Print

Comment

Email

Digg

Del.icio.us

Reddit

Twitter

The months of April and May, in recent years, have often been the harbinger of good times for Indian enterprises. As virtually every sector has been recording growth, this period of publication of annual results has proved to be a source of unbridled optimism for all stakeholders. These annual results might capture the growing toplines and healthier bottomlines as well as stronger P/E ratios, but they have not been able to successfully register another crucial facet of India Inc particularly visible in the last few years-the IT spend.

Yet, the fact is that hardly anyone can ignore the growing trend of automation across Indian enterprises. Not only has it led to more sophisticated usage of IT by Indian organizations to conduct their businesses, but, more importantly, it has resulted in increasing spends on IT across sectors. And while the annual reports of companies might fall short in tracking this growing expenditure on IT, the task has been undertaken eminently by the DQ-IDC Megaspenders Survey.

This year has been no exception, as the survey has tracked the pattern of spending on IT by various Indian organizations during 2007. However, with changing times, maintaining the nomenclature of the survey as Megaspenders might not remain politically correct too long. In these days, when corporate fiscal discipline has become sacrosanct to any organization's well being, it is undeniable that many CIOs would flinch from publicly proclaiming themselves as megaspenders.

It is probably this perception of the stigma of negative connotation that has prevented the likes of HDFC Bank, LIC, Hutch, ONGC and a few other leviathans from participating in the DQ-IDC Megaspenders Survey 2007. Not just them, many of the CIOs from the 211 organizations that responded have desisted from allowing us to divulge their IT spends for the year. In light of this scenario, we have decided to only list down the Top 50 organizations with the highest IT spends, but not publish the exact expenditure figures.

Up or Down?
Taking all key IT spenders into consideration (even those who did not participate), Megaspenders Survey 2007 discovered that average IT expenditure across organization has recorded a 27% growth, touching Rs 34.08 crore in FY '07 compared to Rs 26.86 crore the previous year. Telecom, utility, and discrete manufacturing turned out to be the top three sectors soaring above the industry average; a host of other verticals like BFSI, automobiles and media maintained the industry average while, surprisingly, sectors like retail and oil & petrochemicals proved to be relative laggards.

Interestingly, the survey projects that the average industry spending on IT would record a 26% growth in FY '08 to touch Rs 42.94 crore. This poses the important question: Does the projected reduction in growth by one point signifies that IT spending by India Inc is gradually plateauing? A couple of CIOs and analysts we asked for corroboration, however, refused to take the bait.

Both Akhilesh Tuteja, executive director, Advisory Services, KPMG and Hilal Khan, head, Corporate IT, Honda Motors India desist from reading too much into this drop in IT spending. Instead, they both account it to the increasing reduction in costs of IT, both for hardware as well as software. "The adoption of IT is not coming down, rather it is becoming more sophisticated, but due to reduced IT costs, the absolute spends might show a decline," says Khan. For the same price, today, an organization is able to pack in much more IT power than it could have done a few years back.

Coupled with the fact that average IT spend as a proportion of the company turnover too has gone up from 0.6 to 0.7, the veracity of what the CIOs feel gets established. The fact that IT adoption has just not increased, but it has become more sophisticated and democratic (spread across all hierarchies) puts to rest any apprehension about IT spends petering off in the near future. "The configuration of IT equipment that can be purchased at the same value has gone up significantly," asserts Tuteja.

And while still delving on the fact that projected IT spend can reduce next year, Sunil Kapoor, director, Central Buying, Fortis Healthcare suggests another plausible reason. The IT spending for most organizations is moving from a capital expenditure towards an operating expenditure and this could account for the slight tapering off in actual spending. "This is positively a sign of maturity for most Indian enterprises," observes Kapoor.

"The adoption of IT keeps increasing and becoming more sophisticated. But due to reduced IT costs, the growth in spend might show a slight decline"		"The fact that IT adoption has just not increased, but it has become more sophisticated and democratic (spread across all hierarchies) puts to rest any apprehension about IT spends petering off in the near future"
-Hilal Khan, head, Corporate IT, Honda Motors		-Akhilesh Tuteja, executive director, Advisory Services, KPMG

Tuteja in fact devises a thumb rule to gauge the IT spending pattern of India Inc. "According to a global estimate, in case the ratio of capex to opex on IT is 40:60, or in other words, the capex on IT is less than 40%, the company is still considered to be a high spender on IT." Going by Tuteja's formula, most Indian organizations can still be categorized as mega spenders on IT, even as their expenditure gradually move towards the opex side.

Page(s)   1  2