According to a new Business Technographics® report by Forrester Research, Inc. (Nasdaq: FORR), chronically weak budgets have forced IT executives to become more serious about governance — how firms prioritize, fund, purchase, and deploy IT products and services within their organizations. Forrester’s tri-annual survey of more than 700 North American IT executives revealed that only 5 percent of overall IT spend is still up for grabs this year for new technology investments. This drop in discretionary spending, higher approval thresholds, and shrinking funding windows only add to the challenges faced by today’s technology vendors.
“Today’s IT decision-makers are feeling the heat on several fronts to improve IT’s delivery performance under much tighter fiscal controls and business unit direction,” said Tom Pohlmann, research director at Forrester. “Although vendors and service providers should expect more scrutiny and demands for deep discounts, opportunities still exist for offshore services, proven project management tools, and technologies that improve corporate IT’s own back-office efficiencies.”
IT Spending Weaker At Midyear
- At mid-2003 IT spending budgets are weaker and below planned budget levels. As a result, Forrester revises its forecast to 1.3 percent growth from 1.9 percent in IT spending this year.
- For this report, Forrester profiled the following industries and services: manufacturing; chemicals and energy; technology and telecom; distribution; retail; finance and insurance; and services (both consumer and business services).
- Despite optimism earlier this year, general manufacturing and technology/telecom are the hardest hit industries with respect to IT budget run rates.
- Consumer packaged goods firms and services like healthcare and hospital networks have stronger budget outlooks than their technology counterparts do.
- Firms spend, on average, 21 percent of their overall IT spend on new investments, but three-fourths of that spend is already earmarked for an existing or planned project.
- More IT shops will consider investing in IT for IT’s sake and demand average vendor discounts of 27 percent off list price.
- Apps buyers care more about price than do their infrastructure counterparts, who demand reliability as a critical buying factor.
Who Controls The IT Dollar
- IT and business unit (BU) collaboration is on the rise with 60 percent of BUs funding at least some IT investments.
- Thirty-percent of companies must get executive approval on any new investment, regardless of dollar amount. An ROI calculation is required in nine out of 10 investments, but justification metrics vary by a firm’s governance model.
- Executive sponsors and project champions take note: Most firms won’t commit to funding beyond 11 months, on average. Justifying funds every six months is common.
Governance’s Greatest Hopes — PMOs And Offshore Services
- Although 58 percent of firms have a PMO to improve project delivery, especially in verticals like financial services, chemicals, and utilities, IT project performance still drags, with no proven improvement in visibility into IT staff productivity.
- Offshore represents one viable option for improving IT delivery. Seventy percent of firms express satisfaction with their current providers, leading 68 percent of current users to plan on moving more offshore.
- Firms want to own their major IT rollouts, and they look to outside providers for targeted help. End-to-end capabilities in service firms are not considered as important.
- Firms will spend on improving efficiencies within their back office. Virtualization technologies like blade servers are hot, while IT services and PCs are not.
- Vendors take note: 36 percent of new application implementations are at least one month late. Technology receives the majority of the blame for failures with infrastructure projects. IT execs blame poor scoping for app project failures.
Forrester surveyed 704 executives and directors of North American companies for the June 2003 Forrester Report “How Companies Govern Their IT Spending: Business Technographics Data Overview.” Sixty-six percent of survey respondents work at firms with at least $1 billion in revenues, while the remaining respondents work at firms having between $500 million and $1 billion in revenues.
About Forrester’s Technographics Data & Services
Business Technographics examines how information technology is considered, bought, and used by businesses. This comprehensive, survey-based research program surveys senior IT and business leaders of North American companies three times per year. Forrester’s Business Technographics strategic services and tech spending profiles help executives benchmark their spending, purchase plans, and organizational behaviors against industry peers. Technology vendors can also assess their strengths and weaknesses relative to the competition, uncover vertical market opportunities for their products, and profile prospective buyers.
The research mentioned in this press release is available to Forrester WholeView™ clients and can be found through www.forrester.com.