What's swallowing your IT budget?

Small is beautiful when it comes to making the IT budget sing, with small and medium-sized enterprises (SMEs) being more efficient and innovative with their tech spend.

Research from the Bathwick Group has found smaller companies are not only increasing their IT budgets at a faster rate than the rest of the market but they also use up a smaller proportion of their budget than their more cumbersome rivals for 'keeping the lights on'.

And they are also more likely to spend money on supporting innovative uses of IT.

According to the research whitepaper, Driving Business Value from IT, a hefty 78 per cent of the IT budgets of large businesses is swallowed up by maintenance costs. For SMEs this figure stands at 56 per cent.

The research also found 40 per cent of large companies have IT budgets reducing in real terms, while smaller companies are actually seeing small increases. Mid-market companies saw an average increase of 3.4 per cent and SME budgets rose by an average of 1.6 per cent.

However, all types of businesses are seeing average increases in so-called 'elective spend' - or money they can use how they wish, be it on improving information systems, developing innovative new uses of IT or reducing operational costs. But it is SMEs that are most likely to support innovative uses of IT regardless of budget constraints.

The research found SMEs are more in favour of supporting innovative use of IT, compared to mid-market and large companies.

The Bathwick Group said the relatively conservative use of IT by large companies could be a result of the structure of such businesses, where senior management is less likely to get briefings on the business implications of IT developments. This stands in contrast to SMEs where the proximity of IT investment decisions and business decisions can help encourage a culture of tech innovation, the research said.

When it comes to reducing the burden of 'business as usual' IT spending, smaller companies see outsourcing or offshoring as the least helpful strategy. For both SMEs and mid-market companies, better alignment between IT and the business is considered the most effective activity for reducing 'lights on' spending.

This stands in contrast to large businesses, which place greater value on outsourcing. The Bathwick Group said this shows how the outsourcing market is still firmly entrenched in at the larger end of the market.

The research also found a large majority of respondents in each company size report IT training budgets are vulnerable to investment squeezes or cuts.