A cutback in software spending by local companies to save costs could see revenue growth hampered in the next few years, says a study.
The Enterprise Software in South Africa 2009 report, compiled by software consultancy nFold and technology market research organisation World Wide Worx, shows companies of all sizes are cutting back on software spend.
nFold MD Sandy Pullinger says this could have dire consequences for companies. She explains that organisations could find themselves without the necessary IT infrastructure to implement their business plan.
The study, released yesterday, found that 39% of medium and large organisations in SA are budgeting to spend more than 1% of their turnover on IT. In 2005, 63% of these organisations planned to spend more than 1% of their turnover on IT.
Pullinger says there “has been a dramatic shift in corporate IT spending patterns”. When the survey was conducted in 2005, 19% of companies did not have a fixed IT budget, spending as they needed to. “This year, that proportion has leaped to 32%.”
Software spend stalls
Pullinger says the biggest cut in spending is on software. In 2005, only 16% of companies had budgeted “as needed” in 2005. This number has climbed to 38% this year. She explains that the pressure of the recession has meant companies are paying closer attention to where operational spend is going, and are taking longer to upgrade software.
She adds that senior decision-makers are more involved in large software purchasing decisions. This year, a quarter of companies said financial decision-makers now play a role in the decisions. Previously, financial executives played almost no key role.
In addition, the number of companies evaluating their software needs on an ad hoc basis has increased dramatically, leaping from less than 20%, to more than 35%. This finding is in line with budgets becoming more unpredictable, explains Pullinger.
The most typical time period for reviewing software needs is annually, with roughly a third of companies doing so. However, this is from a situation where, four years ago, half of companies reviewed their software needs at least every six months, she explains.
Related story:
High hopes for Windows 7
Share