Solutions News - Retailers are reluctant to spend money on IT upgrade projects

Retailers won't spend any more money on IT, but still complain about a lack of integration and a legacy of outdated point of sale (PoS) systems, according to research by IBM.

The findings are part of a global survey of chief information officers at 76 top-line retailers worldwide, 15 of which have headquarters in the UK. The survey was carried out by IBM and US business magazine Executive Technology.

The research offers a picture of pressing investment priorities and continuing reluctance to commit funds for projects.

Last year, companies' spend on information technology, as a proportion of their annual turnover, rose from 1.8 per cent to 2.1 per cent. This compares with an average of 3.9 per cent in the consumer goods industry and 6.6 per cent in financial services, according to IT researcher Meta Group.

The seeming rise in commitment to technology is, however, dampened by the prediction by 21 per cent of respondents that they would cut IT spend by 10 per cent in 2003. A fifth (22 per cent) will cut IT spending by a quarter, although a third said they would keep their IT budgets flat for 2003.

At the same time, retailers are demanding that their IT systems increase employee productivity and customer satisfaction - these being top spending priorities for 59 per cent and 58 per cent of respondents. Differentiating the shopping experience came in way behind, at 26 per cent.

The acknowledged drag on businesses from outdated PoS and other information systems was also considered a spending priority, at 58 per cent and 56 per cent respectively. IBM claims the average PoS is now at least eight years old, with many having been in service for between 10 and 12 years.

Results suggest that there will be a revival in IT spend in the mid-term, combined with suggestions of more interest in outsourcing, traditionally never as strong in this vertical as other areas of the economy. In three to five years, respondents say they will be spending 20 per cent of IT budget this way, compared with less than 10 per cent today.

Commenting on the survey, IBM Northern Europe retail and distribution director Fraser Davidson said: 'IT spend in retail remains under extreme cost pressure, and can only be justified to boards through clear return on investment figures.'