Cloud and CRM Will Drive Enterprise Software Spending in 2013 and 2014

Greater adoption of on-premises and software as a service (SaaS) will drive a modest increase in worldwide software spending through 2014, according to a recent survey by Gartner, Inc. Gartner conducted the large-scale enterprise IT spending study through the third quarter of 2012 for analysis of enterprises' IT budget spending plans for 2013 and 2014.

Regions with higher IT maturity, such as North America and Western Europe, expect lower or no budget increases over the next two years, while developing countries with immature IT infrastructure, such as Eastern Europe, Latin America and Asia/Pacific, will experience the largest budget increases in software spending.

Survey results show new software licenses (on-premises, including applications) continue as an important priority in emerging regions, with 69 percent of respondents expecting new software license budgets to increase in 2014, compared with 47 percent from mature regions. The regional differences relate to the amount of mature systems with maintenance and technical support fees. Less mature regions, with little or no infrastructure, will typically spend more on new software licenses (on-premises, including applications), while more mature regions with mature infrastructure tend to spend more on software maintenance and support (including license updates and/or technical support). 

As economic pressures increase and other factors come into play, such as resource limits and skill shortages, organizations have expressed overwhelming interest in cloud computing and other options that externalize IT. In North America, interest in SaaS/public cloud is significantly higher than in other regions, with more than 60 percent of respondents increasing their budget in SaaS/public cloud within the next two years. Organizations in other regions show more interest in hosted applications (single tenant), with Asia/Pacific the highest, with 34 percent of respondents increasing their budget on hosted applications. 

The survey also revealed that customer relationship management (CRM) has edged past enterprise resource planning (ERP) as the top application software investment priority. This further validates a business focus on enhancing customer experience, with both mature and emerging regions emphasizing investments in CRM. Survey respondents indicate that their top three application software investment initiatives for 2013 are CRM, ERP, and office and personal productivity tools. 

Security software topped infrastructure software investment priorities, driven by the evolution of new threats, as well as by changes in working practices. While companies increasingly perceive the mobility of their workforce as a strategic advantage, there is growing awareness of the damage caused by security breaches. More and more organizations are accepting the need to have more-open connectivity with business third parties and assessing third-party security and defining how to securely communicate are becoming critical factors. 

Virtualization infrastructure software, ranked as the third-highest priority for increased spending, continues to grow, with most organizations moving toward 70 percent virtualization (especially in North America) within the next several years. However, virtualization is not among the top three priorities in Europe or Asia/Pacific, mainly due to the already high virtualization rates in those regions.

More information on Customer Relationship Management can be found at www.CRMindustry.com

57% of Finance Executives Say their Companies Are ‘Fair’ or ‘Poor’ at Ensuring Big Data and Similar IT Projects Yield Expected Returns

At a time when Big Data and other cutting-edge information technology (IT) is being actively evaluated in boardrooms everywhere, 57% of senior finance executives at large and midsized North American companies say their companies are either “fair” or “poor” at ensuring that such “improve-the-business” IT projects are actually yielding expected financial returns.  And almost none (3%) rate their companies as “excellent.”  That’s according to a new survey of more than 150 senior finance executives by CFO Research in collaboration with AlixPartners, the global business-advisory firm.

The survey also finds that more than two-thirds of financial executives (66%) give their companies a “C” or “D” when it comes to measuring financial returns from discretionary IT projects, such as Big Data ones, designed to improve or add to a company’s business and profits.  (Only 5% gave their companies an “A.”)

Meanwhile, at the other end of the IT spectrum, the survey reveals that “keep-it-running” IT costs – non-discretionary support and maintenance systems – are cannibalizing funds available for business-improving IT. A plurality of respondents (49%) estimates that, over the past two years, their company has maintained approximately a 70-30 ratio of keep-it-running to improve-the-business IT spending, and of that amount, a solid majority – 63% – believes that their company’s spending is weighted too heavily toward keep-it-running IT services, and that a greater share should be directed to improve-the-business IT projects.

The survey also shows that, despite massive IT investments in recent years, companies aren’t getting enough of the kind of information they need to successfully run and grow their businesses.  In fact, no less than 71% of the executives polled say their companies should have access to more robust business information for the money spent on IT.  In addition to desiring more robust information on product profitability (cited by 42%) and customer profitability (41%), there was also strong interest in having better access to information about customer acquisition (33%), revenue (32%), price elasticity (31%), customer attrition (29%) and promotions effectiveness (25%).  

One big reason companies are over-spending on IT or spending on it in the wrong places, reports the survey, has to do with governance and discipline around IT programs.  For example, 72% of respondents said that factors other than a carefully considered business case (e.g., internal politics, personal persistence/willingness to be a “squeaky wheel”) influence the priority and funding of “improve-the-business” IT projects much more often than they should.  Meanwhile, when asked who in their company should have a greater voice in whether to fund such projects, 45% said sponsors from business or functional units and 28% said the finance function.  By contrast, when asked who today is primarily responsible for deciding funding, just 14% said business sponsors and only 7% said the finance function.  

By the same token, when it comes to “keep-it-running” IT spending, 62% of finance executives say that kind of spending is currently either kept at the corporate level (within the IT department) or only partially charged to business units, neither of which is necessarily optimal for controlling such costs.  Moreover, more than two-thirds of those surveyed (66%) say that keep-it-running and improve-the-business IT spending is budgeted together at their companies.

More information on IT and CRM can be found at www.CRMindustry.com