Executive Briefings

An Increase in IT Budgets? We've Heard It Before. Yet Those Who Spend Will Reap the Benefits.

Vendors of supply chain software must have learned by now not to get overly excited about projections of higher IT spending by business. Last April, AMR Research Inc. reported that 76 percent of surveyed companies were planning to boost spending over the next 12 months, with an average budget growth of 19.5 percent. Things didn't turn out that way, however. A more recent spending report by AMR "found the sentiment still there, albeit tempered," says analyst Eric Austvold. High-tech companies in particular might be planning to spend more on IT in the coming year, but at a "moderate level." According to the latest report, 59 percent of respondents plan to increase budgets in 2007, at an average growth rate of 4.1 percent. But even a moderate rise suggests that companies believe IT has the potential to increase productivity.

IT spending covers a wide range of possible applications, but AMR believes the money will be spent on enhancing some very specific processes. Among other things, says Austvold, companies will seek to review demand forecasts more frequently, sense changes in demand more quickly, evaluate supply network design regularly, increase dependence on contract manufacturers, launch new products with greater success, deploy customer-created scorecards to manage performance, and do a better job of estimating manufacturing costs. All laudable goals, but are they achievable? According to AMR's benchmarking research, "clients that make these investments often enjoy the profound benefits of delivering 20 percent more perfect orders, holding one third less inventory, and reducing costs by as much as 5 percent of revenue."

Visit www.amrresearch.com

Vendors of supply chain software must have learned by now not to get overly excited about projections of higher IT spending by business. Last April, AMR Research Inc. reported that 76 percent of surveyed companies were planning to boost spending over the next 12 months, with an average budget growth of 19.5 percent. Things didn't turn out that way, however. A more recent spending report by AMR "found the sentiment still there, albeit tempered," says analyst Eric Austvold. High-tech companies in particular might be planning to spend more on IT in the coming year, but at a "moderate level." According to the latest report, 59 percent of respondents plan to increase budgets in 2007, at an average growth rate of 4.1 percent. But even a moderate rise suggests that companies believe IT has the potential to increase productivity.

IT spending covers a wide range of possible applications, but AMR believes the money will be spent on enhancing some very specific processes. Among other things, says Austvold, companies will seek to review demand forecasts more frequently, sense changes in demand more quickly, evaluate supply network design regularly, increase dependence on contract manufacturers, launch new products with greater success, deploy customer-created scorecards to manage performance, and do a better job of estimating manufacturing costs. All laudable goals, but are they achievable? According to AMR's benchmarking research, "clients that make these investments often enjoy the profound benefits of delivering 20 percent more perfect orders, holding one third less inventory, and reducing costs by as much as 5 percent of revenue."

Visit www.amrresearch.com