South African Enterprises cutting back on software

Mergers, Acquisitions and Financial Results

An increasing number of South African enterprises are cutting back on information technology spend as a proportion of their overall turnover, according to a new study released today.

The Enterprise Software in South Africa 2009 report, compiled by software consultancy nFold and technology market research organisation World Wide Worx, showed that 39% of medium and large organisations in South Africa were budgeting to spend more than 1% of their turnover on information technology. In 2005, 63% of these organisations planned to spend more than 1% of their turnover on IT.

“There has been a dramatic shift in corporate IT spending patterns,” says nFold managing director Sandy Pullinger. “When we conducted the survey in 2005, only 19% of companies budgeted for IT spend on an ad hoc basis or ‘as needed’. This year, that proportion has leaped to 32%.”

The biggest gap has appeared in software spend, where only 16% of companies had budgeted “as needed” in 2005. This number has climbed to 38% this year.

“It is clear that software forms less of an upfront purchasing priority today than four years ago, but that doesn’t mean software has declined in importance,” says Pullinger. “We find that senior decision-makers in the organisations are more involved in large software purchasing decisions than ever before, with a quarter of companies reporting that financial decision-makers now play a role in the decisions. Previously, financial executives played almost no key role here.”

The pressure of recession has meant that companies are paying closer attention to where operational spend is going, but also that they are taking longer to upgrade software.

The number of companies evaluating their software needs on an ad hoc basis has also increased dramatically, leaping from less than 20% to more than 35%. This finding is in line with budgets becoming more unpredictable. 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.

One area in which emphasis has increased is on mobile applications – a major trend reported earlier when preliminary findings of the study were released. This backs up separate research by World Wide Worx that confirms the growing business importance of mobility in both the enterprise and among small and medium enterprises.

IT News Africa