Caution, cost cutting signal slow increase in IT spend

Recent surveys confirm that at the close of 2002, technology executives still plan to enter the coming year with the same cautious, cost-cutting approach to IT spending that they've endured for the past 18 months.

The Goldman Sachs Group and CIO Magazine separately released results this month of two global IT spending surveys which show similar results. Goldman Sachs' survey of 100 IT executives from Fortune 100 companies found that IT spending will grow about 2 to 3 per cent in 2003. The CIO Magazine study also showed IT budgets increasing about 5 per cent over the coming 12 months.

Despite some optimistic takes, most Goldman Sachs respondents say they believe an uptick in IT spending is at least three quarters away, which puts any significant acceleration in the fourth quarter of next year. And the study found that cost-cutting measures top the list of network executives' priorities.

CIO Magazine's survey of about 300 CIOs conducted in November shows that a little more than 38 per cent of respondents plan to increase spending next year while 22 per cent will decrease spending. And spending on security software garnered the most response with 56 per cent of those polled planning to increase investment specifically in that area. CIO also found that 39 per cent would spend more on hardware and more than 32 per cent plan to buy more infrastructure software.

Esprit Australia will take a prudent approach towards IT spending over the next year because of the uncertainty in the economic climate, said the retailer's IT manager Roger Spraggon. The current IT environment will compel the company to "take things very cautiously at least until the end of the next fnancial year", he said.

How such caution translates into the company's IT agenda for its trans-Tasman operations next year is that the New Zealand business will be a priority, with a few key projects slated including the Esprit global intranet and Esprit Global Systems standardisation, Spraggon said.

The key driver for a more international focus in Esprit's IT initiatives is the company's new reporting structure, aimed at "getting Esprit to run more as global operation than just a number of different countries that report to a head office".

The company's IT budget for the next year will remain tight. Therefore "only projects with a very clear ROI [like telecommunications] will receive the necessary funds", Spraggon said.

Cautious spending continues

Ray Whitehead, deputy director of architecture development for the Department of Defence, believes that despite the cautious climate for IT spending, "we won't see cost cutting so much as a lot more targeted approaches in how companies spend their IT dollars".

It will be increasingly important for organisations to share information across the organisation, using technology, "rather than taking a siloed view of the business", he added. The main lesson he has learned in how to create "true" business value from IT is to involve the whole enterprise in project planning and rollouts.

"As we move into next year, we're trying to get all people to define the department's business systems. Then we can optimise those systems, matching them with the software or hardware to look at the business opportunities within our systems, and meet our business output," he said.

Whitehead claims IT executives "still" work in a siloed fashion when it comes to developing their organisation's IT architecture and setting purchasing priorities. "You're never going to see a pay-off in the enterprise if you take a blinkered approach to the rest of the business.

"We find we need to get right to the top level of the organisation to create business change through IT."

He argues that too often organisations -- particularly in the private sector -- ignore the fact that profit is the motive for all business or IT initiatives. Therefore IT decision-makers must realise that technology "solutions are only a generic thing" to solve a business problem.

"Even if vendors tell you a solution is customisable, and no matter how much money you spend, that's not going to help your business if you don't get your IT architecture right."

In the year ahead, Defence will look more closely at the business return it can extract from deploying XML (extensible mark-up language -- a text-based syntax to describe hierarchical data, and the open standard for exchanging information among disparate computer systems), in terms of the potential cost savings of that computer language, Whitehead said.

"XML may open some really interesting opportunities for us as a business direction as far as the tagging of information and sharing of information across the enterprise goes. We're really interested in the medium-term moving all documents and records to the XML standard," he said.

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