IT budget cuts lead to less profit, innovation

New global survey finds that senior executives believe reduced IT spend had negative impact on profit margins, getting new business and innovation.
Written by Kevin Kwang, Contributor on

A quarter of senior business and technology executives worldwide believe their company's profits and ability to innovate suffered as a result of reduced IT budgets last year, according to new survey.

Commissioned by BT Global Services, the survey also revealed that Asian business heads, particularly in China, India and Singapore, were most affected by the impact of the budget cuts. In fact, 63 percent of Singapore respondents said they felt the effects of the reduced IT spend since the start of the recession.

The online survey was conducted by Datamonitor and received responses from 274 CIOs and other senior corporate executives in 12 countries including Australia, Singapore, Spain, China, the United Kingdom and United States. A further 2,476 employees who use enterprise IT systems also participated in the poll.

According to the respondents, their companies cut IT budget cuts for the first time in 10 years, as a result of the 2009 global financial crisis.

"This research provides a snapshot into the current mindset of global CIOs and senior executives, and it will hopefully act as a spur to action on key issues such as the role IT plays in driving global business success," Jeff Kelly, CEO of BT Global Services, said in the report.

Data management top priority
CIOs also felt swamped by the sheer amount of business data being churned daily, and unable to utilize the information effectively.

According to the survey, 27 percent of senior executives said the inability to retrieve relevant information in time to meet deadlines had resulted in loss of business during the recession. This number increased to 33 percent among CIOs, who typically had a clearer understanding of the impact of data mismanagement, the BT report stated.

Overall, nearly 25 percent of CIOs acknowledged they had more information than they could handle and make sense of. This sentiment was echoed by senior business executives, 18 percent of whom said they struggled with the deluge of data, while 15 percent of IT users shared similar sentiments.

In Singapore, which accounted for 222 respondents, 17 percent indicated they had too much information to deal with.

Some 34 percent of CIOs worldwide said they had only just enough, or nowhere near enough, market data on hand to analyze and make the informed decisions.

Of the data management issues CIOs face today, Chin Hu Lim, CEO of BT Frontline, said in the report: "[IT heads need to] embrace the challenges and opportunities to impact the relationship between information and business success of their organizations."

The report also stated that 90 percent of all respondents agreed information management was "critical" or "important" to the future of their organizations. Some 92 percent of Singaporean respondents shared this view.

CIOs resisting cloud move
Looking at the potential of cloud computing, the BT survey showed that business leaders lost the message about the basic premise for the platform: cost reduction. More than half, or 53 percent, of CIOs globally failed to see how cloud computing could save them money, even though the cloud model was designed to reduce capital expenditure by cutting out the need to purchase additional servers or software applications to refresh IT architecture, the report stated.

They also had reservations about hosting critical enterprise data and applications on servers that were located outside their domestic market, citing for security and compliance reasons. Some 57 percent of CIOs and 53 percent of senior business executives indicated resistance to hosting their corporate data in the cloud.

In fact, 30 percent of global respondents said they would be uncomfortable with servers based in Southeast Asia, preferring Europe instead as the destination of choice. Some 25 percent favored the U.K. as their preferred server location.

"Although we are already delivering enterprise-level cloud services such as hosted Internet Protocol telephony, for many organizations [cloud computing is] still in its infancy," Kelly said. However, he added that the lack of clarity on the benefits of cloud was "understandable" and highlighted the work vendors and aggregators still to do to address this issue.

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