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High-Tech Outlook 2007: Increased IT Investments To Focus on Becoming Demand Driven

published: cw 01, 2007 in Supply Chain Technology & RFID

High-tech companies were looking to aggressively increase their investment in IT the coming year, an April 2006 AMR Research study found. In “Invest in the Future Now: IT Spending To See Double-Digit Growth the Coming Year,” we reported that 76% (of surveyed respondents) plan to increase IT spending the next 12 months. The average budget growth is expected to be 19.5%.

However, when the reality of budget season approached, data for AMR Research’s upcoming U.S. Enterprise IT Spending Report found the sentiment still there, albeit tempered. High-tech companies in particular are more likely to increase their IT budgets, but at a moderate level. 59% of participants plan to increase spending in 2007 at a 4.1% growth, up from last year’s 42% planning to increase at a rate of 3.2% respectively.

While moderate, this increase still says two things about the economic environment today. First, future forecasted business is favorable, and companies are willing to reinvest in the business. Second, companies believe productivity gains can be made by investing in IT, especially in fragmented supply networks more often found in the high-tech industry.

In another survey of 51 high-tech firms, we asked questions about their demand-driven supply network (DDSN) abilities and maturity. We identified the leaders among those that outperformed their peers in realizing benefits from implementing the fundamental elements of the demand-driven supply network. For more information on the most relevant elements that influence a company’s demand-driven abilities see “The Handbook for Becoming Demand Driven.”

The increase in IT investments for high-tech manufacturers will target the following demand-driven areas that leading high-tech manufacturers perform better than their peers. We predict that high-tech investments will target the enhancement of a company’s ability to do the following:

  • Review demand forecasts more frequently. The leading 8% of high-tech companies review demand forecasts daily, 2% sense in near real time.
  • Sense changes in demand more quickly. While no respondents reported the ability to react to daily or hourly changes in demand, 39% reported they could sense changes with a one-to-two week lead time.
    Evaluate supply network design regularly. The top 18% of high-tech firms redesign their network at least twice a year, 2% quarterly.
  • Employ a higher percentage of contract manufacturers. 14% state a greater than 50% reliance on outsourced manufacturing partners.
  • Experience greater success when launching new products. 18% report success with greater than 60% of their product launches.
  • Use customer created scorecards to manage performance. 20% state that scorecard data is readily available and a guiding force in supply chain decisions
  • Become more prescient when estimating manufacturing costs. 31% report that costs are very predictable and closely controlled.

    • The significant year-over-year increase is not surprising. Each of these areas can be directly linked to improved business performance. Our benchmarking research has repeatedly reported that clients that make these investments often enjoy the profound benefits of delivering 20% more perfect orders, holding one-third less inventory, and reducing costs by as much as 5% of revenue.

    Our 2006 U.S. Enterprise IT Spending Report will detail the technologies and applications in which high-tech firms are investing. We encourage readers to check out the Report as well as plan to attend our upcoming AMR Research Executive Leadership Conference, “The IT Revolution: Finished? Or Just Beginning?.” Keynote speaker Alan Greenspan will give his views on how technology is driving productivity and deliver an outlook for IT innovation and business competition.

    Source: AMR Research/Eric Austvold


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