Spring thaw in spending freeze: replace or be replaced.

News Story by Thomas Hoffman APRIL 04, 2005 (COMPUTERWORLD)

- A thaw in the four-year IT spending freeze is becoming more evident as companies are slowly beginning to look at replacing core applications with newer systems that offer improved functionality and scalability, IT managers and analysts said last week.
At the same time, some organizations are using Web services and service-oriented architectures to extend some older applications in addition to installing new ones.

For instance, DTE Energy Co. in Detroit is deploying ERP software from SAP AG to replace five financial systems, two mainframe supply chain management systems and one human resources system, said CIO Lynne Ellyn.

The energy supplier is also replacing two distribution operations systems and nine implementations of a plant work management system with Maximo, an asset and service management system from Bedford, Mass.-based MRO Software Inc., she said.
DTE Energy is simultaneously harnessing Web services to help it develop applications for functions that few, if any, commercial systems can automate, said Ellyn.

Varied Predictions
In a survey of 118 senior financial executives published late last month by Iselin, N.J.-based Siemens Financial Services Inc., 73% of the respondents said they expect to have shorter replacement cycles for software over the next five years.
But Bill Zadrozny, president and CEO of the Siemens AG unit, which offers financing for hardware and software purchases, said he hasn't seen any significant increases in software spending from Siemens' users so far this year.

"We're hearing it from customers, but we're not seeing it yet," Zadrozny said.
Fenella Scott, an analyst at AMR Research Inc. in Boston, said the frequency of software replacement cited in the Siemens survey "seems a little aggressive." She estimated that roughly 5% of AMR's manufacturing industry customers plan to replace their core packaged applications over the next 12 months.

Harrah's Entertainment Inc. is making increased use of middleware from vendors such as Tibco Software Inc. to more closely integrate its existing systems, said Tim Stanley, vice president of IT and CIO at the Las Vegas-based gaming and hotel company.
But Harrah's is also upgrading its core off-the-shelf applications more frequently in order to migrate to newer versions that Stanley hopes will contain fewer bugs "and put us on a more predictable path."

Other CIOs, such as John Schille at American Fidelity Assurance Co. in Oklahoma City, said they aren't planning to increase software replacement over the near term because their applications are working as expected.

Kathy Quirk, an analyst at Nucleus Research Inc. in Wellesley, Mass., said, "What I'm seeing is that a lot of companies are selectively replacing software, depending on the business need." That includes instances where companies are consolidating multiple packages of CRM and other types of software onto a single platform or are upgrading various business users onto the same version of a system, she added.