Innovate with IT to thrive

Survey suggests cost savings should be reinvested in technology

Firms that continue to invest in and innovate with IT through the recession will weather the downturn better than those focusing mainly on cost control, according to a survey conducted by research consultancy Loudhouse for software firm BMC.

The 2009 European IT Survey of 300 UK, French and German firms – 100 from each country - with annual revenues of more than £2bn, classified companies into three primary profile types – Hiders, Survivors and Thrivers.

Asked what the board outlook was over the next year, 36 per cent said the firm was in either a concerned or challenging position (Survivors), 41 per cent considered the board was taking a business-as-usual approach (Hiders), with only 23 per cent being proactive and seeing the recession as a real opportunity (Thrivers).

The key finding of the study was that consistent IT investment delivered a positive impact to business performance, according to the IT leaders surveyed.

The survey showed 77 per cent of respondents delivering cost savings over the past year, but only 46 per cent of those re-invested the money in technology.

Thrivers had a greater focus on IT automation as a route to cost cutting – 41 per cent as against 22 per cent of Survivors. Thrivers also only reduced innovation spend by 0.5 per cent, while Hiders saw their budgets drop by five per cent, compared with Survivors who saw a 15 per cent cut.

Dr Alexander Grous from the LSE's Centre for Economic Performance, who has studied the link between IT investment and business performance, said: "The lesson we can draw here is that companies cannot simply save their way back to recovery. Innovation deficits are extremely hard to redress. Organisations that recover best are those investing in areas of the business that can deliver long-term returns — areas such as IT.”

The research showed an average of 20 per cent of the IT budget being invested in IT-based innovation IT, with a sample range of between three and 48 per c ent. German businesses invested 24 per cent of their IT budget on innovation while the UK and France invested 17 and 15 per cent respectively.

Interviews were conducted over the phone during July 2009 with a respondent breakdown of 27 per cent chief information officers, 46 per cent IT director and 27 per cent classed as "others".