Euro firms losing out on IT value

By Lisa M Bowman, GameSpot Europe, 6 March, 2003 11:52

NEWS

US companies are getting better value for their IT dollar than their European counterparts, according to a new study that says the top companies don't necessarily spend more than their competitors. Analytical tools company Alinean said public companies in Europe are spending almost twice the percentage of their revenue on IT than US companies. According to the study, which looked at about 9,000 public companies in the US and Europe, the average company in the European Union spends about 7.3 percent of its revenue on IT, compared with 3.7 percent for U.S. companies. The highest performers -- in this case, measured by dividing the cost of doing business by IT investment and spending -- spent even less of their revenue on IT. The top US companies spent just 0.8 percent of their revenue on IT, compared with 2.1 percent for European top performers. The study said successful US companies are cutting IT costs through careful strategic planning and outsourcing while keeping critical R&D spending in-house. "US companies have made a major shift that puts them far out head," Alinean chief executive Tom Pisello said in a statement, referring to the outsourcing trend. "At the same time, they're keeping crucial information management investments on knowledge capital growth and retention -- focusing IT spending on the resources that matter." The study's findings are similar to those of a Forrester Research report released last year, which said that companies can't beat competitors simply by outspending them on IT. That study ranked companies based on return on investment, revenue growth and cash-flow growth over three years. It found that the highest performers carefully scrutinised their technology spending, shelling out just 3.3 percent of revenue on IT, compared with 4.2 percent and 4.5 percent for middle performers. The lowest performer spent the least, forking over just 2.6 percent of their budgets. The study suggested companies invest in technologies that help them manage their supply chains and interact better with customers. Alinean makes software that helps companies calculate the potential return on investment of their IT purchases. Its ValueIT software, which shipped late last year, lets chief information officers set benchmarks to evaluate pending projects. Several companies have jumped into the market for tools designed to make IT purchasing decisions easier as expenditures are more closely scrutinised in a down economy.

For a round-up of the latest tech business coverage, see the Business News Section. Let the editors know what you think in the Mailroom.

Post your comment

In order to post a comment you need to be registered and logged in.

You can also log in with Facebook. Log in or create your ZDNet UK account below

By signing up for this service, you indicate that you agree to our Terms and Conditions and have read and understood our Privacy Policy. Questions about membership? Find the answers in the Community FAQ

ZDNet UK Live

> I'm told it's somewhat annoying when people have their Macs stolen > and Apple stores treat the thief as the owner, but there you go. Ouch,...

13 hours ago by BrownieBoy on AMD Ultrathins to challenge Intel Ultrabooks

@kevinmchapman. OK, I acknowledge that 'most' was a gratuitous throwaway comment as an afterthought and too presumptuous. As to proof, as you...

17 hours ago by Moley on A tale of two distros: Ubuntu and Linux Mint

@BrownieBoy > Works really well for thieves.... >> Nice attempt to deflect the argument by tossing in a point that's totally >> irrelevant, even...

18 hours ago by Jack Schofield on AMD Ultrathins to challenge Intel Ultrabooks

fantastic that the so called piracy bills have been withdrawn. however, these anti-democracy supporters are still in the shadows so lets be alert...

19 hours ago by raskolnikof on SOPA, Protect IP support wavers in face of online protest

Please God no; teach them anything you like - thinking rationally, the uses and misuses of data, what data is and what it's not - but leave the...

21 hours ago by Tony Douglas via Facebook on Kids are the future. Teach ’em to code.

@Jack, > Works really well for thieves.... Nice attempt to deflect the argument by tossing in a point that's totally irrelevant, even it were...

1 day ago by BrownieBoy on AMD Ultrathins to challenge Intel Ultrabooks

Make that 13 people now - I got refused today at Manchester airport. I thought I was up to date on this legislation - I knew of the EU ruling from...

2 days ago by bootlegger on UK airport body scans will not be opt out

Don't forget to check out apps like GoodReader or SlideShark either, they're indispensible for people on the go in presentation situations. Best...

2 days ago by tinycg on Four top iPad apps for people on the move

Well it seems there is something a number of us agree on. Why is the Ubuntu Unity launcher so ugly? I thought perhaps it was something to do with...

2 days ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint

Duplicate comments are not made intentionally. Its very good to know that now you are keeping check on this problem because sometimes a commenter...

2 days ago by Freebies202 on Microsoft fixes blog comments, speeds up blogs with open source

"the very significant number of users" and "many (most) of us" - you have no evidence for these statements. It is a fact that most users are saying...

3 days ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint