CEOs at big companies remain cautious about budgeting for new IT projects, but when they do spend, it’s likely to be on items that deliver quick results based on existing implementations.

According to figures from IDC Canada, general

IT spending in the second quarter of 2003 dropped to 41.8 per cent of large organizations planning to spend on new IT projects. That’s compared to 47 per cent that indicated they were increasing IT spending last year at this time.

“”It’s too early to say if things are going to get any worse or any better, but where it looks like the money is going is into making better use of what you already have,”” said Warren Shiau, software research analyst with IDC in Toronto.

IT investment priorities for Canadian companies indicate that last year marketing automation was an IT priority for 3.5 per cent of respondents and sales automation 5.2 per cent, while customer service and contact centre spending was 7.8 per cent of total planned spending. Fast forward to this year and marketing automation and sales automation are down to 2.2 and 5.1 respectively, but customer service and contact centre are up at 11.8 per cent. Finance and accounting is also higher at 11.6 per cent this year versus 2.6 per cent last year.

While the numbers sound low, in total terms, the change is significant, Shiau said.

“”Finance and accounting/HR/payroll — those are add-ons to existing suites or upgrades — not really new implementations of ERP. It’s the same with business intelligence and data warehousing,”” he said.

By comparison, a survey from the Wendover Corporation — an IT intelligence firm based in Haverford, PA, — and Global Insight Inc., (www.globalinsight.com) released last week showed U.S. and UK spending on accounting and finance software projects fell for the second quarter in a row.

It was the first public release of the Wendover-Global IT Spending Index. In the past, Wendover has only provided its private clients with the market analysis. The index fell 6.2 points to 37.6 points in Q2 — a decline of 14 per cent, marking the fourth consecutive flat or declining quarter and the lowest since its tracking began in 1999. The U.S. study indicates spending in the sector will remain flat to the end of the year, despite spikes in certain segments of enterprise software purchases.

The Wendover-Global Insight survey shows planned spending in specific areas was up in the second quarter including CRM which grew by 33 per cent and ERP which increased by 57 per cent. As well, purchasing software was up by 52 per cent — an area Wendover-Global suggests businesses are willing to invest as it can help cut costs.

Wendover interviewed 30,000 decision-makers last quarter and asked which IT projects they had asked for proposals for the next six to nine months. As fewer RFPs were issued, Wendover-Global says that means fewre discretionary IT purchases will be made in the next two to three quarters.

IDC Canada’s second quarter survey had response from about 300 large organizations across the country.

In Canada, business intelligence and data warehousing spending is up to 19.2 per cent of respondents spending this year, versus 7.8 per cent last year and HR/payroll is at 8.9 per cent this year versus 2.6 per cent a year ago.

“”Business intelligence and data warehousing is also targeted at making use of the data you already have. Things like sales automation and marketing automation versus customer service and contact centre — it’s very easy to measure what new implementation is going to do for you,”” said Shiau. “”These are the places within software that are getting the IT dollar right now. With sales automation and marketing automation there are still areas of CRM where defining how you’re going to measure your return is still tricky.””

Also in decline in the U.S. is the number of planned network services and network equipment projects — declining by 40 per cent over the last two quarters according to the Wendover Index. As well, the number of planned firewall protection and disaster recovery projects has reached all-time lows. While both were in demand after Sept. 11, both have been in decline over the last two quarters.

“”I don’t think we can say the same thing for the Canadian market, but at the same time we probably can’t say there was any jump in firewall or disaster recovery projects. The states may have had a spike and then a fall off whereas we never really had the spike,”” said Shiau.

Comment: info@itbusiness.ca

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