Time To Prove It

[From iSource Business, April/May 2003] So far this year the economy has offered most companies no more cause for cheer than it did last year or in 2000 or 2001: profits have been weak, markets have been down, consumer confidence has been wavering. Yet for some enterprises, the past few years have been a time not for dwelling on the present but for planning for the future and implementing the supply chain technologies and process changes necessary to gain a competitive edge when business picks up again. For these companies, 2003 marks the beginning of a new phase, a time to execute on those new technologies and processes. A time, in short, to prove it.

Expectations for IT in 2003

The consultancies that track trends in information technology spending have produced various estimates for growth rates in IT budgets for 2003. Gartner, for instance, predicted late last year, on the basis of a survey of IT users and business executives, that budgets would essentially be flat for the year ahead, and AMR Research confirmed this outlook when it reported in March that a survey of more than 100 decision-makers at Fortune 500 companies were calling for an anemic 0.22 percent growth in spending this year. In a February/March survey of iSource Business readers, 25 percent of respondents predicted that their IT budgets would increase this year, versus 58 percent that saw no increase and 17 percent that predicted smaller budgets compared to last year. Aberdeen Group and Forrester Research have forecast slim increases of 1.3 percent and 1.9 percent, respectively. On the outside, Morgan Stanley's December CIO survey found chief information officers expecting a 5 percent increase in IT spending in 2003 over the previous year, although many of the IT chiefs believed that their budgets could see reductions as the year progressed, depending on the economy.

Whatever the case, it is surely true that, as Aberdeen notes in its report "World IT Spending 20032006: Measuring the Incremental Recovery," released in December, "The factors contributing to excessive growth [in IT spending] in the late 1990s are not repeatable." As examples of those factors, the research group cites corporate spending to deal with the Y2K issue and the burst of spending on Internet and e-commerce technologies, including investment by so-called "brick-and-mortar" enterprises fearful of dot-com upstarts.

But Aberdeen also reported, in a January 2 research note titled "Will the SCM Technology Market Ever Rebound?", that the downward trend in spending on supply chain management (SCM) technologies appeared to have bottomed out toward the end of 2002. Interviews that the consultancy conducted with supply chain executives revealed that 86 percent of enterprises expected their 2003 budgets for SCM technologies to be flat or increased compared to 2002. That's not surprising, considering that a subsequent survey by Aberdeen for its 2003 "SCM Technology Buying Intentions Report" showed that 88 percent of the SCM executives polled expected their companies to seek supply chain cost reductions equal to, or even greater than, the average goal of 13 percent cuts that companies set for 2002. The executives also named "controlling costs" as the top reason to invest in SCM technologies.

Jennifer Chew, an analyst with Forrester, agrees that the economy has forced companies to be more cost-focused, and she adds that the tight IT budgets of the past few years have motivated supply chain executives to look for "quick hit" investments that can generate rapid ROI rather than planning major initiatives along the lines of enterprise resource planning (ERP) projects. "We are seeing people take on a series of $500,000 or $1 million projects that would roll up into a larger initiative, as opposed to taking on the Big Bang,' $20 million or $30 million projects," Chew says.