IT spending on hardware and software is on the rise, according to a study being released today by the Maven Wave Partners consultancy. And firm partner Brian Farrar says CFOs should take this as a good sign, and loosen up the IT purse strings.
"We've been in a deep IT spending freeze and that just couldn't continue. There is pent-up demand for hardware, software and services that has to be met," says Farrar, who is based in Chicago.
Its recent study, "IT Spending Catches Fire," updates an earlier report predicting the future of corporate spending on equipment, software and labor. In the spring, Maven Wave said it expected its IT Investment Index to increase between 15% and 20% from its Q3 2009 low, to an all-time high by the end of 2012. The actual numbers for the first quarter of 2011 are in, and they indicate the index rose just over 14%, already outpacing predictions.
Within this index, derived from sales of bellwether technology firms, are callouts for hardware and software spending. While software surpassed projections by 2%, hardware sales as actual results outperformed estimates by more than 9%, according to the report. [Read CIO's account of the study.]
Farrar is not surprised by hardware's showing, as that is the first thing that has to be purchased. He expects software to pick up going forward, as it will be IT's next focus.
Spending was originally crushed, according to Farrar, in response to the credit crisis. But he concludes that beyond a possible slight blip as the U.S. awaits a decision from Congress about the federal debt ceiling, all systems will be go from next quarter on and CFOs have to be ready.
"Businesses face new regulations, a focus on risk, and internal scrutiny about improving processes. These are all driven by technology," he says, adding that obsolescence can come quickly if companies don't address IT.
He doesn't worry that CFOs will stand in the way of progress. "I think that over the past ten years, CFOs have become increasingly technology-savvy," he says. At the same time, CIOs have become more cost-conscious. [Read more in "How to Manage the IT Spend."]
"While the CFO/CIO relationship has never been a perfect one, they have moved toward a better understanding of each other and this is going to do wonders for the business," he says. For instance, there will be discipline and alignment with IT purchases. "CFOs are going to require an ROI analysis before they agree to a technology investment," he warns.
CFOs should consider the report an indicator of what the company's appetite for investment should be across all industries, Farrar suggests. "This should free CFOs up to accept opportunities to create real change," he says.
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