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March 19, 2001 |
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Sun Reprioritizes IT Projects As Demand Slows
By Cheryl Rosen (crosen@cmp.com)
oncerns about customer IT cutbacks are running high in the IT industry, as a slew of suppliers--from EMC to Hewlett-Packard to Oracle--this month cited falling sales as the cause of reduced earnings in their quarterly financial reports. Like their customers, they're forced to re-evaluate their own IT budgets, and one vendor, Sun Microsystems, says it hopes to forge ahead with IT projects.
Late last month, Sun warned that third-quarter earnings would fall short of expectations because of the faltering economy and a slowdown in demand. Growth in earnings for the quarter ended in March is expected to be in the 10% to 13% range--less than half the 30% increase analysts had been anticipating. "We're disappointed in one and only one thing--and that's the U.S. economy," Sun president Ed Zander told analysts, adding that the drop-off in capital spending was the largest and most sudden he's seen in his career.
Sun may be hoping to send a message to its customers with its own strategy. Rather than cutting back on its IT budget, Sun is prioritizing the IT projects on its 2001 agenda into two piles: the ones that need to be tackled in the first half and the ones that can wait until the second. "We're in a maintenance mode; we've stabilized the IT budget for the next two quarters and are reprioritizing within the budget we set last year," says VP of IT operations Bill Vass. "There's nothing we were planning to do that we're not doing, but we're spreading the budget out more. And some things won't have quite the big-bang, large-scale deployment we had expected."
Case in point: a knowledge-management system that was originally expected to go companywide. In the best of times, Sun would have bought a site license and made the software available to all 50,000 users without giving the expense much thought, Vass says. But this year, it's paying per seat for just the 5,000 or so users who need it most and are most likely to use it. Like a beta test, this partial rollout will let the other business units evaluate the system's return on investment before deciding whether to deploy it themselves.
Still on the express track, not surprisingly, are projects to deploy Sun's own products, including 6,000 SunRay thin clients and four high-end Serenghetti servers to run them. That initiative will cut $2.1 million a year in electricity alone, Vass says, as well as free the IT department from having to manage those desktops. In general, Vass says, Sun spends between a fourth and a third of its IT budget on hardware.
Another piece involves increasing Sun's bandwidth by 12% this year. "There are three things we can't get enough of: CPU horsepower, disk space, and bandwidth," Vass says. "We're more and more centralized, but also more and more dependent on bandwidth and servers."
The budget for outside consultants, though, is headed south, while that for outsourced services is increasing, as Sun turns over its disk management and data storage to Datatone Communications Inc. Vass says the relationship with Datatone lets Sun pay for just what it uses, then scale up when the economy bounces back.
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