US Private Companies Increase IT Budgets, with Focus on Growth and Efficiencies

NEW YORK, July 7, 2011 /PRNewswire/ -- With a focus on new growth opportunities and efficiencies, 29% of US private companies surveyed for PwC US's Private Company Trendsetter Barometer plan to increase their IT budget over the next year. In 2010, US private companies allocated approximately 5.6% of their budgets to IT. This investment is expected to rise to an average of 6.6% over the next 12 months, a year-to-year increase of nearly 19%.

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Nearly half (46%) of Trendsetter companies have identified important and/or sizeable areas or functions in need of IT upgrade or improvement, and 18% of those businesses report that they'll require additional budget expenditures to make the necessary changes. Overall, these companies are a faster growing group, forecasting an average revenue growth rate of 11.5% over the next year versus 9.1% for all other private companies. More international marketers cite critical IT upgrade concerns (54% versus 39%) and say they need additional spending to cover the required upgrades (26% versus 10%) than their domestic-only peers.

"Technology plays a critical role in driving global growth and competitiveness for private companies, particularly in fast-growing and emerging markets like China, India, and Brazil," says Ken Esch, a partner in PwC's Private Company Services practice. "As private companies increasingly view these markets as places to sell rather than just as sites for low-cost sourcing and manufacturing, they'll need to have digital channels in place to deliver products and services efficiently and effectively."

Trendsetter companies' IT investments will be focused on two main areas over the next 12 months: innovation (36%) and maintenance (64%). Significantly, companies in the innovation segment allocate a larger portion of their budgets to IT than those primarily in the maintenance segment - 9.53% versus 5.01%.

Key areas of planned IT investment for private companies over the next one to three years are information security (70%), next-generation data management and analysis (50%), enterprise mobility via tablets and handheld devices (48%), social media/networking (46%), and cloud computing (40%). Companies in the innovation segment are significantly more likely to invest in next-generation data management and analysis, social media/networking, virtualization, cloud computing, and context-aware computing than those in the maintenance segment.

"As the role of technology grows, information security is increasingly critical for private companies," says Esch. "Risks such as cyber attacks, intellectual property misuse, fraud, and system outages can be managed and reduced with strategic investment in IT security."

Data analytics is another top area of planned IT spend. Notes Esch: "Key to achieving growth is having insight into customer needs, trends, and opportunities. Private companies that can leverage IT to this end will be able to make better-informed decisions about new product and service offerings, helping them broaden their customer base."

Business Objectives to be Achieved by IT Investment

The leading business objective of IT investments for private companies is to make their business processes more efficient and effective (90%). Other top objectives include better managing enterprise data (75%), optimizing business information/analytics (73%), making the business more agile (58%), and attracting new customers (58%).

Barriers to Realizing IT Business Impact

A significant percentage (61%) of Trendsetter executives expect to confront barriers in realizing a positive business impact from IT investment over the next year. Lack of appropriate IT resources (34%) and cumbersome IT infrastructure (28%) were the two leading barriers, especially among firms in need of critical IT upgrades or improvement.

"Despite the near-term barriers to achieving business goals through IT, we're encouraging our clients to view their IT spend and return on investment over the long term," says Esch. "Many IT areas, such as cloud computing and offshore IT support, actually require fewer internal resources than legacy IT infrastructure, while often delivering more."

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(1) 2010 Forbes America's Largest Private Companies List

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SOURCE PwC US