Gartner: firms waste £351bn each year on ill-conceived IT projects

The average company wastes 20% of its IT budget on misguided and inefficient spending, the analyst firm Gartner has claimed.

The average company wastes 20% of its IT budget on misguided and inefficient spending, the analyst firm Gartner has claimed.

This amounts to $500bn (£351.8bn) of corporate IT investment worldwide - about $140bn of this in Europe.

Over-specified hardware, inconsistent licensing policies for software, and projects that never see the light of day are the main precipitators of fruitless IT investment.

This waste is an endemic problem cutting across Europe, Gartner insists, in an analysis that will re-ignite the debate about IT spending and return on investment (ROI).

Although Gartner has admitted that the 20% figure is an approximation it said that many chief information officers and chief financial officers it had talked to believe the estimate is a conservative one.

The findings come as IT managers face intense pressure to use technology to cut costs within the business while also demonstrating how new projects can boost profits.

"Chief information officers and IT managers are being stretched by two strong and opposing forces," said Andy Kyte, Gartner research director. "They are being asked to cut costs to the business and do more with less.

"But at the same time they are being asked to implement changes to the IT systems, for example a new supply chain management system for the logistics manager. This will be spend from the IT department budget."

However, not all companies are throwing away large chunks of their IT budgets. According to Gartner mid-sized organisations tend to be more efficient by focusing on tightly-controlled cost-driven expenditure, rather than ambitious e-business projects that are more likely to be tackled by larger firms.

So what should IT managers do to get better value from their IT spending? A coherent approach to software licensing across the organisation would be a start, said Kyte.

Divisions within companies often have different licensing agreements with the same supplier. The result is that users may fail to capitalise on their buying power to squeeze a better deal from software suppliers.

"Companies could make significant cost savings if they have a common licensing agreement," said Kyte.

IT managers and company boards also need to be more ruthless when taking decisions about when to pull the plug on a troubled IT project, Gartner added. In the long run this will save time, money and professional reputations.

IT managers should bite the bullet. "In most organisations it is regarded as a badge of shame to terminate a project but we believe that killing projects is a sign of maturity," said Kyte.

"You are trying new things and innovating but recognising that the innovative idea is not going to deliver value."

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