IT fails to prove business value to manufacturers

Manufacturing companies do not consider IT as important to the business as other industry sectors, seeing it more as a basic utility, ­according to Forrester Research.

Manufacturing companies do not consider IT as important to the business as other industry sectors, seeing it more as a basic utility, ­according to Forrester Research.

A Forrester study of businesses across Europe found that manufacturers on average spend 3% of their revenue on IT, compared with the average of 5% across all industries.

IT departments in manufacturing struggling to maintain their share of the budget each year indicates that the sector generally regards IT as a cost, rather than a critical part of its competitive advantage, said Forrester. This is in contrast to sectors such as financial services.

The study found that only 10% of manufacturing companies expected their next IT budget to be greater than their actual spend the previous year, and 15% expected it to be lower. Across other types of business, an average of 30% expected an increase in IT spend.

In 50% of manufacturing companies, selling the value of IT to the business and improving the measurement of IT's impact on business performance were second only to improving efficiency and reducing costs as critical priorities.

Duncan Jones, senior analyst at Forrester Research, said one of the main reasons for this situation was that manufacturing is generally more cost-driven than other ­sectors.

"Also, IT in manufacturing has not yet proved its value in the same way that it has in some other industries. While the most successful manufacturing companies are using business technology to drive innovation, this is the exception rather than the rule," he said.

According to Jones, the solution is twofold. First, IT departments in manufacturing need to have a clear understanding of how they are helping the business so that they can start measuring their impact on business performance. Second, they need to use that data to market the IT department to the rest of the business.

"IT departments in manufacturing need to do a better job of explaining to the rest of the business what they are doing and how they can help, and only then can they begin to show that IT is a business enabler, which is why business should spend more, not less, on IT," said Jones.

John Hamman, industry business development manager for manufacturing at SAP UK, said expressing IT spend as a percentage of turnover clearly illustrated that although there were some exceptions, the manufacturing industry generally spends less on IT than other industries.

"Forrester's figure of 3% is an average across the manufacturing industry, but some spend even less than that," he said.




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