The IT kit revolution's OVER, say beancounters - but how do they know?

Tim, you mention "there was a vast amount of money wasted in dealing with Y2K".

Why are you perpetuating this myth? It gets trotted out a lot as being an example of a non-event, by journalists in general but even by IT insiders who should know better.

The fact remains that had there not been a lot of time and money spent behind the scenes, the Y2k bug would have been a disaster, but it was averted by a lot of hard work.

Unfortunately, because most of the work done was behind the scenes, the general perception is that it was a load of fuss about nothing.

If you mean that the money was wasted because it shouldn't have been necessary to correct the short-sightedness of those who programmed stuff using a two-digit year then I agree with you, but I doubt that's what you meant.

My take is that Y2k fueled a lot of hardware investment 1998-1999, while needed, far exceeded the normal/average amount of spending one sees in 3 year/1 third of hardware replaced each year system. The overall economy fairly boomed in the years leading up to Y2k, and tech spending quickly receded for a time after that.

el rupester's comments about cloud usage skewing the investment numbers is right on, Big Cloud is spending less than its customers would individually. Short of some Y2k neccesity situation or some dramatic advance in tech, I would think that tech hardware investment will show "normal" growth compared to the past. Also, there are far fewer existing companies with no computerization fueling new investment as there was in days gone by. Maturity has it advantages and drawbacks economicaly...

With you there Tim

10 or 15 years ago many company accountants would have had to record all IT spend as an asset otherwise they wouldn't get approval and the balance sheet would look crap. Then it was written down at 10 to 25% a year so never hit zero (really - I had many computers in skips which still had a value).

Yet the day it got installed it became essentially worthless (in the sense you couldn't sell it for anything like the same money). Part of this comes from the habit of dealing with machinery and cars etc of course, which do retain a value for longer.

These days we don't captitalise anything IT - written off as expenditure on day one, and we buy in smaller chunks (rolling replacement) exactly as you say.

Compare with marketing spend

Consumer goods companies I used to work for would sometimes "invest" in marketing (TV adverts for example) to build a brand. All the money was on revenue budgets, but the aim (and indeed the effect) was to achieve more than a short term revenue goal.

Increasingly I see IT spending falling into this category too. Especially with that dreadful misappropriation of the term "digital".

I'm with Autor

The paradigm shifts have happened. Standalone->networked->integrated systems. We have the networked systems and humans are out of the loop for pretty much everything where they could be out of the loop. The paradigm shifts provided order-of-magnitude efficiency gains, rather than just incremental improvements.

What is the hot tech now? Virtualisation. That's not a process-improvement thing, that's just admin reduction. VMware is sitting pretty, because the tech is still difficult, but the large costs will drive the freebie tech as Google and Amazon look to reduce their costs.

As I said, I'm with Autor - the massive investments of the past brought order-of-magnitude improvements. No-one is offering that now, not even the fabled cloud. Cloud engineering is so much overkill and failures result in such poor headlines. It relies on correct contention assessments Consolidation can only go so far before it runs into human fraility. If anything, consolidation increases complexity and frailty.

On the subject of MSOffice, I don't think it has improved my productivity for quite some time, yet the cost of buying new versions is recurring. I'm not sure that's very sustainable. Even Exchange/Lync which has added new features and integration doesn't really add much to my productivity. Here is where the beancounters are getting their information. What's my ROI on this expenditure? Why should I not just keep using the existing software? The answer increasingly is, "we have no technical need for new features or to upgrade, but we have to keep in support." or "the vendor has declared the product obsolete."

In this scenario, you pay as little as you can to keep the tech ticking over - maintenance mode.

Analysts

are just worried that their pyramid scheme, sorry, the stock market, is going to collapse before they have made enough money - and they are greedy b*stards, so they never have enough money, so they worry when markets mature and the gold grabbing slows down with it.

Lease versus purchase analyses

For decades the accountants have been doing analyses of leasing versus buying in order to put the figures in the desired column. This includes the option of buying, selling to a nominally independent entity, and booking the lease payments as expense. There's considerable leeway for the lawyers and accountants, and considerable motivations around corporate financial strategy, taxes, R&D credits, etc., which I'd hope the economists understand.

More not very helpful economics-speak

"There was a vast amount of money wasted in dealing with Y2K, then we splurged way too much on dotcoms and it's hardly surprising that we're investing less in the wake of one of the largest recessions of modern times".

What's the matter, don't you believe in free-enterprise capitalism and the magical powers of *** THE MARKET ***?

As for "hedonic adjustment", isn't that the clever scam by which the US government replaced the price of beefsteak with that of "hamburger" (cheapo mince to you and me) to disguise the rising cost of food? It doesn't fool anyone.

What do beancounters know?

Well, while they may not be technology experts, they can still know the same things that everyone else knows. And it is a fact that over the last several years, computers haven't been improving as fast as they used to, which is why we have quad-core chips but not 10 GHz chips in our desktop computers.

Although it looks like that's set to go to six-core and eight-core chips thanks to Intel's latest generation.

And the excitement and sales have been in mobile devices, not desktop PCs; that, too, has received lots of publicity.

Looking to my own customers' experience

In recent years, we've sold plenty of upgrades, but the larger customers have been after footprint reduction above all else. As such, I see two things happening:

- Server sales down, as each individual box does more

- Server makers looking for alternative revenue models (e.g. back to licensed capacity - something my line of business knows a great deal about already).

The sector I work in is moving inexorably towards a point where businesses, like the one I work for, no longer provide hardware, instead deploying software solutions into resilient server farms (which may or may not be the property of any given customer). This is fine by me. Certain Chinese competitors can and do offer to replace us for free (and they're big, so the business has to pick its fights carefully); they can do this because they make the hardware, whereas we have to buy our servers from the likes of Oracle and HP. As Ross Perot determined, smartly run software and professional services is an easier game survive.

Structural or cyclical? Intuitively the change seems structural, but I'm not convinced I understand the two words (economically) well enough to call it 8-).

Has IT spending gone down? Good question.

There is probably been a shift from purchasing things that tax law requires be depreciated over a number of years to buying things that are business simple expenses.

Perhaps there were changes in depreciation laws in some countries too.

But also a lot more is leased or run off-site, or run in a cloud.

Software is more likely to be developed by external vendors rather than in-house.

And some companies may have shifted responsibility for some purchases out of IT departments, for example cell phones, memory sticks, program packages not widely used, etc.

I can't even begin to guess whether over all expenditure on IT type things has gone up or down. I would say it is going to vary company to company, industry to industry, and tax jurisdiction to tax jurisdiction.

Don't forget what constitutes capital equipment

I suspect that my workplace is not unique, in raising what is considered capital equipment cost thresholds, from $500 back when, to $5000 these days.

A PC (and many other tangible items) used to be capital equipment, but not nowadays.

Sounds familiar

"Computers in the future will weigh no more than 1.5 tons."

- Popular Mechanics, 1949

"There is no reason for any individual to have a computer in his home."

- Ken Olsen, co-founder of Digital Equipment Corporation, 1977

"640kB should be enough for anyone."

- Bill Gates, 1981

"I have travelled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won't last out the year."

- Editor in charge of business books, Prentice Hall, 1957

"Transmission of documents via telephone wires is possible in principle, but the apparatus required is so expensive that it will never become a practical proposition."

- Dennis Gabor, 1962

"It would appear that we have reached the limits of what it's possible to achieve with computer technology, although one should be careful with such statements, as they tend to sound pretty silly in five years."

- John von Neumann, 1949

"I think there is a world market for maybe five computers."

- Thomas J Watson, President of IBM, 1943

Thanks to TechRadar

In the dark ages

When dinosaurs ruled the earth, most companies couldn't afford computers or the tech priests who ran them.

So they went to what (in this part of the world) they called "consultancies" who would run a couple of big iron dinosaurs & a flock of smaller "mini-computers" (A minicomputer fitted into a single rack, disks were a separate rack) you could buy time of the gear to run payroll, or stock control or whatever, the consultancy operation would be a one stop shop for all your computing needs.

Then as the costs came down and tech priests were more abundant, more & more companies started to run their own gear. They especially liked the fact that the consultancies would no longer have them by the short & curly's ... they would be masters of their own destinies :)

The PC revolution (as stated earlier in the thread) then the networked PC fad of the 90's meant the death of the consultancy model, queue a round or two of in-sourcing & outsourcing and now the trend is cloud computing & managed services, which I'm having a hard time differentiating between and the older "consultancy" model (other than the truly VAST scale of these operations)

So the answer to your cyclical change/structural change question is yes, it's both

Out of steam? There is now stuff called electricity!

This is only a pause... we are edging (pace Mr. Honeyball) in to 64 bit. In a big while we may get optical computing, but who will then buy into it at that cost? And then there is quantum computing - if memory serves El Reg ran a piece on that only two or three days ago...

It is, I know, not good to push arguments by using analogies (i.e. I'm about to do it) but we're past the Kittihawk stage and probably Bleriot's trans-English Channel flight, the old Vimy has crossed the Atlantic but everyone knows that aeroplanes that suck in cold air at the front and squirt out hot air at the back simply cannot work. As we say in Glasgow, "Eh, no?"