Asia Pacific firms expect higher IT budget next year

Thirty-nine per cent of organisations globally expect IT budgets to increase in the next budget year, with slightly more in Asia Pacific expecting an increase (44 per cent), according to a recent worldwide survey by Gartner, Inc.  

Of the Asia Pacific respondents expecting an increase, 72 per cent plan for increases of more than 10 per cent and 36 per cent expect more than 20 per cent increase over the current year’s budget.

Gartner surveyed more than 1,500 IT leaders in 40 countries to understand general IT spending trends and spending on key IT initiatives, such as cloud computing, business process improvement, data center expansion/consolidation, enterprise software implementation / upgrade, outsourcing, security, risk and compliance.

“Following two years of tumultuous change and uncertainty, IT budgets will increase modestly in 2011; however, responses indicate that the ‘new normal’ is as much about where the money is going as how much is available,” said Derry Finkeldey, Principal Research Analyst at Gartner.  “Asia Pacific was not as hard hit as other regions by the economic downturn and the region is resilient, currently experiencing a return to growth.”

Enterprise software implementations and upgrades are receiving the greatest investment focus in Asia Pacific, with 85 per cent of organisations allocating budget to implementations in the current budget year, with most planning to spend at the same or higher levels in 2011.  

On average, these organisations are investing around 23 per cent of their IT budgets on initiatives in this area. Interestingly, all respondents in Asia Pacific are investing in data center consolidation or expansion initiatives in the current year.

Despite the hype, 63 per cent of respondents in Asia Pacific have not budgeted for any type of cloud service in 2010.  However, 34 per cent have allocated IT budget to cloud computing as a key initiative for their organisation and those that are investing in cloud are planning high growth in spending in 2011.

“While we are seeing growing interest in cloud computing, most organisations are still learning when it comes to cloud services initiatives,” said Finkeldey.

“But this doesn’t mean they are not thinking about it – data centre initiatives such as virtualisation are currently higher on the priority list than cloud, but these initiatives are the necessary precursors to a move towards cloud computing.  We are seeing that the money is now shifting from traditional IT budget categories to new types of spending.”

The IT budget distribution across spending lines is fairly consistent globally, especially for telecommunications services and external IT services, with IT personnel accounting for about 30 per cent; data center systems 24 per cent; end-user equipment such as software and PCs 20 per cent; telecom costs 14 per cent; and IT services 13 per cent.

External IT services account for 12.5 per cent of the average IT budget globally.  However, 20 per cent of respondents in Asia Pacific have not allocated any IT budget to external IT services, suggesting good continuing market growth opportunity as buyers mature — especially in countries such as China.

Twenty three per cent of IT budgets in Asia Pacific are allocated to enterprise software initiatives, with 35 per cent of budgets for new software licenses allocated to horizontal software.  83 per cent of respondents are planning to spend on office and productivity software and 63 per cent on CRM applications.

From a vertical perspective, a much higher proportion of those respondents with enterprise application implementation as a key initiative this year in Asia Pacific, are focusing budgets on a vertical software implementation – 51 per cent, compared with the global mean of 37 per cent.  

A core driver for this are banks focusing on core banking applications and manufacturers implementing computer-aided design, engineering and manufacturing, as well as manufacturing execution systems.

“Software spending in Asia Pacific reflects the upbeat outlook of most enterprises and a strong focus in many industries on improving customer service in an increasingly competitive market place,” said Finkeldey.  “It would appear from the results of the survey that the worst of the recession is over on a global scale; at least for IT software spending.”