Smaller Companies Increasing IT Innovation Investments

Companies with revenues less than INR 1 billion will spend 32% of their budget on business opportunity and 25% on innovation, while IT spend for larger companies, with revenues greater than I billion have dropped to <1%, understandably so considering maturity of operations and better leveraging of IT investments as per an Ernst and Young and CIO KLUB 3rd Annual Survey “The Enterprise IT Investment Trends Survey 2011. The study is based on a survey of over 170 CIOs of companies with annual revenue ranging from less than INR 1 billion to greater than INR 10 billion. The objective of the survey is to capture key IT trends and investment patterns across various sectors and strategy adopted by various CIOs to aid business growth.

“The survey results reflect confidence in the India growth story and many companies are taking steps to further increase spend on IT with a focus on providing business with innovative IT solutions, being more customer centric and investing in technologies that truly aid in giving their business a competitive edge in the market. IT’s focus will be largely to develop positive relationship with the users, support business initiatives with innovative technologies and invest in customer centric and business intelligence applications for better decision making,” said Samiron Ghoshal, Partner, Leader – IT Advisory Practice, Ernst & Young.

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Top five priorities for CIOs for 2011

Business alignment – CIOs have voted business alignment as a top priority for FY11–12. More than 70% of respondents from companies with revenues below INR 5 billion have stated business alignment as one of their top priorities as against 50% of respondents from companies with revenues greater than INR 10 billion.

Business continuity - Business continuity has featured as a top priority consistently since the inception of the survey in 2009 - 54% of the respondents have identified business continuity as one of their top five priorities.

Information Security - Information security remains to be one of the top priority this year with 47% of the respondents confirming this fact. Among respondents from companies with revenues higher than INR 50 billion, 69% have identified information security as a key priority, as against only 26% of respondents from companies with revenues less than INR 1 billion who have identified information security as a key priority.

CRM/BI/DW - 41% of the respondents identified implementing customer centric solutions and business intelligence applications as a top priority. Using customer-centric and business intelligence application for better decision making and improved customer interaction is prominent in automotive, media and entertainment, transportation and logistics sector.

Cost reduction – 38% of the respondents believe IT cost reduction as an important initiative as against 55% of the respondents in the prior year survey. Among the respondents, 60% who identified cost reduction as a priority have planned to increase IT operating expenditure. EYPL believes that while an increase in IT spend is necessary to sustain business growth, there is potential to achieve better operational efficiencies of the IT function.

“We need to act as catalysts to enable business capitalise on the opportunities available and help them grow,” said Vikas Gadre, Vice President, CIO KLUB.

Banking and financial services, professional services and retail and consumer products sectors depend heavily on IT and look forward to IT to help achieve competitive advantage. Average budget allocation for business opportunity in the retail and consumer products sector is 38%, while the banking and financial services and professional services sectors allocation is at 30%. The construction and real estate sectors’ spend on maintenance (average budget allocation of 45%) is much higher as compared to other sectors. Interestingly, transportation and logistics, another IT dependent sector spends much more on maintenance (average budget allocation of 45%) than innovation (average budget allocation of 14%).

Additional Insights

• 23% of the IT budget will be invested in deployinginnovative technologies for business to compete in the market

• 28% of IT budget will be invested in IT enabling businessoperations to capitalise on business opportunities

• 35% of IT budget will be invested in maintenance of current IT services

• 14% of IT budgetwill be directed towards compliance with various legal, corporate and regulatory requirements

“We need to partner with the business and help them grow through use of innovative technologies. From this year’s survey, it is evident that CIOs are exploring opportunities like Unique Identification project and Social Media to help business,” said Radhakrishna Pillai, Treasurer, CIO KLUB.

83% of respondents believe that UID can be used for background verifications and further respondents have shown interest in using UID for payroll processing (58%) and authentication of user access (61%).

A large group of survey respondents have indicated that there are concerns around the use of social media as a corporate communication channel. Nevertheless, a high percentage of respondents perceive that their organisations can use social media as a corporate communication channel and benefit from it if the same is used within the protected and secure environment of the business. 61% believe that it can be used for brand promotion/marketing and 47 % feel that it can be also used as communication channel with customers and stakeholders.