Legacy Systems and Spending on New Technology-A Microsoft Advantage

Where is IT spending occurring?  New Technology, Old Technology? Just where. Recently IBM announced that support for legacy systems takes up 80% of IT costs.  The problem, of course, is that  many of the world’s “legacy” systems are IBM boxes. But there’s a lot to be said for opening up these systems to new ways of computing, versus the more expensive rip and replace. On IBM executive, Kristof Kloeckner, general manager of IBM Rational Software, estimates there is at least “a $4.5 trillion cumulative investment” in software from 1995 to 2010 alone. That means, that the “fix it, don’t break it” mentality is predominant.

Then again what is happening to the new technology?

Two recent report by Gartner and Forrester point to the view that many companies are prepping to spend more money on new technology.

Small businesses and telecoms will drive much of the spending. Gartner reports that  Government IT spending will  drop moderately,  driven in part  by austerity measures in the eurozone. And US government IT spending will also remain flat and actually contract in 2013.  As reported here at this blogsite in recent months, the US federal government is getting aggressive about shared servicesconsolidating data centers, and using cloud resources.

But in the small and midsize business market, which represents approximately a quarter of all enterprise IT spending, the  forecast is for spending to reach $874 billion in 2012 and will grow to $1 trillion by 2016. “Throughout the forecast period, midsized business IT spending outperforms other sectors in each of the next five years, driven by growth in spending on enterprise software.”

Where is Microsoft in all of this?

Well if the IBM model is correct, it does mean that there is a large opportunity to push for expansion of services to the Cloud. Legacy systems are legacy for a variety of reasons, like unwillingness to upgrade for cost fears, software changes will not include the existing data, and existing managers may see the change as a threat to their job. But with a Cloud imperative, most of these objections can be put aside. There are no upgrade costs. Software exists that can move legacy data to a new environment, and the managers can manage the change. That puts Microsoft at an advantage because it can provide the resources that may be needed to move the legacy systems into a modern environment.

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