All eyes on the budget knife

It's budget day, but there seems to be more dread than excitement in the IT industry.
Written by Suzanne Tindal, Contributor

It's budget day, but there seems to be more dread than excitement in the IT industry.

The pessimism isn't surprising, given that the government has had to deal with falling revenues, and is looking for $20 billion in savings in order to deliver its promised surplus.

The question is, where will the cuts fall? And will the IT industry, for which the government has always been a major client, be hard hit?

The Australian Computer Society (ACS) has said, ahead of the budget, that it hopes the government will recognise ICT's "growing contribution" to the economy, with the industry likely to add 35,000 extra jobs by 2014.

The ACS said that it would like to see expenditure in ICT education programs to increase ICT course enrolments and support ICT skills creation. It also believes that funding is required to encourage businesses and citizens to engage in the digital economy by using better technology.

Internet Industry Association (IIA) chairman, Bruce Lin, told Computerworld that he also wants money for training, but that he is betting on the deferment of spending this year.

Eyes will certainly be on the Department of Defence (DoD), which has been earmarked for $5 billion in cuts. Many in the industry will also be looking at e-health; the $466 million in funding laid out in 2010 for the personally controlled electronic health records (PCEHR) program runs out at the end of June, despite the fact that there is still much more work to be done to get it off the ground. The Australian Financial Review is expecting changes to the research and development tax incentives, while there are also concerns that government jobs will take a hit.

Unfortunately, we don't need to wait to know that at least some pain is on its way, as Ovum analyst Kevin Noonan reminded various publications. The mid-year economic and fiscal outlook released in November revealed a 2.5 per cent ($500 million) efficiency dividend, and a 20 per cent ($230 million) cut to capital costs to come into effect from 1 July, which Noonan believes will hit IT where it hurts.

The efficiency dividend is to be met through measures, such as reducing consultant and contractor use and using tele-presence instead of travelling, while the capital cuts are to come from agencies "re-prioritising the replacement or maintenance of IT systems", as well as other equipment.

Noonan highlighted hardware and software refreshes as the places where funding cuts would come, and said that governments would look ever more lovingly at cloud.

Yet, there's always a ray of sunshine in the gloom. Even in saving years, IT often comes out on top, with government "investing to save" — a phrase I stole from IBM, which spoke recently to the Australian Financial Review on the topic.

IBM is hoping that there will be more money thrown into IT, with the aim of increasing productivity and reducing personnel costs.

"I would hope that there would be some recognition that spending on technology can actually net you different benefits down the track, rather than looking for quick savings," CFO Sara Watts said.

Gartner released a forecast in April for the Federal Government's spending, which said that it expects an increase in IT spending from 2012-13 of 3.74 per cent, rising from $5.79 billion to $6.01 billion. The growth will also continue further, Gartner predicted, saying that spending will reach $6.48 billion by 2015.

Given this, perhaps IBM's hopes will be met, and the government will think of technology as its saviour, and not as a place to use the razor. We'll just have to wait until tonight to see.

Don't forget to visit ZDNet Australia tonight, when Josh Taylor will be reporting on budget initiatives as they are announced.

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