UK firms ready to spend more on IT

After years of tightened belts, British companies are set to increase their investment in technology in the hope of achieving lower overall costs and providing a better service to customers

Britain's bosses expect to spend more money on information and communications technology (ICT) this year than in 2003, according to research published this week.

The survey of 150 senior UK executives, conducted by the Economist Intelligence Unit on behalf of Telewest, found that many firms are planning to increase investment in high-tech systems and services in the hope of cutting costs and improving customer service. Fifty-eight percent of those surveyed expected to spend more on ICT this year, compared to around 29 percent who expect investment to be flat and 12 percent who predict a decline.

After years of slashed budgets, this news should please IT firms -- even though only a handful of the executives surveyed are predicting massive increases in spending. Few ICT budgets are expected to increase by more than 25 percent.

The research also found evidence that firms determined to cut costs are looking to IT as the solution. Over half of those surveyed said they believe ICT has a critical role to play in lowering costs and maximising efficiencies.

"Given the onus placed on ICT to drive greater cost efficiencies, attempts to shore up the bottom line by slashing IT budgets are likely to prove counterproductive," warned the survey, called Executive perspectives on information and communication technology. This focus on cost-lowering is also likely to lead to greater scrutiny of proposed IT spending before it gets board-level approval. More than ever before, IT managers will have to be able to prove that a potential project can be shown to provide clear business value.

Many of the senior executives questioned for the survey said that IT services such as customer relationship management software helped them to provide a better service to customers in 2003.

The outsourcing of ICT services will be a big priority for 2004, according to this report. The public sector appears to be showing more interest in managed IT services -- 14 percent of executives expect to spend between 50 and 100 percent of their total ICT budget on outsourcing this year, compared to 9 percent who did this in 2003.

In contrast, 11 percent of private sector firms surveyed expect to spend at least half of their ICT budget on outsourced services in 2004, the same percentage as did so in 2003.

Analyst firm Forrester Research predicted last week that spending on offshore outsourcing will continue at a brisk pace this year.