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U.S. Tech Spending Lags, Retail Spending Lags
Further
The U.S. is no longer on the cutting edge of IT innovation,
according to a comprehensive survey by Accenture. Once early
adopters, U.S. companies are now falling behind global competitors.
In the retail sector, the problem is especially disturbing,
since its IT investment level as a percentage of revenue is
at the bottom of the spending curve.
According to Bob Suh, chief technology strategist for the
Accenture study of 700 CIOs and CEOs in 22 countries, “During
this second wave of innovation, newer systems simply outperform
refurbished ones because they have improved substantially
in the last five years making them easier to implement, integrate
and change, and as a result they are driving higher levels
of productivity.”
Retailing has historically invested lower percentages of
revenue compared to other industries. Typically, IT spending
represents 1 to 15 percent of a company’s revenue, according
to Suh. The financial sector is on the high end of the spectrum,
while retailing is near the bottom.
According to the last several years of the RIS/Gartner Retail
Tech Trends Study, retailers allocate less than 2 percent
of revenue to their IT budgets. This figure, according to
Suh and other research analysts, is two or three times lower
than other industries.
Key findings in the Accenture study include:
• Cutting the fat from today’s already lean IT
budgets cannot be done easily. The study shows that as
an organization embarks on a new technology investment, it
should expect spending more of its time in IT operations,
as their optimized IT environment has been disturbed. While
this may look like a step back to IT execution leaders, high
performers view this as a necessary step toward business innovation.
• Consumers expect more and are savvier than ever
before - if we don’t provide it someone else will and
our customers will vote with their mouse clicks. Accenture
data suggests that companies are less than half way to where
they think they could be or should be in terms of leveraging
online interactions with customers, employees and suppliers.
• Those people responsible for maintaining our legacy
system are headed toward retirement. Research shows that
the oldest modules of front office systems driving profitability
are among the oldest in an organization.
• We need to stop looking at IT investment the way
the airline companies view theirs. The average age of
an American airline fleet, for example, is far older than
the aircraft owned by most of their European and Asian counterparts.
Like some 747’s and MD-11’s of similar age, it is
as if the pilots who originally flew them in the ‘70s
are still the only ones who know how to work the technology.
-Joe Skorupa, Debby Garbato, Christina Zarrello
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