IT Investment in B-class cities
IT spends will take off in B-class cities
The IT spend by companies in B-class cities is expected to
increase by 40 percent in the coming year. And much of the investment is going
into hardware, bandwidth/connectivity and enterprise applications like ERP.
by Abhinav Singh
Organizations located in the B-class cities of India have successfully leveraged
the power of IT and are showing a keen interest in investing in different technology
areas. Factors like intense competition, the entry of MNCs and the availability
of new products are the drivers for investment in some key technology areas.
The Network Magazine and IMRB survey was conducted in five 'B'-class cities
of India, namely Nashik, Aurangabad, Chandigarh, Indore and Cochin. The survey
includes small (turnover up to Rs 100 crore), medium (turnover 100 - 500 crore)
and large companies (turnover over 500 crore). 50 companies participated in
the survey and respondents in these companies include CIOs, CTOs and other IT
While companies in A-class cities are more tuned to decreasing costs and increasing
profits, the business focus for B-class cities is to improve the quality of
service. In fact this is the number one business priority for 60 percent of
the respondents. Of course, half the respondents also place high priority on
increasing profits (54 percent) and decreasing costs (48 percent).
And among the various IT priorities Security (42 percent), IT standardization
(42 percent) and ERP (40 percent) get top billing.
IT standardization is a priority for companies as they are
considering new software packages. Rising virus threats and internal threats
has made Security a top priority. ERP is drawing more interest as companies
want to improve the flow of information within and outside the organization.
What comes as a surprise is that even companies in small towns are consolidating
IT infrastructure and hence are looking at re-engineering the IT set-up. That
means upgrading or replacing their existing infrastructure to meet future IT
requirement for servers, storage and security. 38 percent said Upgrades/replacing
existing infrastructure will be the third IT priority area.
Technology spending's up
Organizations from secondary cities and towns are set to loosen their purse
strings this year. While average spending was Rs 213 lakhs during 2003-04, it
is likely to increase to Rs 294 lakhs in the current fiscal.
Much of the spending will be on Hardware and Bandwidth/ Connectivity. In fact
investment in hardware will shoot uplast year just 16 percent invested,
while in the current year the figure quadruples64 percent are likely to
invest. On an average, enterprises are going to allocate 43 percent of the IT
budget for hardware. The time is right for investing in hardware, as prices
sink significantly due to reduction in import duties.
Other than hardware it's Bandwidth/Connectivity that's going to attract more
investment. Last year 34 percent invested in this area and this year 46 percent
The obvious reason seems to be that some of the companies in the B- class cities
are in the process of streamlining their hardware infrastructure in order to
realize the benefits of the IT implementation to the optimum. With an expansion
in the IT infrastructure the bandwidth requirement is likely to shoot up as
many of the IT applications like ERP would demand more bandwidth.
Enterprise-wide applications, particularly ERP, is a major area of investment
in the coming year for many companies in B-class cities as enterprises are realizing
the business benefits and flexibility they can derive through the use of such
Hardware spendings up
Within hardware, PCs and peripherals will dominate investments, followed by
power conditioning equipment and networking switches. Hubs are gradually being
replaced by switches, as these provide better throughput.
Companies are now looking at centralizing their IT infrastructure at one location.
Hence investment in PCs and setting up a Wide Area Network (WAN) are expected
to increase with more spending on high-end routers, structured cabling equipment
and PCs. The 15 to 20 percent drop in hardware prices (due to cuts in import
duties) will effect all the peripherals/network equipment.
Also, many companies are expanding their operations and increasing headcountand
that calls for additional PCs and peripherals.
Spending on Power Conditioning equipment can be taken for granted as most B-class
cities face power problems.
The spend on networking equipment like switches, routers etc is likely to happen
as many of the companies are likely to go in for an increased bandwidth requirement
due to an expansion in their businesses, IT applications and manpower.
Requirement for more Bandwidth/ Connectivity is driven by enterprise wide applications
and messaging, the need to centralize IT infrastructure, and increased usage
of Intranets. Organizations are going in for bandwidth hungry applications such
as streaming videos (video conferencing solutions), and VoIP phones.
Last year the average spend on bandwidth/connectivity was
29 percent of the IT budget. This year the figure will increase to 36 percent.
There's going to be more demand for leased lines, VSATs and Wireless LANs.
Leased lines have been preferred as they give uninterrupted connectivity and
are able to the meet the increased bandwidth requirements. The need to have
better connectivity within campuses for better co-ordination is likely to drive
the demand for VSATs and Wireless LANs. Many organizations have also gone in
for a Wi-Fi implementation within their campuses.
More investment in ERP
According to the survey ERP, data warehousing/data mining and CRM (Customer
Relationship Management) are the three areas within the enterprise wide application
space, that are likely to witness robust investments. ERP, which plays a very
important role in the coordination with the financial department in an organization,
and with the suppliers, is essential for many organizations in B-class cities.
Currently, 34 percent of the respondents are using ERP, and this figure is likely
to increase to 45 percent this year. Data warehousing/ data mining tools will
see a quantum jump from 14 percent last year to 21 percent in next one year
(in terms of the number of companies investing). Businesses are looking at data
warehousing/data mining tools to get granular details of their business.
Additionally many organizations are using these tools to
mine ERP data, searching for information that will give them an edge over the
competition. CRM penetration is also expected to increase from the current base
of 7 percent to 10 percent in the current fiscal. Some businesses are looking
at automating some of their front-end tasks to improve the customer experience.
According to the survey, 92 percent of the respondents feel that virus attacks
is the most crucial security issue. This is followed by Internet Security and
Theft or Damage to data (36 percent). To counter these threats companies will
spend heavily on anti-virus applications (39 percent), Firewalls protection
(36 percent) and Intrusion Detection Systems (14 percent). They are also likely
to spend on VPN solutions for added security
reasons, Identity Management Applications, Access Control Devices and Cryptography.
The survey also finds that over 85 percent of respondents did not have any kind
of security audit. Also those who had security audits in the past conducted
internally. It is a possibility that security audit requires a lot of investment
on part of the companies because of which they are not outsourcing to external
Abhinav Singh can be reached at
- More than 3/4th of the respondents believe that the business and
IT goals of their organization are closely aligned.
- Improving the quality of service is the number one business priority
for 60 percent of the respondents.
- Half the respondents also place high priority on increasing profits
(54 percent) and decreasing costs (48 percent).
- Among the various IT priorities Security (42 percent), IT standardization
(42 percent) and ERP (40 percent) get top billing this year.
- Investment in hardware will shoot uplast year just 16 percent
invested, while in the current year the figure quadruples64 percent
are likely to invest.
- Bandwidth / Connectivity will attract more investment. Last year
34 percent invested in this area and this year 46 percent will invest.
- While average spending was Rs 213 lakhs during 2003-04, it is likely
to increase to Rs 294 lakhs in the current fiscal.