International Data Corp. (IDC) reported this week that total IT spending by companies and governments in the US will increase 5.6 percent in 2011, outpacing the 3.0 percent forecasted growth in US gross domestic product.
That figure slightly surpasses the 5.5 percent spending growth recorded in 2010, which showed marked improvement from the previous two years when the financial crisis and recession caused significant across-the-board budget slashes. So said Ted Dangson, IDC program director for Vertical Markets Research, during a recent Webinar.
What's different this year is the spread between the public and private sectors, he noted. In 2010 spending in both segments was commensurate; this year, governments are still hurting from deep deficit issues, while businesses have largely bounced back.
“What we're finding this year is that the expected growth in private sector spending will increase north of 6.0 percent, but in the private sector — which we define as government and education — will grow by 3.8 percent,” Dangson said.
Given the way economic recoveries often trend, it's not surprising that many of the 5,700 respondents in the Framingham, Mass., research firm's annual survey cited productivity and security as the top business goals driving IT investment. Having gone through staff reductions and with news of various hacking scares still buzzing in their ears, companies can no longer postpone necessary IT upgrades or expect their existing systems to meet changing efficiency and flexibility requirements. About 31 percent of respondents said their focus would be on security, while business analytics will be the key priority for 19 percent of executives polled.
At the same time, companies are shifting budgets away from traditional infrastructure and essential software purchases to “new initiatives.” IDC estimates that in 2011 new projects will account for 23.9 percent of the budget, compared with 18.5 percent last year.
Among these new initiatives, cloud and smart technologies are garnering more attention than in recent years, pointed out Monika Kumar, IDC program director for Vertical Markets Research. Companies expect that these technology platforms will help:
- Reduce costs
- Eliminate errors
- Aggregate and analyze data more efficiently
- Improve customer relationships
- Enhance value
- Plan and execute a better response
By 2020, IDC expects, 450 billion “intelligent interactions” will take place every day via some 31 billion devices and affecting 4 billion people. Smart technology and other mechanisms that help companies respond in real-time, or near-real-time (like cloud computing), will sit at the heart of many of these business-to-business and business-to-consumer transactions.
When it comes to software, industry-specific tools that improve targeted function areas will continue to get the thumbs up from CIOs, said Kumar. Within the manufacturing sector, the obvious tools that make their way into IT budget calculations center on: production scheduling; quality management; order management; inventory planning and optimization; and sales and operations planning.
While I'm happy to see that IT spending is again creeping upwards and companies are reinvesting in necessary tools that will help them move some operational processes forward, I always wonder if the equivalent is being spent on actually identifying issues that can't be fixed with an IT band-aid. We all know IT quick fixes only take companies so far in addressing or resolving most major supply chain issues.
In my next post, I'll take a look at how manufacturers in Central and Eastern Europe are migrating more towards quality production than high-volume churn and what operational and IT structures need to be put in place to ensure a stable transition.