The future for IT department budgets looks uncertain as
the economy comes under pressure from rising oil prices and slower
consumer spending, according to the latest Computer Weekly IT
Expenditure Report, produced by Kew Associates.
The rate of growth in IT spending across the UK fell from a peak
of more than 7% in the second quarter of 2004 to 4.8% in the second
quarter this year.
But there are signs of underlying resilience in the economy
which could prevent the growth rate of IT spending dropping further
this year, and may even produce a spending growth increase.
Kew predicted that the net result would be a level of growth in
IT spending that was likely to oscillate around 5% in a stop-start
pattern until the end of year.
This budget uncertainty would put pressure on IT departments to
invest in projects that produce measurable savings to the business
and offer a rapid return on investment, said Kew director Kris
Wicka.
The research found that businesses plan to prioritise investment
in e-commerce, which is expected to experience spending growth of
18% in 2005-2006. This was followed by CRM and broadband, with 7%
growth. Spending on ERP, IT security and storage products is
expected to grow by between 3% and 4%.
Spending by large companies has grown between 3% and 4% over the
past 15 quarters. Spending by small firms has stabilised over the
past year to between 7% and 8%.
"IT is not off doing its own thing," said Ben Booth, chairman of
the BCS Elite group of IT directors. "If the economy is slowing
down, one would expect IT spend to go with that."
The survey results suggest that businesses are improving their
profitability, with lower growth in IT spending than previous
years.
"People realise they can be a little smarter with what they have
got," said Wicka. "They had the scare with the millennium bug and
the dotcom crash and they are now looking more closely at how they
spend their bucks."
Growth in spending in the IT service sector has remained roughly
constant over the past three quarters at just under 6%. The rate of
spending increase in the manufacturing sector was 2.8%, down from
6.4% in the first quarter of 2005.
Analysis of the Computer Weekly UK IT Expenditure Survey is
available for purchase. For details, e-mail:
georgina.tucker@rbi.co.uk