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Spending cautiously on IT initiatives
CIOs have taken a cautious stance towards IT investments.
They are keeping budgets constant and allocating additional funds to certain
enterprise-wide IT initiatives, on a case-by-case basis. by Anil Patrick R
The cash registers are ringing again for IT solutions vendors around the world.
Global enterprises are once again spending on IT infrastructure. The improved
economic scenario and the need to stay competitive have caused corporates to
loosen their purse strings. While this is definitely good news for the technology
industry at large, the Indian set-up provides a slightly different picture.
If 2002-03 witnessed under-utilization of IT budgets, 2003-04 saw many organizations
exceed their initially defined budgets.
As per last year's survey (IS 2003, June issue of Network Magazine), CIOs had
committed to spend an average of Rs 493 Lakh on IT-related investments. However
2003-04 saw organizations spending more on IT than they had initially budgeted.
The companies surveyed have spent to the tune of
Rs 528 Lakh on an average. The strong economy along with the positive undercurrents
seems to have bolstered CIOs to spend more.
The biggest spenders in 2003-04 were BFSI and Govt./PSU verticals. The average
amounts spent by them were Rs 1026 Lakh and Rs 993 Lakh respectively. The Services
sector (logistic, hospitality etc) with an average spend of Rs 551 Lakh has
displaced the Telecom/IT/ITES vertical as the third largest spender.
The IT-enablement drive initiated by nationalized and second-tier cooperative
banks along with the traditionally heavy dependence on technology have made
BFSI the largest spender. Govt/PSUs are the other big spenders given the diverse
nature of transactions over distant locations. Large-scale implementation of
e-governance and enterprise automation initiatives in the Govt/PSU vertical
during the last year is a major contributor towards this trend.
Among the companies surveyed, 73 percent CIOs said they invested in connecting
their organizations (Bandwidth/connectivity), followed by 72 percent in hardware
procurement (Enterprise hardware). Security comes third with 55 percent CIOs
investing in this area.
More than allocated
In 2003-04 CIOs have spent more on IT procurement and maintenance than what
they had initially budgeted for. Nearly 67 percent of the CIOs surveyed claim
that the actual amount spent has remained same when compared with the budgeted
amount.
Only 10 percent of the CIOs claim to have spent more on IT than the initial
amount budgeted for 2003-04. Of these Chemical/Pharma companies seem to have
spent more that the allotted budget (22 percent organizations), followed by
BFSI (14 percent) and Auto and auto components (10 percent).
Telecom/IT/ITES is the main vertical to have underutilized
its budgets with 30 percent of surveyed CIOs claiming to have spent less.
Treading with caution
The IT budget allocated for 2004-05 is more or less equal to one planned in
2003-04. On an average the companies surveyed have budgeted an amount of Rs
478 Lakh for 2004-05. The major spenders are likely to be Govt/PSUs, followed
by BFSI and Manufacturing/Engineering.
The Govt/PSUs vertical is committing a significant spend: their average amount
allocated has climbed up from Rs 642 Lakh in 2003-04 to Rs 1065 Lakh in 2004-05.
There seems to be a significant drop in the budget allotted by the BFSI vertical
this year as compared to last year, since most of the banking and financial
institutions surveyed already have substantial IT initiatives in place.
From the overall results, it appears that CIOs have taken a cautious stance
towards IT investments—they are keeping their budgets constant and allocating
additional funds to certain enterprise-wide IT initiatives, on a case-by-case
basis. Also, in the case of certain automation initiatives, a certain part of
the project is funded by various business units.
Many large organizations already have sizable IT investments in place. These
companies are more concerned with maximizing their returns on IT and other maintenance
initiatives than making fresh investments.
Technology spends
On the technology front, the good news is that more Indian organizations are
taking security more seriously this year. Security investments seem to be the
clear focus area with nearly 61 percent CIOs planning to invest in Security
in 2004-05. This is an increase over last year when 55 percent of CIOs had spent
on Security. The other technology areas registering growth are Storage and Enterprise
wide applications, with nearly 48 percent CIOs planning to increase their in
Storage and 42 percent in Enterprise wide applications.
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- 2003-04 saw many organizations exceed their initially defined budgets.
Companies spent Rs 528 Lakh on average.
- The biggest spenders in 2003-04 were BFSI and Govt./PSUs verticals.
The average amounts spent by them were Rs 1026 Lakh and Rs 993 Lakh
respectively.
- Chemical/Pharma companies are the ones who seem
to have exceeded their allotted IT budgets.
- The top three technology areas for investment in the last one year
were Bandwidth/Connectivity (73 percent), followed by Enterprise Hardware
(72 percent) and Security (55 percent) CIOs investing in this area.
- Telecom/IT/ITES is the main vertical to have underutilized its budgets
with 30 percent of the respondents claiming to have spent less.
- In 2004-05 the average IT amount budgeted is Rs 478 Lakhs. This year
Govt/PSUs will be the largest investors in IT followed by BFSI.
- Security will be the focus area in the next one year, with nearly
61 percent planning to invest in Security.
- The other technology areas registering growth are Storage and Enterprise
wide applications.
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One of the objectives for IS 2004 was to understand
the typical IT decision making cycle in Indian organizations. Active business
involvement in making IT investment decisions is evident with 80 percent
of the organizations claiming close alignment of business and IT goals.
Top management is now more involved with IT initiatives.
Participation is more during the initiation/authorization stage (58 percent).
This is due to the fact that IT budgets are clearly determined by the
business functions required (in 50 percent of organizations). The business
involvement lessens during the planning (52 percent) and execution (42
percent) stages. However, in many organizations, the business is actively
involved in controlling/monitoring and measuring progress of initiatives
(44 percent). Post completion assessment of initiatives with the involvement
of senior business leaders happens in 37 percent of the organizations.
There is active involvement from user representatives
during the various stages of IT initiatives. User representatives are
most actively involved during the initiation/authorization (56 percent)
and planning (48 percent) stages. The involvement decreases afterwards
during execution (44 percent), controlling/monitoring/measuring progress
(39 percent) and post completion assessment (35 percent).
Today, the Indian corporate considers the IT head as
part of the organization's executive management team (70 percent). Most
businesses are highly dependant on IT and it is common to see IT heads
as members of the management board. More than 76 percent of CIO/CTOs have
corporate wide responsibilities than just being confined to the division.
The IT team is the final decision maker for IT investments in 24 percent
of organizations and part of the team making IT investment decisions in
the rest.
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