Almost two-thirds of respondents expect to increase their IT spending levels this year. If their company profits improve over the next three to six months, 21.6 percent of these firms will 'definitely' increase their technology spending above the current plan, while 38.1 percent said they will 'probably' do so. Meanwhile, 25.8 percent said they will stick to the allotted budget even if their firms register growth in income.
For purposes of the survey, a firm's IT budget consists of spending allocations for operations (hardware, software, services, and training, among others), staff, and overhead expenses.
Similar to last year's findings, firms which anticipate increases in their budgets will invest in projects that will efficiently run their operations to boost productivity and improve competitiveness. These companies have also implemented cost-reduction measures in the past, making use of the available resources and equipment in their day-to-day operations. However, this cannot be done in the long-term as equipment depreciate and need to be replaced with new acquisitions to accommodate company expansions and other requirements.
'Currently we are pushing a business-related requirement for the company and this involves the firm's network and communications system,' disclosed the IT manager of an insurance entity who revealed that their IT resources need to be beefed up this year to more effectively run their business. 'Most of our desktop PCs and network servers were acquired three years ago and cannot anymore support expansions that the company is going to implement. One of our ongoing projects is the insurance administration system and we have other requirements to do. This is the reason why we are increasing our IT budget,' said the IT manager who requested anonymity.
Most of the respondents who said they will have budget hikes this year will implement lower rates of increase. Thirty-seven percent plan to have a budget increase ranging from 10 percent to 30 percent, while 14 percent reported hikes lower than 10 percent. Those who will bring about an increase of more than 30 percent in their budgets comprised 10 percent of the respondents.
The survey also revealed that 20 percent of the IT officers surveyed expect IT spending to drop. Of this lot, 14 percent disclosed that their spending has gone down by 30 percent and below, while 6 percent will reduce their expenses by 31 percent to 60 percent.
Asked why their IT budgets were pared down, some organizations said that they were still saving on costs. Others said they already acquired newer versions of both software and hardware last year. Another reason given was that all major projects have already been done and implemented and no must-have technologies need to be installed in their companies.
Aside from cost-controlling issues and the lack of urgent company requirement, the 19 percent who anticipate no changes from their budget last year have decided to become comfortable with the technology level of their currently installed systems.
Meanwhile, the study also showed that the average IT budget as a percentage of the company revenues was still very low, averaging below 5 percent of the organization's revenues as claimed by 51 percent. While 31 percent reported that they allocated an average of 5 percent to 10 percent of their revenues to their IT budget, 7 percent claimed their IT spending represented 11 percent to 15 percent of their revenues. Only 11 percent said their IT budget constitutes more than 15 percent of their revenues.
Budget priorities enumerated by most IT executives this year are targeted at the following: acquisition of new hardware to replace aging hardware; application/systems integration; deployment and development of newer versions of software to upgrade existing installations; security; and disaster recovery/business continuity.
Most of the IT spending this year would be used in acquiring new hardware to replace depreciated and older models of hardware, to cope with present software requirements, and to easily accommodate company projects. An IT director of a Manila-based school gave a typical explanation when he said that 'we will replace aging hardware with new and faster ones to continue the existing network-managed services to students, faculty members, and employees and, at the same time, to accommodate additional online services which we will implement.'
To many respondents, another expense item that will account for a bigger share of the budget pie is the integration of their existing applications/systems aimed at improving operations and trimming costs.
Another budget priority area which managers expect to receive the biggest hike in 2006 is the deployment and development of new software applications. With these new applications that are compatible with their existing hardware, a bigger improvement in their operations will be realized. An IT manager of a garment manufacturing and exporting firm who is bent on improving their productivity and automate their basic operations had this to say, 'We are looking for a software that will enable our foreign buyers to comprehensively track the progress of their orders (actual delivery of fabrics, cutting, sewing, pressing and folding, and the actual release of garments from the factory) with online inquiry and interactive response. With the fast-paced software development, it is possible.'
Projects concerning security are another major aspect that needs proper attention, claimed survey respondents. Being fourth among the top budget priorities, security concerns must be addressed at once as the threat posed by computer viruses and hackers is increasing and changing every year.
Last year, majority of survey respondents disclosed that they spent P10 million (US$195,000) and below for hardware, software, staff, services, and other operating budgets. Of the total spending, 50 percent of IT budget was spent on operations; 30 percent was used to pay wages and salaries of their staff; and 10 percent for overhead, supplies, and miscellaneous items.