Retailers’ IT Budgets Increasing on Security and N
Washington, DC, August 21, 2006--Retailers are expected to show healthy IT budget and capital expenditure growth in 2006 according to the third annual Retail IT Budgeting Study conducted by National Retail Federation (NRF) and AMR Research.
The NRF and AMR Research developed this comprehensive IT Budget Benchmarking Survey to create a “retail specific” study that is granular enough to be of any value. The data in the survey was supplied directly from chief information officers from 34 of the nation’s leading retailers, with combined annual revenues of $224 billion.
The survey found that retailers plan to increase their overall IT expenditures by 7.0 percent. In addition, from a technology investment perspective, the study showed retailers are increasing capital expenditures by 6.0 percent. These expenditures include investments in store systems such as POS, kiosks and other customer-facing technologies. For companies with revenues in excess of $5 billion, total IT spend as a percentage to total revenues was 1.3 percent in 2005. Companies with revenues between one and five billion dollars, total IT spend as a percentage of revenues was 1.7 percent in 2005.
“This increase really is not surprising when considering how dated some systems are,” stated NRF CIO Dave Hogan. “Retailers used Y2K as their main reason for investing in new technology. That equipment is now almost a decade old--this is a completely normal buying cycle for store systems.”
The survey also found that headquarters hardware maintenance and support outsourcing is expected to grow 24.0 percent from 25.0 percent in 2005 to 32.0 percent in 2006. Application management should grow 35.0 percent from last years’ budget (8% vs. 6%).
Budgets for IT security are expected to increase 34.0 percent and IT compliance budgets are anticipated to grow 7.0 percent in 2006. Companies with revenues over $5 billion grew their IT security and compliance budgets 34.0 percent and 19.0 percent, respectively. Much of this increase is due in part to retailers trying to comply with payment card industry (PCI) data security standards.
Mainly all IT operational costs such as hardware maintenance, networking, telecommunications, software infrastructure and maintenance saw positive growth. Hardware maintenance and software infrastructure are expected to grow 11.0 percent for their FY 06 budgets. Companies with $5 billion or more in annual revenues expect to increase hardware maintenance and software infrastructure, 12.3 percent and 15.1 percent, respectively.
“Retailers increased investment in store hardware, software, infrastructure, and networking is driven not only by the desire to lower operating costs,” stated AMR Research Director, Rob Garf, “but also by retailers' focus on improving the customer experience by bridging data and processes between each point of interaction back through the supply chain.”
During a live webcast recently in which AMR and NRF announced the results, the IT executives who participated were polled and asked what was their change in IT spend from the previous year anticipated for security. Of those who answered, nearly 76.0 percent are either increasing significantly or increasing moderately.
