ROI demands to blame for IT spending slump

Demands for IT projects to be justified under normal business guidelines, not the economic downturn, are to blame for the...

Demands for IT projects to be justified under normal business guidelines, not the economic downturn, are to blame for the slowdown in IT spending, according to research by analyst firm NelsonHall.

IT directors are increasingly being asked to justify all new spending with return on investment (ROI) analysis followed by post-purchase checks, according to NelsonHall.

The survey's findings fly in the face of conventional wisdom, which blames the recent reduction in IT spending on the economic downturn.

Difficulties in building a business case and a lack of ROI justification were the major reasons for reduced IT spending cited by about half of the companies surveyed.

"Real economic slowdown, reduced revenue or reduced revenue growth is strongly affecting the IT spend of less than 20% of UK organisations," said John Willmott, NelsonHall's managing director.

Many IT directors got out of the habit of justifying spending during the period when their companies were investing heavily in e-business processes, added Willmott.

"IT spending is now a part of mainstream business and has to justify its contribution using similar measures to any other business initiatives," he said.

Despite fears about the economy, improved customer service remains a more important driver of new IT spending than cost reduction.

Only 25% of the 112 firms surveyed said they had initiated IT cost-saving strategies. These were typically among the minority of companies which had reduced their overall level of IT investment.

Willmott said that, so far, IT spending has been "hit hard" only in the telecoms sector, although he added that the situation looks "worrying" in banking.

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