IT spending in the retail industry will reach $A1.54 billion ($US1.36 billion) by the end of 2007 and the market will grow at a cumulative growth rate of nine per cent from 2006 to 2010, according to Springboard Research. The market will hit $A1.96 billion by 2010, according to the company's forecasts.

"Springboard has concluded that after focusing on driving customer satisfaction, increasing retention, and expanding business, IT is the highest investment area for most large and medium-sized retailers," said Phil Hassey, Springboard Research's country manager for Australia/New Zealand.

"Our data also shows that one in five Australian retail companies are on the verge of an IT infrastructure overhaul, and in the process of replacing legacy systems with more modern and cutting-edge technology. This will create many short-term opportunities for IT vendors that are able to effectively communicate the benefits their solutions provide to retailers," added Hassey.

A saturated local market has forced Australian retail companies to look at investing in new markets, including geographic expansion and new formats, to boost their business. These retailers consider expansion as key to continued growth and profitability.

This focus on new market opportunities -- and the pivotal role technology plays in these strategies -- will prove to be one of the key drivers for IT revenue growth in the Australian retail industry.

"Our survey of 48 CIOs and IT decision-makers showed that a quarter of the retail companies we surveyed have invested significantly in enterprise resource planning (ERP) solutions. This underscores the industry's need for streamlining back-end operations affected by the dynamic changes retailers face due to expanding markets, developing technologies and evolving business strategies," said Nilotpal Chakravarti, a senior analyst for Springboard Research.

"We have also seen retail companies across all sectors invest in supply chain management (SCM) to streamline business operations. Retail investment in this IT area is viewed as fundamental to industry growth and profitability, and 26 per cent of retail respondents have said that SCM has been their IT focus area of the past 24 months," Chakravarti added.

From a competitive standpoint, no clear leading IT vendor emerged. Most of the retailers surveyed (60 per cent) stated that they implemented their IT solutions in house. MNC vendors were mentioned by 29 per cent of respondents. From its market research, Springboard has seen SAP, IBM, Oracle, HP, and Fujitsu gain traction with the larger retail houses.

Len Rust is publisher of The Rust Report.