Spending on IT projects to drop in Europe in 2012

European businesses and public sector organisations will significantly cut their IT project spending in 2012 following a spending surge in 2011.

European businesses and public sector organisations will significantly cut their IT project spending in 2012 following a surge in investment this year, an international benchmarking survey reveals.

IT project expenditure in Europe will fall by an average of 14% as businesses complete long delayed IT upgrades, according to the survey of 175 organisations, representing US$38 billion in IT spend, by the Corporate Executive Board (CEB).

“There was a lot of pent-up demand in 2011, investments that could not wait any longer,” said Andrew Horne, managing director at CEB UK.“We think a lot of that pent-up demand is now through.”

Organisations stepped up their capital IT spending by 20% in 2011, as they took infrastructure projects, including desktop PC upgrades, investments in ERP and CRM, off the back-burner.

Spending on information management (39%) outstripped process automation work (32%), as organisations looked to find innovative ways of exploit their business data – a trend that is expected to accelerate.

“We are seeing a lot more interest in information analysis of sales and marketing, understanding customer information and customer value,” said Horne.

IT departments are increasingly investing in applications to manage external sources of information, as knowledge workers take a greater proportion of their information from outside the organisation.

“If you are no longer controlling and generating all the information your users are consuming, some of the traditional ways of governing and architecting that information change,” he said.

Investments in cloud computing and mobile technology only account for a small proportion of IT budgets currently, but are growing rapidly.

Spending on mobile applications is expected to grow from 2.7% of total IT spend, to 4.2% in 2012.

And investment in the cloud will increase from 5.6% of the total IT budget in 2011  to 7.1% in 2012, with infrastructure as a service making up the largest component.

“Most organisations will have a portfolio of applications with some things in the cloud, some things in house and more traditional outsourcing,” said Horne.

IT organisations are increasingly offering end to end services, which wrap up a range of IT systems and services, into a single service, with a single cost per transaction and a single service level agreement.

“It gets to the age old problem that IT partners don’t understand what IT does for them and how much it costs. It’s a way of positioning IT to make it more relevant to industry,” said Horne.

By 2012, just over half of CIOs will offer at least some end to end services, the survey reveals, with take up expected to gather pace over time.

In contrast to Europe, which is predicting a significant drop in capital spending,  investment in IT projects North America is expected to rise by 5% in 2012

European organisations have moved to work through their backlog more quickly than US organisations, says Horne, with the US still playing catch-up.

The more uncertain outlook for the economy in Europe than the US, may also be a factor in Europe cutting back more rapidly.

Operational budgets will remain roughly flat in 2012, with growth at 3% compared to 9% in 2001.

Photo: Thinkstock

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