Dynamic IT

As companies search for tools and strategies to help grow their business, one area in particular stands out - the impact of IT. For a number of years, European companies have sought to streamline costs in the face of dismal economies and fierce competition from the East.

Investment in productivity enhancing, process improvement and service-developing IT tools came to near standstill. In fact, in 2004, European spending on software technology grew by just over 1% over 2003. However, 2005 showed significant improvement, and IDC predicts growth greater than 6% across Europe in 2006. The jump in demand is not a windfall for IT suppliers, but rather a wake-up call to European companies.

The delays in investment are over and those companies not looking seriously at IT infrastructure, business processes and new IT automated services to support the organisation, will find they are quickly outpaced, outpriced and outmanoeuvred by the competition.

SOFTWARE AND BUSINESS SUCCESS

These are not just random opinions. IDC conducts periodical surveys of the market, seeking to validate its assumptions about demand and spending patterns. Some of the latest indicators support the picture described here. In fact, a key question asked for several years relates to the importance of software solutions to a company's success.

These business tools remain essential to ensuring future performance, according to 81% of European business and IT decision-makers, up from 74% in the previous year. Top of the list in daily discussions with IT decision-makers are: the relevance of software to the business world; software investment plans; the outsourcing of IT; regulatory compliance; and open source software.

None of our survey respondents thought that software had zero importance, and less than ¼ of 1% thought that it was of low importance. Slightly more than 50% of respondents gave software the highest rating.

'GOOD-ENOUGH' WON'T DO

Digging under the covers of this rather dramatic proclamation, we find there are a number of key areas where IT managers and those who influence IT budgets must focus their attention in 2006. Much of those budgets will be focused on upgrading outdated office systems and key back-office applications (such as financials, contract and customer information management), and replace existing infrastructure (storage and content management, system performance management and back-up, etc.)

However, the prevalence of 'good-enough computing' is being replaced by a more strategic emphasis. Simply put, a release of IT budgets towards investment in entirely new projects is on the way. These new projects are not simply further tools to lower operating costs.

In fact, recent interviews suggest that only a very small number of European organizations look towards new software tools and architectures, such as Services-Oriented Architecture (SOA), for this purpose. Rather, discussions surround issues such as increasing the speed at which new solutions can be built and rolled out, the overall quality of IT systems, and, most importantly, enabling key points of automated integration between the company and its customers and suppliers.

Looking a bit further into where some of the fundamental software tools impact the business highlights one area of hot interest and growth in 2006. After security solutions, investment in the various Business Intelligence (BI) and analytic solutions easily ranks number two in many surveys on investment plans.

GETTING THE BUSINESS UNDER CONTROL

The impetus to reduce the bleeding often caused by cost-cutting, as well as the desire to retain the superior products and century, is significant. IDC believes that in 2006, there will be significant emphasis on:

• Business Performance Management (BPM) and balanced scorecard
• Financial analytics (budgeting, planning, reporting and consolidation)
• Customer analytics (CRM)
• Risk management analytics
• Supply Chain Management (SCM) analytics
• Workforce management analytics

IDC surveys show that financial analytics is by far the area rated as the most important. 72% of all respondents rated these solutions at four or above, on a scale of one to six ranking importance. 26% actually gave financial analytics a six - the highest rating on this scale.

Just looking at the highest ranking alone among these solution areas, the 'very important' rating was given to risk management, workforce management and BPM analytics by approximately 17% of European decision-makers. Around 12% of respondents rate CRM and SCM analytics as very important when carrying out BI and analytics projects.

Financial and BPM analytic applications have been part of the long-range plans of many companies, and the strong growth in these analytic tools in the past few years indicates that serious adoption has begun. Also, compliance concerns around regulations such as Basel II, IFRS, CAD and IAS, and concerns about privacy, will continue to drive attention towards financial and BPM analytics.

DEMYSTIFY IT INVESTMENT

Years of severely limited IT budgets have produced a negative spiral towards both the solutions and the investment process, leading to the damaging approach of 'good-enough computing'.

On the other hand, this period has forced IT suppliers to dramatically redesign entire platforms, collaborate with industry standards, and start documenting payback value for existing and prospective customers. Today, we are presented with a host of opportunities when looking at new IT investment strategies.

A NEW ERA IN IT

In particular, IT investment decision-makers must consider a number of options between infrastructure enhancement and services automation. Financial planning process management, being a key area supporting a number of business functions as well as an enabler for better business strategic decision-making, cannot be overlooked.

In 2006, companies in Europe will completely re-evaluate IT strategies, bringing in key business constituents and relying more and more on management consensus and buy-in to ensure successful IT deployments.

Keeping a focus on these issues will enable a successful transition from 'good-enough computing' to the new dynamic IT era, in which business and IT blends more fluidly and effectively than ever before.