Some IT Purse Strings May Be Loosened Next Year

Computerworld - IT managers who have quickly reacted to demands for cost-cutting over the past three years could see a payback in the form of discretionary spending increases next year, according to several reports and interviews with CIOs.
But 2004 IT spending plans vary widely by industry, said Howard Rubin, executive vice president at Meta Group Inc. in Stamford, Conn. For example, Meta predicted in a report released Nov. 18 that the insurance and manufacturing sectors will each see double-digit percentage gains on a year-over-year basis, while spending in the banking and energy industries will decline by 12% and 15%, respectively.
Meta's projected 12% increase in insurance IT spending maps with plans at Reinsurance Group of America Inc. in Chesterfield, Mo. Demand for new projects from its business units will drive a 12.4% rise in tech spending next year even though Reinsurance Group's IT infrastructure costs continue to decline, said Rick Nolle, the company's vice president of IT.
Allstate Insurance Co. hasn't finalized its 2004 IT budget. But Cathy Brune, Allstate's chief technology officer, said the Northbrook, Ill., company won't spend any less than it does this year. It also expects to allocate a higher percentage of funding to strategic projects, partly as a result of its ability to reduce IT maintenance costs through offshore outsourcing.
Rubin said that in the insurance industry, "we're seeing companies moving along at somewhat of a recovery mode and investing in IT for future growth and to gain a better customer view." Meta also expects manufacturers to invest more heavily in warehousing and distribution applications to increase efficiency and tighten links with suppliers. The forecasts are based on an independently funded survey of 860 IT managers in 21 industries.
Another reason why manufacturers might see a boost in IT spending is "the fact that they haven't spent anything [on discretionary projects] for the past two and a half years," said John Parkinson, chief technologist for the Americas region at consulting firm Cap Gemini Ernst & Young U.S. LLC in Chicago.
In a report released last month, Forrester Research Inc. predicted that the retail and insurance industries will see the largest increases in IT spending next year. But Forrester's forecasts are relatively modest. Analyst Tom Pohlmann said IT budgets in those two industries will likely rise by 4.4% and 3.4%, respectively. The report, funded by Cambridge, Mass.-based Forrester, was based on a survey of 820 IT executives in October.
On the other hand, National Grange Mutual Insurance Co. in Keene, N.H., plans a slight drop in itsIT budget. CIO Joel Gelb said that improved governance, including the use of portfolio management techniques, has helped the company "focus IT efforts and control costs."

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