haves. Those defined as nice to have rather than must-haves — such as Web 2.0 — may see a potential dip in demand.

All eyes are on security and privacy. IT security obviously remains a high-profile area of concern. The Commission on Cybersecurity for the 44th Presidency, a bipartisan effort on the part of computer security experts, has recommended that Obama set up a high-level post to increase IT security and counter cybercrime, citing intrusions within the computer systems at the Departments of Defense, State, Homeland Security and Commerce.

With the White House and Congress dominated by the Democratic party, privacy is emerging as an equally prominent issue. In a recent survey of industry executive members of the Washington, D.C.-based Centre for Information Policy Leadership, 90.9 percent predicted that an Obama administration would address issues of privacy and information security.

More than seven in 10 members believe Congress will enact major privacy legislation, and more than six in 10 feel a better approach is needed to enhance the privacy and security of personal information.

Will IT jobs stay here? Another IT area in which the new administration could have an impact would be by increasing barriers to the offshoring of IT and other services. Obama’s campaign promises included ending tax breaks for firms that move jobs out of the country and awarding tax credits to firms that increase their ratio of U.S. to non-U.S. employees, notes Sean O’Dowd, senior analyst at Financial Insights, a market research company owned by Framingham, Mass.-based IDC.

Still, any meaningful change in this area will take years, not months, even if Obama moves quickly. “You won’t see an immediate spike,” O’Dowd says. “You’ll see more of a slow progression. If the economy continues in a downward slide for the first year of the new administration, companies will be too involved with cost-cutting to put too much focus on this. Besides, if the economy remains in trouble, Obama will have far more critical issues to focus on than outsourcing.”

Adding more green to IT. Information technology investments that reduce energy should also get a boost in the new administration, as Obama’s New Energy for America will seek a $150 billion investment over 10 years to encourage development of technologies that reduce energy.

According to the U.S. Environmental Protection Agency, servers and data centers consume $4.5 billion worth of energy annually, which is equivalent to the energy used by 5.8 million U.S. households.

Server virtualization and consolidation has emerged as Topic A on the green front among IT purchase decision makers, as the technology can significantly reduce energy consumption and costs. San Antonio-based Rackspace, a Web hosting company, is already reducing its own energy costs via virtualization and consolidation.

“We’re doing this primarily because the environment is in a very dangerous state right now,” says John Engates, CTO, “but we have self-serving reasons as well. We save on energy costs, and that puts us in a better financial situation.”

Complying with new realities. The new administration — backed by a Democratic majority in Congress — is expected to push for greater regulation of businesses, so IT managers will likely see an increase in options with regard to compliance IT tools. Compliance enhancement, information security, risk management, database auditing and other related software tools should also be in greater demand.

Will progress be hampered by economic realities? Innovation in IT enterprise solutions could increase, as Obama supports making the R&D tax credit permanent and reforming the U.S. Patent system to encourage more innovation in technology. “Obama supports a number of positions like these that are encouraging,” says Tom Berquist, executive vice president and CFO at Redwood City, Calif.-based Ingres, an information management company.

“He supports Internet neutrality—meaning he wants to keep the Internet open—and he wants to put broadband in every American consumer’s home,” adds Berquist, who is a former software industry analyst at Citigroup and Goldman Sachs. “Obama wants to double funding for basic research over the next 10 years to help the technology and science industries. He also wants to increase protection for American intellectual property in the United States and abroad, particularly in China.”

That said, as other experts and IT decision makers contend, the staggering economic meltdown and credit crisis of the second half of 2008 will serve as the inevitable elephant in the room—a potential roadblock to anything productive that the new administration will attempt that could enhance IT spending.

“Obama is going to have to dig the country out of a recession, which will focus his attention on consumers and away from businesses over the next two years,” Berquist predicts. “His proposed increase in the capital gains tax rate will hurt stock ownership on the margin and make it more difficult for startup tech companies to get funded. “The [administration’s proposed] increase in taxes for high-income earners will make them less likely to take risks. And building new technology companies is all about taking risks.”

Though these technology challenges seem daunting, keep in mind that no U.S. president ever achieved greatness without leading the country during turbulent times. Many think Barack Obama will be able to do just that by overcoming our current economic crisis—and benefiting the IT industry in the process.

This article was originally published on 2009-01-19
Dennis McCafferty is a freelance writer for Baseline Magazine.
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