IT Spend 2008: Some Wiggle Room for Innovation

By Doug Bartholomew Print this article Print

AMR Research had recently reported one of the more bullish outlooks for IT spending in 2008, but has since shifted. It does, however, find that some companies are looking for IT spend to be an innovative catalyst.

Just when 2008 was shaping up to be another minimal-growth year for corporate investment in information technology, along comes a fresh report from AMR Research predicting a fairly robust IT spending increase of 8 percent next year.

Aha, but there's a caveat. It seems that since AMR Research polled 495 business unit executives and IT managers for the survey in late October, the research firm has since had second thoughts about being quite so bullish, trimming back its estimate for IT spending growth to a more modest 5 to 6 percent. That's almost exactly the approach that Forrester Research took, paring back its October prediction of 8 percent growth in IT investment in 2008 to 5 percent.

"We think it's safe to knock 2 to 3 percent off the growth estimate for IT spending next year," says Bob Kraus, vice president of quantitative research at AMR Research in Boston and author of the report. The reason, he said, is that "although the markets were still doing very well in October, a month or so later we think it's likely we will see different results."

Regardless, AMR's initially bullish attitude for next year's IT outlook was based on plans for increased spending on technologies that help companies reduce costs while improving their utilization of existing technologies. Improving efficiencies and lowering costs was cited as the number one business initiative for 2008, followed by outsourcing and better utilization and analysis of data.

When asked to rank their most strategically important investment for next year, customer management was first, followed by ERP and then governance and compliance. Kraus says the emphasis on customer relationship management dovetails with the emphasis on using IT to help reduce costs.

"When a company decides to use Salesforce.com for its customer relationship management system, there is no upfront cost for the software—it's like leasing a car instead of buying one," says Kraus. "Another way IT organizations are saving money is by getting their software development done in India and Eastern Europe."

Kraus says many large companies continue to operate with a variety of applications that are run separately and have poor, if any, integration. "They have all these systems that don't talk to each other," he says. "That's one of the reasons that SAP and Oracle are doing so well, because companies believe that by buying all their applications from one company, there is a better chance the systems will work together."

One of the more surprising findings of AMR's survey was a strong sense among participants of the need to pursue IT investment in 2008 to foster innovation. "Normally most organizations find that after using IT to run and expand the business, there is nothing left for new investment, but that's not what we found," Kraus points out. Some 26 percent of respondents said they were allocating IT investment in 2008 to help transform the business. "I think this figure is too optimistic," Kraus adds. "But the fact that these line managers and IT executives are thinking that way is a very interesting sign. It not only shows optimism about the coming year, but it also runs counter to the notion that everything is related to cost containment."

Although AMR Research focuses on technology for manufacturing industries, the survey included healthcare and financial services. About two-thirds of those participating were in IT, and the remainder were business managers.

This article was originally published on 2007-12-26
Doug Bartholomew is a career journalist who has covered information technology for more than 15 years. A former senior editor at IndustryWeek and InformationWeek, his freelance features have appeared in New York magazine and the Los Angeles Times Magazine. He has a B.S. in Journalism from Northwestern University.
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