Believe it or not, IT spending will increase and it will be permanent

By Barb Cole- Gomolski, InfoWorld |  Business

IF YOU'VE BEEN watching the stock market roller coaster and listening to the gloomy predictions about dot-coms, you may think that things are looking bleak for those of us in the IT profession. You may think that companies will begin to rein in IT spending, and that budgets will shrink.

Despite some less-than-stellar indicators, I believe the opposite is true, and so do many of the people who made it down to Orlando, Fla., last week to the Gartner Symposium/ ITxpo.

Much of the conference centered around how further investments in IT will allow companies to exploit the strong economy we continue to experience.

Follow the money

We know that until recently, IT investments were largely made to improve productivity in post-sale, back-office operations. In short, IT investments were used to automate routine processes and were typically implemented as a cost-saving measure. But e-business is dramatically changing the way businesses operate, and the investment needed to make this happen isn't small. E-procurement, e-recruiting, and other e-enabled processes are not just about improving efficiency. Rather, such processes are about improving the effectiveness and, dare I say, innovation within our companies.

One of my colleagues, Kurt Potter, says that as a result of e-business IT spending as a percentage of revenue will exceed 10 percent by 2005, as two-thirds of large companies funnel funds away from ERP (enterprise resource planning) and into e-business. Overall, e-business initiatives will consume between 30 percent to 50 percent of enterprise IT spending, according to Potter.

The message that "IT spending will increase and it will be permanent" is a difficult one to deliver to CEOs and CFOs, and it's often rejected. Already, IT spending in many companies has surpassed what the companies spend on real estate, human resources, and other infrastructure services, a fact that raises red flags in the eyes of top leaders. The common reaction of CEOs and CFOs when faced with rising IT costs is that IT is inefficient. "Why does it cost us too much to run IT?" is a litany I hear all the time.

Your CEO may wish to ponder the following Gartner predictions.

* More than 50 percent of each new IT investment dollar will serve business processes outside of the back office, especially the most critical revenue-generating processes.

* More than 50 percent of each new IT investment dollar will serve business processes outside of a client's enterprise, especially revenue-generating business-to-business processes.

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