IT budgets for small businesses are expected to increase by over 12 per cent in the coming year, but innovation is being pushed to the side, according to research.
The report on IT budgets by analyst AMR Research reveals spending is now focused on product manufacturing and improving existing systems rather than investing in new technology.
‘The numbers look really good, but 20 per cent of the money being spent is on compliance so actually there is not that much free money floating around for innovation,’ said Nigel Montgomery, one of the authors of AMR's Small and Medium Business IT Spending Profile 2006-2007 report.
‘In previous years manufacturing has been left on the shelf; this year people are overtly focusing on manufacturing. It’s much more of a brass tacks approach, essentially going back to basics in IT,’ said Montgomery.
In the 2005 report, product innovation and development was the main focus for business initiatives, but this has now shifted to better use of data throughout organisations. Containment of IT costs is also a new priority for businesses.
Companies that have fully integrated IT into the manufacturing process are now investing in software to address customer issues, including pricing management and customer retention.
‘The challenge is in building the skills to provide the professional services and support that is expected,’ said Montgomery.
Business process outsourcing is also changing the priorities for small firms, with changing numbers of supply and delivery points.
‘Companies who have been used to managing within four walls are suddenly finding themselves dealing with large networks. They have data within the business but they can’t make any sense out of it,’ said Montgomery.
IT budget growth in the UK is outstripping that of both France and Germany by seven per cent, an increase on last year’s growth, although capital expenditure continues to increase across Europe.
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