Finding Benefits in Higher IT Spending

Economic pressures on companies to cut spending aren’t impacting information technology outlays severely, according to a new survey that shows half of U.S. companies planning to boost IT spending in 2012. Indeed, more than half of those indicate they are aiming for a 5% or more increase.

The results, based on 220 U.S. firms surveyed by Nucleus Research Inc., showed that one in 10 companies is planning to increase the IT budget by some amount in double figures. Four in 10 said they expected “roughly the same” level of IT spending, with 10% expecting to decrease their IT outlays.

As is often the case, increases in tech spending could also signal at least a slight downward trend in hiring, the research suggests.

“A lot of companies shrunk their workforce and are now looking to technology to get more productivity out of existing employees,” Nucleus vice president Rebecca Wettermann said in an e-mail to CFOworld.com. “The upside of technology is you can interrupt spending on it at any time, which is not true with employees that may collect unemployment.”

Strong Signals for Healthcare

Increased investment offers strong signals for future prospects in certain industries, the Nucleus research suggests — especially in tech-heavy industries such as healthcare, and for any companies on either the demand or supply side of the move toward more cloud computing.

That’s “one sector where we’re seeing an increased investment, particularly in medical records because of the government incentives,” Wettermann said of healthcare.

“We’re also seeing small and medium-sized business increasing their tech spend because cloud options put more sophisticated application capabilities — like analytics and e-commerce — within their reach,” she added.

In general, the latest research from Nucleus, an independent, Boston-based research concern, contained a somewhat more bullish review of tech prospects than was presented in recent research from the Society of Information Management appraisal of IT budgeting, and the TechAmerica Foundation, although both of their surveys also recorded some spending and job growth in IT.

Case-Studies Bear Out Findings

Nucleus, which has a strong return-on-investment case-study focus, has been noting for a year the role of greater IT spending in holding employment levels down. It said more than 60% of its cases “included reduced or avoided staff as a benefit.” Nucleus added that it expected to see continued investment in areas that include customer relations, integration, business intelligence and analytics, and workforce management.

In terms of cloud-based investment, it noted the trend toward cloud computing will continue in part because it allows CFOs to manage cash flows better. Some of that cash-flow control occurs when companies shift more IT investment from the capital-spending environment required for infrastructure, toward the operating-expenditure environment, achieving tax benefits.

The report listed cloud implementations as one of the five categories in which companies can improve their spending regimen for IT. The other categories involve using more commercially-developed applications, rather than costlier custom ones; using fresher data for decision-making with real-time tracking; replacing some custom reports with data based on analytical tools; and installing a more sensible about IT training costs.