IT budgets axed, organisations ‘flying blind’ with decision-making: survey

Staff Writers
Friday, 27 February 2009 16:26

IT Industry - Market

IT budgets have been slashed by 73 per cent of Australian organisations for 2009, with 46% cutting budgets in absolute dollar terms for this year, according to a recent survey by Compuware(NASDAQ:CPWR).

Compuware, a provider of solutions to optimise IT performance, says its survey of 112 company senior executives at a recent Sydney conference, also found, that while there had been big cuts, 28% of organisations have the same budget in dollar terms (representing a real cut after inflation), 17% have had budgets increased in line with inflation (1-4%), and only 10% have had IT budgets increased above the inflation rate (5% or more).

Van Giang, regional sales director for Compuware Australia and New Zealand, claimed that
many Australian organisations were “flying blind” when it comes to having a sound financial basis for making IT budget cuts.

Giang also cautioned that very few organisations have real-time visibility into the demand for IT, where IT budgets are being spent or the performance of IT services. The survey found that organisations either had limited or no visibility (15% of respondents), used ad hoc or manual reports (55%), had regular or automated reports (19%) or real-time visibility (10%).

According to the survey, at the same time, 20% or fewer respondents said their organisations were, at any point in time, able to calculate:
*How much business activity is each IT asset/service generating -- 19% of respondents;
* How is the performance of each IT service affecting the bottom line -- 15% of respondents;
* What is the value of the IT asset to the business -- 20% of respondents;
* What is the return of the IT asset -- 9% of respondents.

Explaining the findings, Giang said that many organisations lacked the tools and the disciplines to optimise their IT investment decisions. As a result, their sub-optimal IT investments may not be obvious to the business – “something that is often tolerated when economic conditions are good. But when conditions are tough and organisations are looking to make real budget cuts, it becomes of paramount importance to understand the impact of those cuts.

“When the financial information used for investment decisions is inadequate or inaccurate, the results can be very costly to the business.”

Giang claimed that customers who had implemented Compuware’s changepoint IT portfolio management solution, on the other hand, had the ability to detail both costs and benefits tied to an investment across multiple fiscal years to drive better decisions.
 
He went on to assert that most organisations struggled to get detailed visibility of how their IT budgets were spent and what the direct business outcomes were,” and said “it was not uncommon to achieve a 10% efficiency saving just from the improved visibility into IT that the company’s solution provided. “

However, Giang warned against simply cutting back on new strategic initiatives to meet IT budget cuts, a decision he maintained could prove very costly over the longer term.
 
“Over 75% of organisations’ IT budgets are already devoted to keeping the lights on. While no-one is arguing that you should let the lights go off, the economic value to organisations of new strategic IT initiatives is typically far higher than existing investments.”