Our series on IT expenditure concentrates on the business services sector, where firms are generating new business by using single systems to monitor client data.
The UK's business services industry is set to spend £4.7bn in 2004, up from £4.4bn in 2003, according to the latest Computer Weekly IT Expenditure Report, produced by Kew Associates.
Although the size of this investment is dwarfed by other sectors, such the public sector (£13bn) and financial services (£11.9bn), business services sector technology spending now accounts for about 6.5% of total IT expenditure in the UK.
Rising IT investment within the diverse business services sector, which includes professional and legal services, the accountancy profession, real estate services and media businesses, will be driven by the need to find new business. The challenge of sharing data between scattered subsidiaries and compliance with industry regulations will also drive investment.
The sector contains a marked spending disparity with small firms' IT investment running at almost double the rate of investment in all industry sectors, and enterprises with 5,000-plus employees investing at half the rate of UK industry as a whole.
The multibillion-dollar financial scandal of Enron and subsequent collapse of the energy trading company's auditor Andersen sent shockwaves through the accountancy profession.
In response to mounting concerns over auditor independence, the "big four" accountancy firms have spun off their IT and management consultancy practices.
This trend, coupled with industry regulations such as Sarbanes-Oxley, has increased pres-sure on firms to use technology to make better use of the information they hold on customers to help generate new business.
Customer relationship management systems are of increasing importance. "We are in the post-Enron world where restrictions exist about the work professional services firms can do for audit clients," said Gerry Penfold, partner in KPMG's information risk management practice.
"We use CRM systems to track client contacts and business development with people in different offices [and countries] working on the same client."
Accountancy firms also faced the challenge of standardising CRM and enterprise resource planning applications globally to make information sharing more efficient and cut costs.
"There is a big benefit in the use of a single system across offices, otherwise you have a tower of Babel scenario," said Kathleen Klasnic, lead analyst within the enterprise networks programme at analyst firm Datamonitor. "With the big accounting firms having spun-off their consulting arms, they also need to partition a lot of data to see what they can keep to comply with data protection [rules]."
Other areas for IT investment at KPMG include specialist software products to support services such as tax planning, risk assessment and fraud investigation, and global databases that provide reference material for staff, for example on audit rules and new accounting regulations.
Mobile computing will be another priority. "[Our] professionals are travelling an awful lot, so mobile and wireless computing is a big area of investment for us," said Penfold. "All our partners in the UK are using Blackberry devices."
The property industry has traditionally been something of a laggard when it comes to investing in new technology, but the growth in online property websites and the pressure to generate business leads has raised the profile of IT within the sector.
For Owen Williams, head of IT at global property services firm Knight Frank, two priorities will be using IT to support new business opportunities and controlling the costs of IT infrastructure. "It is an issue of balance and a debate about how you get the most out of IT," he said.
Knight Frank is investing in mobile technology such as SMS messaging and Bluetooth to use with clients, added Williams. The company also wants to improve the internet and extranet connections between its subsidiaries.
"The internet is an increasingly important medium for us and we already use XML quite a lot for moving data between different systems and various property sites," he said.
Legal services and media
Linking different offices through networking technology is one of the main challenges facing the legal services sector. The media sector meanwhile, has begun to invest in interactive television and advertisements.
"Many law and accountancy firms have offices across the world and want to access the same data about clients, monitor IT security and comply with data protection regulations," said Datamonitor's Klasnic.
Networks - local area, virtual private and wireless - are becoming a widely used technology to link sites, she added.
With the explosion of news and information services available over the internet, media IT investment will increasingly focus on technology to distribute and charge for content (whether online or through a broadcast medium).
IT will play a pivotal role in maintaining control over online content (digital rights management) in the media sector and firms will also invest in CRM software to help retain customers.
IT investment will also be driven by the growth of interactive television and adverts, such as those on Sky and MTV, said Adrian Drozd, an analyst in the enterprise networks programme at Datamonitor. For example, viewers can click on a red on-screen button to get more information about a product.
Manpower backs CRM for growth
Manpower, the recruitment, training and human resources company, has installed customer relationship management software incorporating artificial intelligence technology to help it match the right candidate to the right job at the right time.
The software, from NCorp, is based on a web-services architecture and helps Manpower consultants view client details and match them to suitable job vacancies within minutes.
The previous system used by staff to place candidates was based on a SQL server database and struggled to generate enough suitable candidates from the search results, according to Manpower.
The software produces a shortlist of job candidates based on a range of criteria including skills, experience, career goals, interests and availability for work.
Manpower estimates that the system will deliver substantial benefits when a worldwide roll-out to offices in 60 countries has been completed.
Benefits include the speedier placement of candidates; 3,000 man-hours a day worldwide saved through improved employee productivity; an easier method of identifying the "hot skills" being demanded by clients; and a target of placing an additional 600,000 candidates in jobs worldwide as a result of the new software.
How to buy the report
The Computer Weekly IT Expenditure Report, produced by Kew Associates, analyses spending in 66 industry sectors covering 30 spend categories. These categories encompass a comprehensive range of different types of hardware, software and services. A series of reports is available containing varying levels of detail. Prices start at £495. For more information, contact Georgina Tucker at Computer Weekly. Tele: 01895-632163
How the report was produced
Information on total IT spending is collected annually from more than 60,000 UK IT budget holders on Computer Weekly's circulation list. This is supplemented by more detailed IT spending information from 5,000 budget holders surveyed each year. Additional information is sourced from the Office for National Statistics and the Treasury.