A recent report from Forrester, which surveyed 774 senior IT executives at enterprises with more than 500 employees across ANZ, Japan, South Korea, India, China, Singapore and Vietnam, shows that generally IT spend in Asia Pacific region is down during this economic downturn, even in the economies witnessing growth. The research focused on trends in current IT spend and cost cutting measures.
The findings shows that almost half of the respondents said their 2009 IT budgets will be down, and only 15% of the respondents expects an increase in their IT budgets. Even in China and India, both of which are expected to register strong economic growth this year, many enterprises are decreasing their IT spend. In this two emerging markets, only those organizations that businesses rely primarily on the local or Asian markets continue to see IT budget growth, while those that have higher exposure to the Western markets will see decrease in their IT budgets.
Interestingly, a “two-speed” IT economy is emerging as some companies continue to invest rapidly in IT systems, while others take deep budget cuts. Singapore companies seems to be taking the deepest budget cut. One possibility is that most organizations in Singapore run IT as a cost center instead of a service organization. Hence, when the business is not doing well, they usually resort to cutting IT’s budget to reduce cost. Couple that with the contracting economy in Singapore.
Chinese companies, on the other hand, are the least affected. For the 23% of enterprises seeing growth in their IT budget this year, their expected growth will be around 17%. This exemplifies the growing gap between those who are experiencing decreasing budgets and the those who are investing more. Surprisingly, Indian firms will witness the largest descrease (or one-fifth of their budgets gone in a 12-month reporting period). Although Indian firms have been catching up on the rest of the world in their IT investments over the past few years, they are more exposed to the global financial crisis and the economic downturn than China. It is all related to the risk exposure with the volume of offshore businesses, outsourcing contracts, etc. which Indian firms have been servicing and the impact of the western economies on these businesses.
Australia and New Zealand firms represent the middle ground in Asia Pacific. Both countries are in recession, although relatively milder, and both should see a quick return to growth when the world economy picks up. Again, the impact to businesses depends on how reliant they are on markets outside of their countries.
The above chart shows the varying cost-cutting measures adoption across Asia Pacific. So, what can we deduced from this chart? Well, here are my thoughts:
- Energy efficiency remains an important objective in countries like ANZ, Japan, South Korea, primarily where electricity tariffs are higher than the developing countries. As utility is an ongoing operating expense, increasing energy efficiency will help much to the business. This is also a clear indication of the maturity of companies in those countries where IT and facility departments seems to collaborate much more intimately.
- Deferring capital expenditures is of high importance and most of the time, this can be accomplished through right-sizing of investments, minimizing technology refresh investments through use of consolidation/virtualization technologies (better utilization of IT assets), modularity design features in new data center design, selective outsourcing or managed services instead of building up their own capabilities, etc.
- IT staff hiring freeze indicates that more and more of these organizations will have to make do with whatever resources they have. CIOs are expected to continue delivering value to the business even with this constraint. Therefore, it becomes increasingly important to re-evaluate the portfolio of IT from the business customer’s perspective. Who are your IT service consumers? What are the services being offered and consumed? How does the business benefit from these services? As an example, IT needs to show value and consolidate its capabilities around services which the business need and appreciates, to better align itself with the business demand (and CIOs or IT leaders needs to be able to articulate this to the business effectively too).
- With limited staffing and resources, productivity will be more important. How can we achieve more with equal or less? It is necessary to map out each the main IT activities, distribution of resources, costs, effort, and the processes, procedures, etc. into the portfolio of IT services offered to the business. Then look at ways to streamline the processes, tighten the relationship between IT and business, reduce wastage or unproductive steps, etc.
Tags: Cost, Efficiency, productivity, Service Management