Cost-containment mentality rules IT usage

By ADAM GIFFORD

New Zealand executives increasingly view information technology as a way to contain costs and boost operations rather than as a source for competitive advantage.

This is the finding of International Data Corporation analyst Peter Hind in his latest "forecast for management" survey of IT use and trends.

Hind told a seminar in Auckland that IT spending in New Zealand had remained steady over the past four years at about 4 per cent of operating costs, compared with 3 per cent in Australia.

But as a percentage of turnover, IT dropped last year from 3 per cent to 2.25 per cent.

Spending on projects, outside the information systems budget, fell from 1.5 per cent of turnover to less than 0.5 per cent.

"We are dealing with organisations with a cost-containment mentality," Hind said.

Asked to rank their top 10 challenges, chief information officers (CIOs) rated reducing costs as No 1, on a par with integrating new hardware and software.

Meeting user expectations was the third hardest task, and "change management' was fourth, up from eighth place last year.

Developing IT investment cases was fifth equal, up from ninth place last year.

"There is a challenge getting money for IT. CIOs want to see immediate return on investment," Hind said.

One reason was because CIOs had to increasingly answer to chief financial officers rather than chief executives.

"What is happening is business views IT as being less strategic and more operational. It is not looking at IT as a panacea for all its problems."

Companies were spending a lot less on hardware and more on contracting out work, Hind said.

"In 1994 only 6 per cent of the information systems budget went on external staff.

"Last year it was 13 per cent and this year it will be 15 per cent," he said.

Contracting levels were higher than across the ditch, especially in desktop management, network and systems support and application maintenance and development.

New Zealand firms were also willing to rent applications from an application service provider, with 12 per cent of firms taking some "apps on tap" compared with 5 per cent last year.

Looking at what technology was bought last year, Hind said wireless local area networks, storage area networks and biometric technologies grew strongly along with enterprise resource planning and document management.

The number of companies using Linux servers increased from 24 per cent to 32 per cent, and frame relay also performed well.