Technology Spending Healthy in 2007

By Mel Duvall  |  Posted 2006-12-08 Print this article Print

Survey says worldwide budgets will rise for the fourth year in a row.

It may not be time to "Party Like It's 1999," but a study released this week of worldwide technology spending trends shows that companies will continue to spend more in 2007.

This will mark the fourth consecutive year of healthy spending growth for the technology industry, according to Alinean, an Orlando, Fla.-based company that specializes in measuring return on investment from technology initiatives.

Based on a survey of 21,000 companies in 37 industries, Alinean says that growth in technology spending likely topped 6% in 2006. While companies indicated they were more conservative in their forecasts for 2007, spending increases are still predicted to be in the range of 5% to 6%.

"Our research proves that overall I.T. spending is growing steadily, but perhaps more conservatively than was expected," says Alinean chief executive Tom Pisello. "This continues the trend toward more mature I.T. spending governance and the requirement to prove and improve the return from every I.T. investment."

Among other key findings of the study:

  • Technology projects remain risky. Companies reported almost half of all projects were cancelled prior to completion, or failed to meet schedule, budget or feature requirements. Only 1 in 4 projects launched successfully and delivered on promised benefits.

  • Frugal spenders do best. In its ranking of top performers, which Alinean calculates by measuring I.T. spending against a company's revenue and profitability, the top performers spent only 2.45% of revenue on I.T., compared to a 3.3% average.

  • Spending on innovation is up. Companies are dedicating about 14% of their I.T. budgets toward innovation projects, primarily to reduce operating costs and improve efficiency. That's up from 10% in 2003.

    According to Alinean, its research showed that spending on infrastructure optimization projects, such as consolidation, virtualization, security and automation tools, had a significant payback, with companies reporting a 10% gain in information-technology efficiency. Pisello says that with the economic picture unclear, such reported gains in efficiency will be critical for CIOs as they look to shift more of their budgets toward innovation projects.

    Contributing Editor
    Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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