Under embargo till 1930 hrs on Saturday, 21 April 2012
Businesses respond to volatile markets by focusing on increasing IT agility, says Ernst & Young and CIO KLUB survey
• Creating lean, agile and resilient IT will act as a catalyst for success;
• Cautious spending and innovation to leverage business opportunities are key factors;
• Top 5 priorities for CIO: Business continuity, cost reduction, improving IT function effectiveness, business intelligence and information security.
IT functions are responding to the current volatile markets and uncertain economic outlook by focusing on establishing lean and agile IT that can quickly respond to business demands. A two-pronged approach of cautious spending coupled with focus on innovation to support revenue enhancing abilities of IT has emerged as per the Ernst & Young and CIO KLUB 4th Annual Survey “The Enterprise IT Investment Trends Survey 2012”.
This year’s study is based on a survey of over 184 CIOs of companies with annual revenues ranging from less than INR 1 billion to greater than INR 10 billion. The objective of this survey is to capture key aspects of IT priorities and investment patterns across various sectors and gain insights on strategies adopted by various CIOs to aid business growth.
Devendra Parulekar, Partner-Advisory Services, Ernst & Young Pvt Ltd says,“Our survey results reflect the overall market sentiment of uncertainty and cautious optimism, ie, while IT budgets experience a steady increase over previous years, the CIOs will be cautiously optimistic in the outlays. Identifying revenue increasing opportunities while enhancing the agility for quick response to business needs would be the key for a successful transition of IT from its role as an “enabler” to that of a “transformer”. A large part of the increase in IT budgets will be spent on innovation and identifying opportunities to realize business benefits”
IT expenditure in companies continues to gain momentum. This year’s survey clearly indicates the increasing importance being placed by businesses on IT. A wider community of CXOs is better appreciating the role of IT to achieve business transformation. This change is reflected in the budget outlook numbers provided by the CIO community. Approximately 60% of the respondents have reported a planned increase in capital spending on IT with 20% of respondents reporting more than 20% increase in IT spending. On similar lines, 60% of the respondents plan to increase operational expenditure.
Survey results showcase that banking and financial services and utilities sectors have a balanced allocation of budgets for maintenance and innovation. Transportation and logistics, automotive, media and entertainment sectors lead the innovation story and have more than 60% of IT spend earmarked for innovation. Technology, infrastructure and manufacturing sectors too have more than 50% of budgets planned for innovation. Real estate and construction sectors, along with life sciences, still continue to plan larger spends of more than 60% for maintenance and compliance.
“The focus of Indian enterprises is on cost reduction and improving operational efficiencies and the survey rightly reveals that Indian CIOs are completely aligned with business. The current uncertain economic outlook will lead to organizations taking a cautious approach towards new capital intensive projects” commented Radhakrishna Pillai, Treasurer, CIO KLUB.
Devendra Parulekar further added,“that the effective organizations will see IT as a strategic commitment than a utility; establish well articulated governance framework; measure IT performance in business terms; and continuously improve the breadth, quality and levels of service to help improve business efficiencies”.
Top five priorities for CIOs
Business continuity - Business continuity has featured as a top priority consistently since the inception of the survey in 2009 - 48% of the respondents have identified business continuity as one of their top five priorities. The focus on business continuity is more evident in smaller organizations. More than 55% of the respondents from organizations with revenues less than INR 10 billion have identified business continuity as a priority for FY 2012-13. From sectoral perspective, automotive, chemicals, professional firms and services will focus on business continuity.
Cost reduction – 43% of the respondents identify IT cost reduction as an important initiative as against 38% of respondents in the last year survey. Focus on IT cost reduction is consistent across organizations, irrespective of their size and scale. Considering weak demand and higher input costs, it is not surprising that amongst respondents from real estate and construction sector, 57% have identified focus on IT cost reduction and have plans to reduce their capital expenditure. Utilities and automotive are other sectors that will focus on cost reduction in FY 2012-13.
Improving IT function effectiveness – 42% of the respondents have identified improving IT function effectiveness as a priority for FY 2012-13. It is interesting to note that while the focus is on improving IT function effectiveness, organizations are not keen to make a large scale “architectural transformation” and will rather take a “process route” to effectiveness. Organizations with revenues greater than INR 50 billion will have a larger focus on improving effectiveness of the IT function, with 52% respondents from these organizations identifying it as a priority. Technology, infrastructure, media and entertainment sectors have identified IT function effectiveness as a key priority for FY 2012-13.
Implementing BI – Business intelligence (BI) applications are a key constituent of an organization’s initiative to become an intelligent enterprise. The BI priority is fairly consistent since inception of the survey in 2009. 40% of the respondents have identified BI as a priority for FY 2012-13. Focus on BI is more in the larger organizations with revenues greater than INR 5 billion. Automotive, banking and financial services will focus on business intelligence applications in the coming year.
Information Security - Information security remains as one of the top priorities for FY 2012-13 with 33% of the respondents confirming this. 28% of the respondents from organizations with revenues higher than INR 50 billion have identified information security as a key priority, as against 69% of respondents who identified this as a priority last year. The information security evolution will largely be driven by data leakage prevention (DLP), disk encryption, digital rights management (DRM) & security information and event management (SIEM) technologies. Professional firms and services sector will focus on information security agenda in FY 2012-13.
Additionally, IT consolidation is one of the key priorities for technology sector companies, which face the challenge of increasing their revenues and operating margin without increasing the headcount. Banking and financial services sector companies have identified mobile computing as a key priority. Infrastructure sector companies will explore cloud computing as a key initiative in FY 2012-13.
• Mobile application, budgeting, planning and consolidation (BPC) and customer relationship management (CRM) application will lead the application landscape evolution.
• Cloud services continue to gain momentum, but the progress is slow. Skepticism in using public cloud services continues.
• Desktop virtualization will be a major focus for organizations in FY 2012-13.
• Security audits and software testing will drive the outsourcing agenda in FY 2012-13.
Priti Bhutani, Ernst & Young Pvt. Ltd
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