Recession Takes Toll on IT Spend

Jay Decenella, IT audit expert
August 22, 2012 /

Global IT spend will reach $2.7 trillion by the end of 2012 to hit a 3.9 percent high over the previous twelve months, forecast showed. However, the increase falls short of earlier predictions as recession in many parts of the world is hitting technology budgets, making businesses across the globe tighten their belt.

According to KPMG’s latest Technology Issues Monitor, earlier forecasts of a 5.9 percent growth rate fall wide of the mark because of the weak European economy. Moreover, natural disasters in Thailand are affecting the global supply chain for computer and storage equipment.

The report said weak European economy will have significant impact on 4 major technology sectors – computing hardware, enterprise software, IT services and telecoms equipment. IT services is expected to grow by just 3.1 percent, less than half the growth seen in 2011 (6.9 percent).

Mac Scott, associate director within KPMG’s CIO Advisory team, says: “With factory output falling and economic sentiment weakening, initial views about the industry’s growth pattern are being hastily revised. The second recession is beginning to hit and CIOs must now decide which way to turn. The questions they must ask revolve around whether they have the right processes in place and what value they can squeeze out of existing arrangements.”

On the other hand, emerging economies such as Malaysia, India and China are experiencing a rapid growth in demand for improved supply chain management and innovation in business, suggesting that the pattern in developed countries is not reflected in developing territories.

The boom sent organizations to turn to IT for an answer. For example, Malaysia’s enterprise IT spend is expected to grow 6.1 percent in 2012 to approximately $10 billion. India, long-regarded as an emerging IT and economic growth area is predicted to see organisational IT spending reach $39 billion, a year-on-year growth of 10.3 percent.

KPMG’s report also indicated that business analytics, cloud computing and enterprise mobility will keep IT spend afloat in the coming months. However, how IT budgets are allocated will no longer be the sole domain of CIOs, with many organisations turning to their marketing teams for advice on how to retain customer loyalty through improved CRM programmes.

Scott concludes: “With the convergence of marketing and IT, marketing professionals will gradually hold more influence around how, where and why IT budgets are spent. Simply because marketing and IT teams depend on quality data, slick processes and stable software, chief marketing and chief information officers will increasingly need to form strategic partnerships. Their cross-functional collaboration could well be the key to help companies create efficiencies, improve workflows and reduce costs.”

 

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