These were the key findings of the IT Spending survey conducted by Computerworld Philippines Research Group covering 100 organizations from December last year to February this year. For the purposes of the survey, an organization's IT budget include spending allocations for staff, hardware, software, communications, services and other operating budgets. It should also be noted that the impact of the changing market conditions on user priorities influences IT investment decisions."
Most companies have more to spend for IT this year as 46% of survey respondents reported plans to increase IT budget to finance and implement new projects. And if corporate profits improve over the next three to six months, 31% of these firms are optimistic that they will definitely hike their spending above their current plans, while, in all probability, 33% will raise their technology spending above what they have planned.
An IT manager of a foreign construction firm, when interviewed, summarized the position of local businesses regarding technology spending this year. Arthur Diaz, IT manager of Japanese-owned Kajima Corporation, relayed that the need to invest in more powerful and standard hardware and software has become the company's order of the day.
"We have been cutting cost for the past years, striving to extend the life of our hardware as best as we could. But whether we like it or not, we have now reached the time to replace equipment which have become too old and slow," noted Diaz. Although the implementation of this project calls for higher IT allocations, "we have to replace aging hardware with new ones to run the business better and boost the company's competitive advantage," he added.
Of those who have increased their budgets, 22% reported the hike will range from 10% to 20% compared with their 2011 budget, while seven percent said the expansion will average from 21% to 40%. While six percent disclosed that their budgets have gone up by less than 10%, only four percent divulged that they expect an increase of more than 100%.
The survey also found out that the average IT budget as a percentage of the company's revenue remains very low, averaging below five percent of corporate revenue as disclosed by 30% of respondents. Thirty-nine percent claimed they allotted an average of 5% to 10% of their revenue to IT while only 21% said more than 10% has been allocated to their IT budgets.
On the other hand, only 25% of survey respondents said their IT budgets will be slashed or, at best, keep IT spending tight this year to manage their bottom line. Some say they will minimize cost as there were no "must-have" technologies that will spur new investments and that major projects were already completed last year. Among those who have reduced their IT budgets this year, 14% said their spending will drop by 10% to 30% while five percent will trim their budgets by 40% to 50%. Only two percent will reduce their IT allocations by less than 10%.
Asked why their IT budget was trimmed down, Ronilo Quiat, IT manager of Ortigas & Company, replied, "the decrease in our capital expenditures for IT this year is significant because we are almost done with our SAP implementation that started in 2010."
Comparing their IT CAPEX this year with the last two years, Quiat revealed that "it is a lot smaller because of the one time payment for the SAP license and implementation costs for the past two years."
Quiat also attributed the lowering of their operating expense budget to IT manpower reduction. "I decided not to replace two IT senior staff who resigned last year because maintaining the SAP system is much simpler compared with our legacy systems."
For the 29% of the respondents who expect their budgets to remain unchanged from the previous year's, the need to adopt a more cautious strategy to counteract the uncertainties that affect the business conditions is important for managing IT costs.
Apart from this, some of their IT projects were already done and implemented the previous year as revealed by Xavier Lucas, an IT manager of Holy Cow Animation, Inc., who said, "Our major IT projects were already implemented last year. We have pending projects but this will be on a case to case basis depending on our clients' project demands."
For this year, the top IT budget priorities which survey respondents expect to receive the greatest increases are the following: security project, storage, data networking, disaster recovery/business continuity, managed network services, application/ systems integration, deployment and development of new software application, replacement of aging hardware, and network convergence.
Majority of IT managers claimed that security projects will absorb a large share of the IT budget this year. Security is a top-level issue for IT due to the increasing threat posed by computer viruses, spam and hackers alike.
To counteract the harmful aftermath that these threats may bring about, Lucas disclosed that "we are still in the process of improving our overall data security in terms of hardware and software, bringing to mind that everyday new kinds of threats are emerging so equipping a business with the best technology is a must."
Another budget priority area which is expected to receive increases is the need to expedite the storage systems to facilitate operations of these organizations. "We intend to add more storage space for our online storage and backup systems this year," said Quiat, explaining that "we started to implement a robust online and centralized file storage system for our users as the need for file sharing and collaboration (among users) are becoming relevant in our day-to-day operations.
Apart from this, Quiat also confirmed that they want to add more offsite backup outside of Manila. "Once this is completed, we are going to have two offsite backup systems in place," he said. "I think it is reasonable to have redundancy at all times, especially now that almost all of our transactions are in electronic form," he added.
On data networking, this year's third top priority project for most managers, Lucas believes that the installation of this technology is very significant nowadays for a firm to achieve operational efficiency.
"There is still room for improvement in this area in order for us to achieve optimization on our current operation," he said.
The need to replace aging and slower hardware is also another priority concern that is prompting local firms to open up their vaults this year. "We started installing brand new PCs, workstations, and servers two months ago as replacements for old ones that the company spends much on maintenance expenses," recounts Diaz He also noted that hardware replacement must be done to cope with the present software requirements of the company and to maximize users' efficiency.
With many organizations planning changes in major applications and operating systems, one area that is likely to receive a huge share of the IT budget this year is the deployment and development of new software.
Aside from hardware, Diaz disclosed that they are also installing Windows 7, Office 2010, and AutoCAD 2012 in their computing system. They have started email and data migration, and propose security and storage as their future IT projects. With regards network convergence, which is also a top concern, Lucas relayed that "improving this area will help us achieve better communication internally and most of all, with our clients especially those that are situated in other countries."
Meanwhile, with budget intended for increasing salaries of deserving IT employees, 64% of survey respondents granted a well deserved salary hike to their staff last year. For 36% of IT managers, however, implementing salary increases was not a priority. According to 46% of those who granted wage hike, the increase has no effect on their overall budget while 33% claimed the implementation of salary increases represented a corresponding increase in the IT budget. Increased labor or operating costs was the result of increasing compensation, according to eight percent of respondents.