TechnologyAccounting SoftwareIT investment does pay off

IT investment does pay off

Spending on IT will increase a company's profits but only if the investment is spread around, according to research by analyst group, Gartner.

The survey of European business confidence found the average profit of firms that invest heavily in IT is 9.1%, compared to 6.7% for companies that did not. And businesses that focus on improving IT achieve higher profits than those which place a higher priority on customer focus.

But the survey of 973 business executives across Europe, sponsored by BT Ignite, warned that IT investment must be balanced. ‘Only those companies that had a broad-based IT investment strategy across a number of key areas achieved improved levels of business performance,’ it said.

Gartner vice president John Simcox added: ‘One of the key things we found was that those organisations that invest in one part of IT but not others did less well than those that invested less, but spent more broadly.

‘Throwing large amounts of money at one part of the business won’t work.

What we are seeing is that the pendulum is swinging back; that all IT investment has to be justified on business benefit because a large amount of money has been wasted.’

Paul Booth, head of the IT Faculty at the Institute of Chartered Accountants England and Wales (ICAEW) agreed that IT investment often provides business benefit but added that the institutes members were no fools, were experts in business and as a result would not invest in IT for the sake of it.

‘If they cannot see payback from using technology just because it’s there, then they will not use it,’ he said.

Although the UK is one of the highest spenders on corporate IT as a proportion of GDP and has the most confident companies, UK executives have a low level of confidence that their IT investments are suitable for future demands.

The survey also found that UK companies are most concerned about the nationality of their IT suppliers, and the least concerned about innovation.

‘The UK is living up to its image of being staid and conservative,’ said Simcox.

A UK engineering company scored highest in the survey, and the UK had more companies in the top 100 than any other country.

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