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Analyst Cal Braunstein and a New Lease on Your Business Life


Illustration by Peter and Maria Hoey

It’s tough out there. With constrained IT budgets, a difficult loan environment and continuous pressure to do more with less, the CIO and CFO hold crucial positions in determining a business’s success or failure.

To learn more about how businesses can thrive in challenging economic times, IBM Systems Magazine turned to Cal Braunstein, chairman and CEO of Robert Frances Group (RFG). He is also executive director of research. His research and economic expertise have made him an advocate of refreshing IT for significant cost savings and better performance.

Q. How would you characterize the state of IT economics today?
A. Market uncertainties are having an impact on the capital and operational expenditures. Companies are worried about the market contracting and revenues shrinking so they’re not moving forward on expenditures. You see that in the areas of deferred purchases, extended hardware lifecycles, and staff cutbacks or hiring constraints. I don’t see that changing very much over the next 12 to 18 months.

Q. How does the economic uncertainty affect businesses?
A. Basically, the uncertainty heightens executive concerns about the risk exposure and causes executives to be more cautious. They’re going to invest less, which is going to continue to constrain things. Companies want to sit on cash reserves when they can and wait for better times. Trillions of dollars in cash reserves in major corporations aren’t being spent just because they don’t want to take the risk. They continue to focus on ways to cut costs and improve their margins.

“You can replace 1,000 four-year-old servers with fewer than 250 current servers and the financing cost for the new servers can be paid for with the power savings alone.”
—Cal Braunstein, chairman and CEO, Robert Frances Group

As a corporation, you don’t really have control of revenue; that’s at the whim of the customers. You can innovate and try to drive revenues but if people aren’t spending, you can’t do much about it. On the other hand, every dollar you save is a dollar that can flow to the bottom line, so companies want to find ways to take cost out of what they’re doing. That’s why you see a lot of IT organizations trying to do more with less year after year.

Q. What are the biggest concerns for CFOs?
A. We have the usual suspects we’ve been dealing with since at least 2000 when everything started going awry—there’s still the worry about revenues and profit margins, capital preservation, cost control, increased efficiency, competition, risk exposure, and the economic environment. All of those things are not really new.

Before 2008, the ability to borrow was easier than it is today. Now, if the company doesn’t really need the money it can get a loan, but aside from that it’s very constrained, and that hadn’t been the case previously. The rates may be down but you don’t qualify.

Tami Deedrick is the former managing editor of IBM Systems Magazine, Power Systems edition.



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