Introduction

Shepherd and Wedderburn recently conducted an IT Spend survey among senior
executives with responsibility for IT decision-making to gauge current IT spend
trends. This article provides a summary of the findings.

Looking back to the end of the last century, this was a boom time for IT spending
thanks to the massive investment in IT made by many organisations to deal with
Y2K, as well as in new technology such as email and desktop internet access.
But millennium bug spending effectively removed a significant amount of IT
expenditure from the market for future years. On top of this, dotcom crashes
and worsening economic conditions put additional pressure on those with responsibility
for IT spend to reduce their budgets and capital expenditure. In the first
few years of the 21st century, IT cost reduction and bedding in the new technologies
of the late 20th century were the priority for many organisations, with strategic
IT initiatives not often high up the agenda.

With the general perception seeming to be that IT spend is now returning,
we were keen to find out whether or not IT was again becoming a high priority
for businesses in the UK and so conducted the survey to gauge industry opinion.
We also felt that offshore outsourcing was becoming increasingly common and
wanted to test that. The respondents who completed the questionnaire came from
a wide range of sectors and varying sizes of organisation. The majority of
respondents were Scottish-based but many have national and international interests.
Just over half of the respondents had an IT spend of less than £500,000,
about a quarter had spend between £500,000 and £2,500,000 and the
remaining quarter had spend above £2,500,000.

Summary of Findings

Overall Spend Trends and Board Approval
Respondents are more positive than negative about the prospects for IT spend
in the next 12 months, with a likelihood of an overall material increase
in spend this year. 40% of respondents expect their IT spend to increase
by up to 30%, 31.4% anticipate no change and the remaining 28.6% think that
their spend will decrease.

A small number of respondents feel that it is becoming more difficult to obtain
Board approval for major IT expenditure proposals and an equally small number
feel that it is becoming easier. The majority (74.3%) are of the opinion that
there has been no change.

Main Areas for Investment
The main area for investment in the next 12 months will be software purchase
and development, followed closely by hardware, including servers. Security
applications, disaster recovery, storage, document and knowledge management
are also seen as key priorities. HR, finance and marketing systems (such
as CRM applications) are least likely to receive investment in the next 12
months.

This indicates that priorities for spend have now changed. Over the past few
years many organisations have invested in new HR, finance and CRM systems.
These all seem now to be taking a back seat to security and disaster recovery
as priority IT activities, which is not surprising considering the increasingly
interconnected and interdependent nature of all commercial activity in the
internet age and the major costs associated with security problems caused by
viruses which can have devastating effects on businesses.

Outsourced Services
The survey went on to ask respondents how much of their organisation's spending
currently relates to outsourced services. 32.4% do not outsource any services
at all. Conversely, none outsource all their services. The majority (55.9%)
outsource less than 50%, and just 11.8% outsource more than 50%.

The domestic (UK) market is by far the preferred region for outsourcing, with
all respondents who do outsource choosing the UK as either its sole destination
(67%) or one of several locations (33%). The USA/Canada is the next most
popular choice, with a quarter of outsourcers choosing it for between 10%
and 30% of their outsourcing requirements. Western Europe, The Far East,
Middle East and Indian Subcontinent are used by just two respondents.

The top two concerns limiting the extent of offshore outsourcing activity
are service levels and security issues. These are followed (in order of concern)
by language ability, data protection compliance and resilience. The ability
to secure cost savings, employment relations and staff turnover are of least
concern.

Respondents seem to have been reluctant to invest offshore and have favoured
more tried and tested markets than India and the Far East. Looking at the IT
press in the UK, however, there is no doubt that an increasing number of organisations
are in fact outsourcing offshore. Given that the survey respondents are mainly
based in Scotland, are they lagging behind businesses in other parts of the
UK or do they not view the benefits of offshore outsourcing as having been
proven yet?

IT Legal Services
Respondents rate "getting the job done" and "doing what they
say they will" as the two most important factors in service delivery from
law firms. These were followed by "understanding our business needs" and "responding
to our needs." "Strong experience in IT law" and "strong
track record in our industry sector" are worryingly least important. In
terms of performance, law firms have room for service delivery improvement
in all areas, but particularly in "keeping us informed about costs."

The majority of respondents (78.1%) use their generalist law firm for legal
advice relating to IT projects, while 21.9% use a specialist firm. Whether
organisations use a specialist law firm or a generalist firm with an IT specialism,
with the significant and increasing sums being spent on IT, it is advisable
to employ a lawyer who has IT expertise and experience.

Based on the results of our survey, Shepherd+ Wedderburn, in association with
PricewaterhouseCoopers, is holding a free seminar on IT spend trends, how to
ensure maximum ROI, as well as off shoring - examining both the benefits and
the inhibitors. The seminar will take place in Edinburgh, Glasgow and Aberdeen
later this month, if you would like to attend [url=../../seminars/seminar-itspend.php]click
here[/url].

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