Gartner Survey Reveals IT Spending in Asia Pacific Lags North America by Half

Organisations in Asia Pacific spend only about half as much on IT operations as their North American counterparts, according to the results of Gartner’s latest Asia Pacific IT Spending and Staffing survey, spending only 1.4 percent of revenue on IT operations compared to 2.6 percent in the US.

As a relatively mature market, Australia leads the Asia Pacific region with an average IT operating budget of 2.1 percent of revenue, compared to a low of 1.2 percent in Malaysia and South Korea. However, spending on IT capital varied from a high of 1.7 percent in India to a low of 0.8 percent in Australia, compared with 1.2 percent in North America. High IT capital spending in the booming economies in Asia is consistent with other evidence, which indicates increased investment in IT to cope with growth.

Australian organisations spent more on staff as a percentage of the IT budget than most other Asia Pacific countries, second only to South Korea. However, the average number of IT staff employed by Australian organisations is lower than all other Asia Pacific countries surveyed, except Singapore. While differing wage rates explain some of these variations, it also reflects the differing IT portfolios in each country.

John Roberts, vice president and distinguished analyst at Gartner, said Asia Pacific IT organisations must take advantage of opportunities to apply good practices from experiences elsewhere around the world, because in general they lag in IT adoption.

“There is no simple answer to the question ‘how big should my IT budget be’”, said Mr Roberts. “However, there is clearly an opportunity for IT to deliver greater value to the business by improving business processes and enhancing operational efficiency. This survey will help business and IT managers compare their IT spending with that of peer organisations, but more detailed benchmarking is needed to compare not only spending but also the efficiency of your IT operations.”

Mr Roberts said there were significant country variations in IT spending, as Asia Pacific is not a homogeneous region.

“For example, labour rates in Asia are still relatively low compared to Australia, so in countries like China or Malaysia there isn’t the same drive to automate. We see ERP implementations there happening nearly 10 years after North America. With higher labour rates in Australia, this country tends to be an earlier adopter of technologies, mainly because automation delivers cost savings.”

In general, organisations in Asia Pacific see themselves as far more conservative in IT adoption (35 to 50 percent range) compared with in North America (14 percent). Australian IT departments rated themselves as more aggressive and less conservative than Singapore, but other countries were much more aggressive and less conservative than Australia.

“Interestingly, it is the booming economies of China and India that see themselves as the most aggressive, consistent with their current high levels of IT capital spending, ” said Mr Roberts.

The survey also found significant differences between industries in the level of IT investment, apportionment of IT budget, level of IT maturity and the relative importance of drivers for IT spending. However, operational efficiency (saving money) is still cited as a driver of IT spending more often than any other factor in Asia Pacific.

Education and financial services organisations are most likely to use IT to achieve management goals, whereas agriculture, mining and construction companies are the least likely. Consistent with these findings, the financial services industry continues to invest the greatest amount in IT across Asia Pacific and presents the largest IT market opportunity for high-tech providers.

The financial services industry is also the most mature adopter of IT in the region, however, its self-perception is sober in the face of competition from more progressive financial services organisations from North America and Western Europe. Financial services companies also have more IT employees as a proportion of all employees than other industries surveyed: 4.4 percent compared to 2.6 percent across all other industries in Asia Pacific.

“Adjusting the IT budget must be a continuous exercise and comparisons between countries and industries can help an organisation to set objectives to improve performance,” said Mr Roberts. “Your budget is what it is because of decisions made over many years. The challenge is to develop plans to improve the effectiveness of IT spending in the years ahead.”

For the Gartner 2006-2007 IT Spending and Staffing Report, Asia/Pacific, input was collected from approximately 650 respondents across six countries and more than a dozen industries. The average number of employees for these organisations was 1,690. The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=505353

About Gartner:
Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for our clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, we are the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, we work with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,800 associates, including 1,200 research analysts and consultants in 75 countries. For more information, visit www.gartner.com.