Stretched IT budgets in the manufacturing sector focus on business benefit over cost-cutting

Research among 700 IT directors in the manufacturing industry reveals that their primary spending objectives are to improve system stability and up-time (39%) and to deliver business benefit (38%). Only 20% in the manufacturing sector spend in order to cut costs. Manufacturing IT directors budgets remain tight, (70% have experienced a budget freeze), which has left them at odds with the rest of the business and in fear of their job security. Just under half (48%) view wider cost-cutting initiatives across the business as the greatest threat to their role.

Their next biggest threat, according to 34% of manufacturing IT directors, comes from a lack of proven benefit from existing IT strategy. Only 7% say that they always see return on an IT investment, and 10% dont even know whether any of their investments have yielded a return.

When asked about the most effective way to save costs, over half (55%) said selective outsourcing, 28% said by reducing spend on new software and 11% said by reducing spend on new hardware. None view wholesale outsourcing as an effective cost-cutting measure and just 6% favour job losses.

In the research, commissioned by managed IT services and business availability provider Synstar, 16% of manufacturing IT directors pointed to systems integration as the least effective deployment of IT investment over the past 12 months. Enterprise software was cited by 21% of manufacturing IT directors.

Russell Flower, director of managed services at Synstar, comments:

Over the past 12 months, IT directors in the manufacturing sector have realised that investing simply to cut costs is a short-sighted approach. Not surprisingly, they are worried about their jobs since their new strategy is at odds with the rest of the business - where cutting cost is still key. But 55% of them seem to agree that outsourcing selected IT functions to a managed services provider could help them achieve more with less. Not only do they reduce costs, but they free up in-house IT resources to develop strategy and deliver greater business benefit.

Worryingly, many IT directors still dont monitor ROI. IT directors need to be clear from the outset which investments will and will not deliver financial return. If spending adds value because it is critical to the smooth-running and stability of the IT infrastructure, but will not yield financial ROI, this must be communicated to the board and the rest of the business.