Having written a lot about virtualization and cloud computing in this blog, it has been fascinating to see how that proposition has been gaining traction over the last few months. And not only in media either, as we’ve spotted a large number of real organizations out there riding the virtualization trend. As a matter of fact, as much as 85% of our direct sales are now made to organizations running Nixu Products in virtualized computing environments.

Despite the economic and financial turmoil, it really seems like many organizations are working actively on virtualization and cloud computing initiatives, to realize the efficiencies and enjoy the financial gains it promises. In fact, this is also the reason why I haven’t been writing recently: our virtualization-ready software appliance proposition has been gaining such a good traction over the last few months that we’ve spent all our time catering to the needs of customers making their way to the virtual land.

Luckily, there are some great minds out there who are more than willing to help us out in providing you with quality content. Jake Sorofman, the VP of Marketing for rPath (the other software appliance pioneer) just recently forwarded us an excellent piece on virtualization and cloud computing; the way in which the current economic trend impacts these underlying trends; and how that relates to IT Budget Planning. I couldn’t agree  more with Jake so please find his insights below.

Cutting with a Scalpel: IT Budget Planning in a Down Economy

“If you’ve followed the recent presidential debates, you’re probably familiar with the “hatchet and scalpel” metaphor for fiscal planning. By one candidate’s logic, the hatchet is the old way of cutting budgets during a down economy: wholesale reductions across the board, with little regard for the relative value of programs.  In this context, a single hatchet stroke cuts fat, while also cutting away the muscle and bone that is fundamental to setting the economy back on track.

The new and perhaps more enlightened approach, this candidate suggests, is to use a scalpel to make precision cuts at just the programs that can be sacrificed, while preserving investment in the areas required for future growth and transformation.

This metaphor is equally apt for thinking about IT budget policy.

During the last recession, IT organizations learned the high cost of cutting with a hatchet. By their own admission, many IT organizations cut too deeply, hacking at IT spending in a way that left organizations weakened and unprepared to fully exploit the opportunity presented by the subsequent economic expansion. What was seemingly lost on some folks was the fact that IT had become so fundamentally entwined in business models — even for traditional old-line organizations — that wholesale contraction in IT spending was penny-wise and pound-foolish.

This time around, the prudent CIO will cut with a scalpel, ensuring that adequate investments are made in foundational technologies that will help transform the delivery and consumption of enabling technologies.

A recent podcast conversation between pundit foursome Dana Gardner, Tony Baer, Jim Kobielus and Dave Linthicum supports this point, suggesting that interest and investment will continue for transformational IT approaches like cloud computing.

This finding is corroborated by a recent rPath webinar, “The Pragmatist’s Guide to Cloud Computing: A 5-Step Framework for Achieving the Strategic Value of Cloud Computing While Delivering Real ROI Along the Way,” which introduced the concept of The Cloud Computing Adoption Model as a graduated approach to cloud transformation.  A poll conducted during this very well-attended webinar clearly indicated that spending continues in virtualization and cloud technologies at paces equal to and often far exceeding pre-recessionary levels. In fact, only 5.9% of respondents expected to see declining investment in these areas, which is quite a statement when you consider the downward pressure facing most IT budgets.

Reading between the lines, the story appears to be that organizations will continue investing in these areas, because they recognize that change is necessary. The old way of delivering and consuming technology has become far too slow and expensive, and new models like virtualization and cloud have begun to shine light on a more sensible model that organizations must embrace to remain competitive. Forgoing investment in these areas during challenging economic times is the sort of hatchet-based IT budget policy that would have deep and lasting consequences.

But while they recognize that this sort of transformational change is necessary, prudent organizations aren’t willing to dive headlong into change without the promise of near-term impact. Tony Baer refers to this as “tactical transformation,” his admittedly oxymoronic take on what I believe is the zeitgeist of IT today.

According to Baer, “in times like these, obviously you have changing economic conditions — changing in a very unpredictable manner. On the other hand, the financial crunch and the credit crunch [are] going to restrict the amount of resources you have at your disposal. So, you’re basically going to look very opportunistically. You are going to look at, let’s say, the low-hanging fruit that will give you the greatest gain in savings or a way to respond to the market in a more agile manner.”

This is consistent with the goal of The Cloud Computing Adoption Model, which aspires to help organizations realize the benefits of virtualization and cloud on the path to a gradual transformation. It’s grounded in the reality that, while organizations recognize the need for change, intergalactic concepts and overstated promises are increasingly overtaken by a cooler, more pragmatic approach.

Investments in transformational areas of IT like virtualization and cloud will continue, but they must occur stepwise with tangible business impact. Change for the sake of change, or change toward the promise of payoff on some distant horizon, simply won’t hold up to scrutiny. Taking a hatchet to IT budgets may be somewhat out of vogue, but that certainly doesn’t grant anyone a blank check for even the most strategic investments. The new IT mantra is both pragmatic and progressive: tangible benefits today, while laying the foundation for transformation tomorrow.”

Jake Sorofman is vice president of marketing for rPath, the pioneer and leader in technology for virtualizing software applications and managing the complete lifecycle of virtual appliances and application images for cloud and virtualized environments. Learn more about rPath at http://www.rpath.com, and contact Jake at jsorofman@rpath.com.