Tempe, AZ August 7, 2002 While information technology spending worldwide remained flat in 2001 and declined in the United States, e-business spending grew by more than 20 percent last year and will continue to be an IT investment priority, according to a new survey from technology consultancy IDC.
Meanwhile, a recent study by the Center for Automotive Research (CAR) at research institute Altarum found that while lower-tier auto industry suppliers are lagging behind higher-tier companies in the adoption of e-business tools and are planning only small increases in IT spending over the next few years, they nevertheless are deploying specific types of tools with perceived business value.
IDC's eWorld 2002 survey encompassed more than 2000 companies with 25 or more employees, covering the finance, real estate, insurance, manufacturing and retail/wholesale sectors in 10 countries. Respondents to the survey said they currently are allocating 12 percent of their IT budgets to Web-based initiatives, almost double what they allocated before the dot-com crash of 2000 and 2001.
"The dot-com crash didn't kill anything except hundreds of ill-conceived companies," said John Gantz, IDC's chief research officer. "In fact, it actually helped usher in the real 'New Economy,' the one where businesses, schools and government agencies from around the world are steadily integrating Internet technologies into their normal business operations."
More than 50 percent of respondents said investing in Web initiatives was important or very important for improving coordination with customers and suppliers, while 42 percent said they invested in e-business because they wanted to cut costs. Likewise, 42 percent of respondents admitted they made these investments because their customers demanded it.
In addition, 40 percent of respondents felt Web initiatives had a significant impact on improved customer service.
IDC is predicting a boom in the growth of transaction-heavy Web sites as companies beef up their commerce engines, automate their supply chains and integrate with customer service systems.
"e-Business is one of the top investment priorities for companies, right up there with security," Gantz said. "Companies now have enough operating experience to understand that e-business is as prosaic as it gets. It cuts costs and generates revenues."
Meanwhile, the CAR study, sponsored by SupplySolution and with execution support from Amplitude Research, looked at how e-business is conducted today and will be conducted in the future by the lower tiers of the automotive supply community.
The initial findings indicate that while these lower tiers of the automotive supply chain are lagging behind the upper tiers in the adoption of e-business tools, they are anticipating further consolidation in auto industry supply bases and expect that e-business capabilities will be a key factor in supplier selection.
A total of 81 percent of the respondents anticipate that their original equipment manufacturer (OEM) customers will be reducing their supply base within the next two years. Additionally, respondents themselves plan to reduce the number of their suppliers and will use the capability to engage in e-business as a key factor in supplier selection.
At the same time, respondents to the CAR survey said they expect a small increase in IT spending over the next two to three years. However, it appears that these companies will focus their technology investments on specific solutions they believe will deliver value and make them more competitive.
For example, 27.1 percent of suppliers said that e-business enabled demand planning and management is "required for success" in today's automotive supply chain. Almost 47 percent expect such tools to be required for success in the next two to three years.
Another 18.9 percent of suppliers characterize e-procurement applications as being required for success today, but 39.3 expect procurement to be required for success within two to three years.
"It's clear that, while e-business adoption has proceeded more slowly in the lower tiers of the automotive supply chain than at the OEM and tier-one levels, there are still applications that are perceived as having real business value in the lower tiers, such as demand planning and management and procurement," said Jonny Morell, senior research analyst for the Center for Automotive Research. "There seems to be a push within this group of respondents to implement e-business applications with their suppliers and customers."
On the other hand, the survey indicates that design-related applications will not have as high a growth and adoption rate. While a significant number of customers have managed to implement CAD interoperability or mandated single-platform CAD usage, very few of the suppliers' own suppliers have managed to get to that point, with only minor improvement expected over the next two to three years.
More than 160 supplier representatives responded to the Web-based research survey, entitled "Just How Wired is the Supplier Sector: The Mid-level Supplier Perspective?" Eighty percent of respondents were from suppliers based in the United States, more than half had annual revenues under $100 million and 12.7 percent had revenues over $1 billion. More than half the respondents do more than 80 percent of their business within the automotive industry and were significantly likely to be suppliers of engineered or unique-content parts.
"The lower tiers of the supply chain are critical to the success of e-business initiatives in the automotive industry," said Lee Grubb, SupplySolution's general manager of automotive and chief financial officer. "This research makes it clear that tier-two and lower suppliers are willing to implement e-business tools when it makes sense to their business, but not until then."