IT spending cuts backfire on business

Attempts to cut IT investment are backfiring because companies are forced instead to increase expenditure on maintenance and repairs to ageing systems.

A survey of 300 CIOs by consultants Accenture found that organisations that try to freeze or cut IT budgets become caught in an "austerity trap" because they hold onto ageing legacy systems that lead to higher costs in the long term.

Combined with demands for projects focused on compliance this is creating a 'perfect storm' that is diverting IT budgets from other projects, the consultants claimed.

The study found high-performing IT departments spend less on maintenance and more on new investments.

High-performing IT departments spend 40 percent more of their budget on building and integrating new systems than their poorly performing rivals.

Low-performers spent on average 48 per cent of their time maintaining and fixing legacy systems, whereas the high performer group spent, on average, 35 per cent of their total time on the same activities.

Bob Suh, Accenture chief technology strategist, said: "Poor spending quality is characterised by a high percent of time spent on maintaining and fixing systems versus investing in productivity-driving change."

The survey also found that many CIOs are very conservative, with more than half (55 per cent) describing their organisation as one that prefers to "follow, not lead" when it comes to pioneering IT developments.

But three quarters of high-performing IT organisations said they want to be early adopters.

Accenture said companies are reluctant to invest in IT because of the poor track record on delivery: "IT projects, on average, come in at a 29 per cent success rate. The average cost overrun for projects is 56 per cent, and the average schedule delay is 84 per cent of plan."

The report added: "Clearly there is a gap in performance standards between what is expected of enterprises as a whole, and what is expected of IT organisations."

CIOs are currently most interested in compliance technologies. In contrast half said they were doing nothing about RFID, while 35 per cent said they "reading and monitoring", while just under half (49 per cent) said they were doing nothing about another controversial technology, Linux on the desktop (although 37 per cent said they were reading and monitoring).