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"After all is said and done, a hell of a lot more is said than done"—Murphy’s Laws

Enterprises, across the board, are finally on the mend, with average IT spend slowly and steadily hitting an upward curve—IT budgets of these enterprises on an average have increased by 5.5% during the last fiscal, just short of the industry’s projected target of 7%.

The cautious optimism approach remained firmly entrenched last year. The year ahead, or rather the outlook for the year ahead, looks bright and sunny. CIOs are looking at spending nearly 26% more than this year. (see table: ‘Growth in Spending’)

And this upbeat mood transcends across verticals. CIOs across verticals are looking at a positive year ahead and moderate to very high growth in investment over the current year. And they do hope that Murphy’s Law won’t strike again. For instance, the banking and insurance verticals exhibited a strong uniformity in the allocation of IT spending. On an average, 60-80% of total spending went into hardware. And within hardware spending, the largest chunk went to PCs and servers. Apart from this, spending on networking of branches was an area, which will continue to see increased allocations in the coming FY too. The Real Time Gross Settlement (RTGS), mandated by the RBI, is likely to force the banks to shell out large amounts for spending on IT in the year ahead.

In addition to this, banks are looking at providing multi-delivery channels like any branch banking (ABB), ATM, tele banking, Internet banking, kiosk banking etc. to their customers and they have therefore, been spending heavily on branch networking and ATMs over the last two-three years. It’s also an effort in the direction to be more customer centric. This automation definitely has strengthened the internal control.

The newer technologies are at the bottom in terms of ownership by organizations, not something that should surprise anyone. And the IT and Telecom vertical actually lead in the adoption of these technologies. 63% of Telecom and 41% of the IT companies surveyed had some form of Wi-Fi in place. A similar story was seen for the other technologies that have not gone mainstream as yet. Wi-Fi even though does not enjoy mass acceptance, it has still seen a considerable increase in penetration from a measly 12% last year to 26% now. Technologies like VoIP, web conferencing and even storage solutions seem to be on the CIO’s active radar. Those organizations that don’t have these in place are looking at acquiring them in the year ahead. But on the whole, there has been no significant change in the penetration of technologies across the enterprise. The one downside observed has been that not as many organizations implemented and adopted the technologies that they said they would. And this was more the rule than the exception. Base: 178 Figures in Percentage

Technology, when used appropriately, can deliver more than just one benefit and its time for the industry folks too to wear more than one hat. While it will of course have to push its products and technologies, it will also have to evangelize the optimal use of technology.

Research suggests that the three main areas where IT can add immense value are business enablement, operational improvement and innovation. The Indian enterprises’ focus on new hardware acquisition, software and maintenance or management services clearly indicates their focus on the first two activities. Its this lack of attention to drive innovation that technology delivers neither competitive advantage nor productivity enhancements. A McKinsey research suggests that six sectors in the US economy that used IT innovatively contributed as much as 76% to the growth in productivity of the late 1990s. And it is the innovative use that will drive adoption and penetration in the near future closer home too.

Innovation is Important
The badly needed upswing in the industry has come. The task ahead is not only to maintain the upswing but also to accelerate it. And this acceleration will gather steam when even the smallest of organizations feel a compelling need for IT, a need that takes IT beyond it being a plain vanilla business-enablement tool. IT will need to be thought of as a source of strategic competitive advantage. This would be contrary to what Nicholas Carr postulated in his, by now (in)famous article, "IT Doesn’t Matter" in the Harvard Business Review, May 2003.

But IT can be a source of competitive advantage. IT should be looked at more as a means to create knowledge and leverage existing information. And knowledge, unlike other physical assets, can be deployed at more than one location simultaneously and exhibits increasing returns. Best practices embedded in software is not equal to capture and application of knowledge created somewhere else. While it definitely helps build on productivity, it does not enable the creation of a sustainable competitive advantage. That will come only when the new knowledge created is ingrained in fine-tuning the in-house processes and systems. A lot on this will follow, but read on to find out more about the top IT Users in the country.

Average IT Spend: Rs 12 crore Spending pattern for 178 large enterprises surveyed SIS=System Integration software ADD=Application development and deployment tools SI=System integration NI & M=Network integration and management CSD=Customized software development Like the previous years, this year too, the prime driver of IT investment has been hardware. For every rupee invested, 51 paise went into hardware as opposed to 42 last year. And within hardware, PCs continue to attract the maximum investment. PCs and servers combined eat up more than half of the outlay on hardware. Corporation Bank emerged as the largest spender on hardware and spent as much as 75% of its overall IT budget of Rs 100 crore on hardware. Software still attracts less than half of what is spent on hardware. Services accounted for nearly one-third of the total IT spend. And out of this, nearly half went into maintenance. A few percentage points have shifted here and there but the overall broad trend in terms of spread of spend remains unaltered. So with nearly 90% being spent on new hardware acquisition, software and management services, little is left for the CIO to invest in tying technology closely with the business strategy of an organization. DQ-IDC India Survey: Magaspenders 2004

With more and more IT companies adopting the consultative approach towards addressing customers’ needs, the step towards using IT as a potential source of innovation has been taken. It’s now time to step on the accelerator.

Mohit Chhabra in New Delhi With inputs from Tirthankar Sen (senior analyst, end-user research, IDC India)

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