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Business

Study: APAC firms want shorter ROI

Compared with other regions, businesses in Asia-Pacific demand shortest payback time frame on their IT investments, according to a new study.
Written by Liau Yun Qing, Contributor on

A new study has found that organizations in the Asia-Pacific region are more demanding when it comes to their IT investment payback time frame compared with their worldwide counterparts.

Released Wednesday, the study, conducted on behalf of Hewlett-Packard (HP) by Coleman Parkes Research, found that Asia-Pacific firms demanded an average of 7.7 months on their IT investments as the ideal payback period, while worldwide figures were at 9.8 months. Among the Asia-Pacific respondents, 18 percent of them specified less than three months as an ideal time frame, while the figure for worldwide was 13 percent.

For the study, telephone interviews were conducted in February and March with a total of 560 respondents worldwide. Among the respondents, 200 were from the region. The study included only India, Australia, China, Japan and South Korea, and Anthony McMahon, vice president of HP Software & Solutions in Asia Pacific and Japan, acknowledged that the results might have been skewed slightly.

The study was conducted to find out challenges faced by companies due to "innovation gridlock". The term, coined by HP, describes a situation where the IT organization is blocked from driving new business innovation due to the majority of the funding being consumed in operating the current environment.

In a media briefing, McMahon said the region's firms saw the opportunity of breaking out of the innovation gridlock for them to be more competitive. Their expectations on returns were higher as well, compared with global figures.

"There's an expectation that Asian companies are more nimble when bringing new services and offerings to the market," he said. Plus, Asian firms are going out of the region to compete in the worldwide market, not just being based in Asia, he added.

Results from the survey also showed that almost half the IT operations budget for Asia-Pacific firms was used on legacy-based systems. Firms in the region spent 45 percent on legacy-based systems, while 29 percent was on mission-critical systems and 26 percent on new IT initiatives. In comparison, the global percentage for legacy-based systems spending was 31 percent, with 40 percent on mission-critical systems and 30 percent on new IT initiatives.

McMahon pointed out that markets in Japan, South Korea, Australia, and to a lesser extent Singapore and Hong Kong, as well as China's financial sector and insurance sector had a higher proportion of legacy systems, compared with other countries in the region.

He gave the example of Japan where the number of mainframe installations was "largest globally", and China where the four major banks were using mainframes in their core banking structures. HP has been an advocate of mainframe alternatives.

According to McMahon, the other reason for the high proportion of legacy systems in the region was that firms had built out their infrastructure before technologies, such as blade servers, cloud-based solutions and Web 2.0 applications, "really happened".

Breaking free of innovation gridlock
To break free from the innovation gridlock, McMahon said companies should not blindly throw money into projects. Instead, they should create initiatives that attack areas causing the gridlock. He suggested three approaches to achieve the goal:

• Create self-funding IT projects
Companies need to look at where they are spending money and embark on projects which allow transformation within their current budgetary constraints and quick paybacks. Such activities include application retirement, creative financial arrangements and ways to reduce licensing arrangements.

• Architect new solutions for change
Companies must ensure that they are investing in solutions which enable them to quickly and easily add new functionality as they require it, so that the solutions do not turn into tomorrow's legacy systems. This can reduce operational cost for the company.

• Free up funds trapped in operations
Companies must find ways to reduce their steady cost of operation through best practices and technologies, which will lead to lesser operational costs. The funds freed up can then be invested in innovations.

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