IT budgets globally are predicted to grow but technology vendors hoping to cash in face competition from other providers and from in-house enterprise IT teams.
So says a report by independent market analyst Datamonitor titled Understanding IT budget trends H1 2007. In its report, Datamonitor analyses IT budget changes, focusing on particular markets and the way their budgets are split by entity and provider.
The analysis suggests that, while most enterprises in the US, Australia and Europe will be increasing their IT budgets compared to 2006, they are likely to be spending more with their in-house IT departments, for best value and faster communications.
“Enterprises spend over a third of their IT budgets on internal development and maintenance,” says report author Aphrodite Brinsmead. “This makes sense given the in-house team is usually the first choice to address an organisation’s IT needs.” She said this was due to cost effectiveness and the fact that developments could be carried out faster because staff were already in place and had a more detailed knowledge of the business. “Vendors must work hard to secure business and to target particular verticals and geographies where economies and IT budgets are strong.”
Over half of the surveyed firms in retail banking, energy/utilities and financial markets indicate they will raise their budgets in 2008. Financial institutions typically have higher revenues so, combined with the fact of strong economies in the surveyed countries, this result is unsurprising. More interestingly, the planned increase in energy/utilities organisations’ budgets coincides with the recent consolidation among enterprises in this market. Standardising and replacing old systems are clearly high on their agendas.
Hardware has always taken up the largest proportion of enterprises’ IT budgets, and is still reportedly over one third in this survey. However, software and services may be gaining more traction, as the proportion of budgets spent in these areas appears to be gradually increasing. Datamonitor believes this is due to the regular updates needed by software, new investments in enterprise resource planning (ERP), customer relationship management (CRM) and business intelligence (BI) as well as a higher demand for services.
The survey results indicate that enterprises will select their in-house team to address IT needs where possible, and that the largest proportion of their budgets is spent on internal development and maintenance.
Variations by country are useful in pinpointing areas for vendors to target: Italian enterprises are more likely to approach technology vendors before their own in-house team, whereas enterprises in Benelux and Australia are far more likely to use their internal IT staff.
“IT budgets do not always allow for the highest level of expertise and, since there are a number of technologies and issues to manage, technologies must be prioritised for internal development so the costs can be balanced. With this in mind, and the regional variations, vendors will need to work harder to prove the value of their solutions.”
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