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IDG Study Tracks IT Executives Spending Priorities

  Industry Statistics published in DM Direct Special Report
October 1, 2002 Issue
 
  By Mary Jo Nott

A newly released survey of more than 450 information technology (IT) executives in the U.S. and Europe by Getronics and International Data Group (IDG) Research finds that 41 percent expect to increase IT spending in 2003 and an equal percentage plan to spend the same as this year.

Due to the economic downturn, business objectives translate into a focus on cost savings over other business goals. Across multiple industries, 67 percent of the respondents report "decrease costs" as a top-three business priority for the next 18 months, followed by 58 percent for "increase profits," 52 percent for "increase customer loyalty," and 42 percent for "increase revenue."

Despite economic difficulties and pressures to justify expenditures, only 18 percent of IT executives use a formal methodology for measuring return on investment (ROI). The research found a significant difference between the U.S. and Europe on this issue with more than one-third of U.S. respondents measuring ROI compared to just 15 percent of European corporations. The majority of IT leaders at medium-to-large companies surveyed evaluate project success with on-time and on-budget measurements.


Figure 1: Evaluation Methods among IT Executives

Security is the top IT spending priority in Europe. While spending on security is seen as a priority at more than 20 percent of U.S. firms, it comes sixth behind customer relationship management (CRM) at 39 percent, e-commerce at 35 percent and enterprise resource planning (ERP) at 29 percent. Looking at the global view of spending priorities, security is number one, followed by e-commerce and CRM. In the U.S., the desire to reduce costs is by far the leading reason to outsource.

The survey, conducted in June and July 2002, finds that business strategy now firmly leads IT strategy. Eighty-two percent of companies surveyed report that business strategy has a significant or critical impact on IT strategy. The findings indicate that IT is now a solution for achieving business objectives rather than a strategic imperative.

In terms of major application areas, through next year e-commerce is cited as the top IT project area by 37 percent, while data warehousing, new technologies, ERP, and CRM each notch a response rate of 30 percent or higher.


Figure 2: IT Spending Priorities for 2003

Across all seven countries surveyed, the most cited IT spending priority through 2003 is security, with 36 percent, moving it ahead of traditional technologies such as e-commerce (35 percent), CRM (33 percent) and ERP (31 percent), with larger companies more interested in CRM. In an interesting divergence, the survey finds that security has a higher priority in Europe with 38 percent versus 23 percent of U.S. executives rating it as a top-three priority.

Spending on outsourcers, integrators, support/maintenance providers and staff augmentation firms accounts for about 30 percent of IT budgets, regardless of company type or home country. Almost one-quarter of the companies in the survey indicate they will increase outsourcing modestly in areas covering local and wide area networking, datacenters, help desks, application development/management and business processes. The majority project level funding for outsourcing next year.

The key factor driving outsourcing decisions is cost reduction (43 percent), followed by focus on core competencies (35 percent) and access to special expertise (32 percent). In the U.S., half the respondents cite cost reduction as the primary motivation followed by a need to focus on core competencies. Technical competence is rated a critical or very important selection criteria when selecting outsourcing providers by 79 percent of the respondents. Service and support, the provider's understanding of the company's strategy and needs (73 percent and 64 percent respectively) also rate high. Past experience with the vendor, price and industry experience each poll above a 50 percent response rate.

The telephone survey included interviews with 458 IT decision-makers in the United States, United Kingdom, the Netherlands, Spain, Italy, France and Germany. The full survey is available at http://www.g e tronics.com/download/pdf/CIO_survey_160902.pdf

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For more information on related topics visit the following related portals...
Strategic Intelligence.

Mary Jo Nott is the editor in chief of DM Review and responsible for the content that appears in the magazine and its associated Web sites. You can reach her at (262) 784-0444, ext. 215 or maryjo.nott@sourcemedia.com.

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