44 percent of APAC firms expect IT budgets to increase next year

by CXOtoday Staff    Oct 11, 2010

IT InvestmentsFollowing two years of tumultuous change and uncertainty, organizations in the Asia Pacific (APAC) region are now expecting their IT budgets to increase in 2011. According to a Gartner survey, 44 percent of APAC firms expect an increase in their IT budget, of which 72 percent plan for increases of more than 10 percent and 36 percent expect more than 20 percent increase over the current year’s budget.

Currently enterprise software implementations and upgrades are receiving the greatest investment focus in APAC, with 85 percent of organizations 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 organizations are investing around 23 percent of their IT budgets on initiatives in this area. Interestingly, all respondents in APAC are investing in data center consolidation or expansion initiatives in the current year.

Despite the hype, 63 percent of respondents in APAC have not budgeted for any type of cloud service in 2010. However, 34 percent have allocated IT budget to cloud computing as a key initiative for their organization 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 organizations are still learning when it comes to cloud services initiatives,” said Derry Finkeldey, principal research analyst, Gartner. “But this doesn’t mean they are not thinking about it - data center initiatives such as virtualization 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 percent; data center systems 24 percent; end-user equipment such as software and PCs 20 percent; telecom costs 14 percent; and IT services 13 percent.

External IT services account for 12.5 percent of the average IT budget globally. However, 20 percent of respondents in APAC 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 percent of IT budgets in APAC are allocated to enterprise software initiatives, with 35 percent of budgets for new software licenses allocated to horizontal software. 83 percent of respondents are planning to spend on office and productivity software and 63 percent 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 APAC, are focusing budgets on a vertical software implementation - 51 percent, compared with the global mean of 37 percent. 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.