After a year of decline, IT spend
likely to increase by 5 percent in 2003-04
Around the world, enterprise
IT spend has been on the decline. The economic downturn
coupled with inconsiderate or unplanned spending on
IT in the last decade, has contributed to all this.
So what is the scenario in
India? As per last year's survey (IS 2002June
issue of Network Magazine), CIOs had committed to spend
an average of Rs 554 Lakh on IT-related investments.
This spending was more or less equal to what they had
spent in the previous year (2001-2002).
So, did Indian enterprises
spend that amount? As per this year's survey, the average
amount spent on IT was only Rs 468 Lakh. This implies
there has indeed been a decline in IT spending. CIOs
did not fully utilize the amount they had budgeted for
IT related projects.
The largest spenders in 2002-03
were BFSI, Telecom/ IT/ITES, and Govt./PSU. The average
amounts spent were Rs 1109 Lakh, Rs 954 Lakh, and Rs
649 Lakh respectively. All other industry verticals
show modest spends.
Technology is a key component
for BFSI and Telecom/IT/ITES verticals. This explains
why spending on IT is high in these sectors. Also, nationalized
banks have been spending substantial amounts on computerization.
PSUs have traditionally been big spenders, given the
need to link distant locations. And with various state
governments and quasi-government institutions pushing
initiatives like e-governance, technology has been of
high-priority here too.
So, which were the technology
verticals that received a maximum chunk of the shrunken
IT budget? 68 percent CIOs said they invested in Bandwidth/connectivity
last year. 64 percent in Enterprise hardware procurement,
and 48 percent in Enterprise packaged software. Security
comes fourth with 47 percent having invested in this
We were keen to find out the number of CIOs who had
spent more than the amount budgeted. Nearly 60 percent
said they had spent the exact amount budgeted for IT
in 2002-03. 20 percent said they had spent less, while
only 15 percent claimed to have spent more than the
A majority of those who had
spent less than the amount budgeted are from large-sized
companies (turnover exceeding Rs 500 crore). Nearly
22 percent large-sized companies spend less on IT. The
reason behind this is obvious: Most of the large-sized
companies already have sizable investments in IT when
it comes to automating back-end and front-end processes.
In this particular case, the reasoning was to build
a buffer within the IT budget, to provision for any
last-minute or unforeseen procurement/maintenance costs
that may arise.
Even in the case of leading
IT spenders like BFSI, Telecom/ IT/ITES, Govt./PSUs,
more than one-fifth of companies have spent less than
the amount budgeted, indicating a slowdown in IT spending.
the rise again
The IT spend in 2003-04 is on the rise again, albeit
slowly. This year companies plan to spend on an average
Rs 493 Lakh, indicating a 5 percent increase in IT spending.
The major spenders are again the BFSI, Telecom/ IT/ITES,
and Govt./ PSU verticals.
The BFSI vertical is registering
significant spends; their average budget has climbed
from Rs 1109 Lakh in 2002-03, to Rs 1310 Lakh in 2003-04.
In Telecom/IT/ITES and Govt./PSU,
both major spenders last year, the allotted budget is
same when compared with last year. In almost all other
verticals, companies are registering a small increase
in the budget allotted for IT.
In terms of turnover, IT spending
in medium-sized companies is expected to grow by 20
percent, while in large organizations the IT budget
may actually shrink by 11 percent.
This brings us to our next question: Which technologies
are companies investing in? The top areas of IT spend,
in terms of technologies, are: Bandwidth/connectivity
(57 percent plan to invest), Enterprise hardware (55
percent), Storage (46 percent), and Security (46 percent).
Both Storage and Security are clearly gaining prominence
in the BFSI sector where information security and availability
- Analyze IT spends across technology and industry
- Understand the IT-decision making cycle
- Understand whether IT is aligned with the
- Find out the financial matrices, if any,
used by corporate India for IT investment
- Overall IT spending in 2002-03 was Rs 468
Lakh indicating a fall in spending over 2001-02.
- The IT spends in BFSI, Telecom/IT/ITES, and
Government/PSUs sectors are significantly higher
than the average IT spend. BFSI leads the lot.
- One-fifth of the respondents mentioned that
the actual amount spent was less than the amount
budgeted in 2002-03.
- The IT budget for 2003-04 at an overall level
is Rs 493 Lakh indicating a marginal (5 percent)
increase in IT spending.
- While spending by BFSI, Services, and Healthcare
are expected to increase, other sectors like
FMCG/Consumer Durables, Telecom/IT/ITES will
show a marginal decrease.
- IT spending in medium-sized companies is
expected to increase by 20 percent, while it
is expected to shrink by 11 percent in large