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Software // Enterprise Applications
03:24 PM
Darrell Dunn
Darrell Dunn

Catch The Wind

Business-technology leaders are optimistic about their companies' prospects this year. But they know IT budgets to support that growth will be tight.

In an old Hollywood movie, a wise nomad has some advice for the film's hero, who's traveling through the desert: "Trust Allah, but don't forget to tie up your camel."

Business leaders preparing for 2004 appear to be exercising the same blend of faith and caution when it comes to the economy, growth prospects, and budgets. Business-technology executives surveyed for InformationWeek's annual Outlook study expressed the highest level of optimism in three years about their companies' revenue prospects, but they're moving cautiously, with no plans to significantly increase IT purchasing levels or appreciably boost technology staffs.

The 400 companies surveyed plan to devote, on average, 8.3% of annual revenue to IT expenditures, down slightly from last year's 8.6%. That could still bring an increase in overall spending, since 82% expect their companies' sales to increase this year. Nearly half the respondents say they expect IT spending to exceed 2003 levels, a positive shift from a year ago, when 40% anticipated increased spending.

chartOn average, survey participants say 30% of 2004 IT budgets will be dedicated to salaries and benefits, with 22% going to hardware and technology purchases, 20% to applications, and 11% to consulting services and outsourcing. Top-of-mind initiatives for the new year include optimizing business processes, improving customer service, and organizing or using customer data. Anticipated technology priorities include purchasing PCs, enhancing network security, and upgrading network-management software.

Money won't be easy to come by in the next 12 months. Tech projects underwent significant scrutiny during the last budget-analysis cycle, and short-term return on investment remains critical at many companies. Successful projects depend on workers understanding why they have an IT tool and being able to do their jobs better because of it, says Keith Morrow, VP of IS and CIO of convenience-store chain 7-Eleven Inc. "For us, it all boils down to, does it make our stores easier to run or does it add pain? That's the filter through which everything must pass."

Morrow has been known to fight against IT initiatives he doesn't think will provide adequate return on investment within a reasonable time frame, especially ones trying to patch-fix a broken process or get too far ahead of unproven technology. For instance, Morrow supports 7-Eleven's research and testing efforts in radio-frequency identification technology. But he's not ready to go beyond that. "I'm dead set against plunking down a significantly large investment on unproven and untested technology and perpetrating it on our stores," he says.

Morrow says 7-Eleven believes RFID--using tags that emit radio signals to track goods in the supply chain--will be an important technology, but as a retailer where inventory distribution to individual stores is generally completed on a single-item basis, costs associated with the technology are still too high for full-scale implementation. Instead, the retailer plans to continue budgeting for proof-of-concept initiatives around RFID, he says.

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