UK retailers tighten reins on IT spending

The UK retail sector will dramatically reduce its IT spending this year, to counter the costly technology investments made in 2004.

While overall IT spending in the UK is set to increase slightly this year, according to research from the Economist Intelligence Unit (EIU), retailersare reining in the purse strings.

Almost a third of retail managers (29 per cent) surveyed say they will spend 10 per cent less in 2005 than in 2004, while a further 14 per cent will cut IT investments by half.

The survey of chief executives, chief information officers, chief financial officers and senior managers found the retail sector suffers the greatest gulf in understanding the relationship between IT and the business.

Some 71 per cent cited a lack of understanding of the benefits IT can deliver to the business, compared with 27 per cent of overall respondents.

Retail is struggling to prove these benefits, with 43 per cent of respondents in the industry saying they don't know if they are hitting IT targets.

'Retailers have had an expensive time recently, with initiatives such as chip-and-PIN and radio frequency identity (RFID) technology,' said John Cunningham, business services director at survey sponsor Telewest. 'This could be the reason why investment is set to decrease over 2005.'

In-house software applications and storage and archiving will feature on the retail IT budget in 2005, as data protection regulations increase the storage burden, according to Cunningham.

Nick Gladding, senior analyst at retail researcher Verdict, says 'retailers are generally more nervous about growth in general', and cites increased competition as another reason for more cautious spending.