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Midmarket companies increasing their 2011 IT budgets

Midsize businesses are seemingly looking to increase their IT spending, potentially helping to drive the UK economic recovery.

The mood does slowly appear to be changing in Britain. After a tough few years for businesses and consumers, it finally seems as though some form economic recovery is underway. The latest government growth projection - announced in the 2011-12 Budget may have been a little underwhelming - but the private sector is gradually positioning itself to move forwards with confidence. Businesses are reporting replenished order books, demand for goods and services is rising, and the chancellor has delivered a growth-focussed fiscal plan.

As a further sign of improving confidence in the economy, larger companies are starting to increase their IT budgets. While many firms continued to invest in technology during the downturn, a significant number of discretionary projects were seemingly put on ice. Upgrades deemed desirable rather than essential were delayed - understandably in many instances, with companies forced to keep a close eye on their finances. Among those firms which held off on IT investment altogether, there is a sense of 'now or never' in terms of securing the technology upgrades they need to compete effectively. With IT helping rival companies to expand, those who persist with legacy solutions beyond their use-by date risk falling even further behind. As such, it seems the majority of businesses are ready to commit additional funds to this area.

Research conducted by IBM indicates that more than half of midsize companies are planning to increase their IT budgets over the next 12 to 18 months. Conducted among 2,000 firms across 20 countries, the survey found that businesses are focusing on a wide range of priorities including analytics, cloud computing, collaboration, mobility and customer relationship solutions. Midmarket businesses seem particularly keen to take advantage of the cloud, with more than two-thirds either planning or currently deploying cloud-based technologies to improve IT efficiency and productivity. In addition, 72 per cent of firms surveyed said they were actively pursuing analytics technology to better understand their customers, make more educated business decisions and reduce costs.

The survey clearly highlights the different conditions faced by businesses in 2011 compared to two years ago. When questioned in early 2009, at the height of a tough, six-quarter recession, a mere 11 per cent said they would be making more money available for IT investments in the coming 12 to 18 months. At this time, they simply had more pressing priorities. But with the economy back in positive territory, and the government eager to drive private sector growth, this figure has increased to 62 per cent. Conservatism has been placed by a new-found optimism, providing a boost to the entire IT supply chain. Just 19 per cent of firms said they would be reducing IT spending during 2011 and early 2012, with the remaining 19 per cent planning to maintain current budgets.

According to Miles Templeman, director general of the Institute of Directors, there has been "a change of mindset" among companies in recent months, with more seeking to expand and explore new market opportunities. This view is supported by another IBM finding, that 81 per cent of companies are now focusing on 'customers, growth and innovation'. When questioned two years ago, 47 per cent of firms described their main priority as being 'efficiency and cost control'. Mr Templeman noted that operational cost reduction remains a major priority for midmarket firms, but many are now looking to increase business investment in key areas such as their IT infrastructure.

Among the justifications for increased IT investment are better cost reduction, professionalism, manageability of IT, system redundancy and remote access. Businesses are also looking to work with greater speed and agility, enabling them to respond quickly to emerging trends and keep one step ahead of the pack. Technology can provide a competitive advantage to UK organisations, so if one business takes the plunge and embraces a new enterprise solution, it's a fair bet that others will look to mark this progress with their own investment.

Lubomir Cheytanov, midmarket business leader at IBM UK & Ireland, offers the view that medium-sized companies are tackling a new set of opportunities" to advance their role as engines of economic growth". These are the firms with the sufficient capital - and vision - to drive the UK recovery forwards, increasing their own turnover as they go. A stronger economy means greater consumer confidence, and generally speaking, increased sales and revenues for private sector operators. "When we surveyed medium-sized firms 18 months ago, most were focused on reducing costs and improving efficiencies," Mr Cheytanov stated. "Today, the conversation is also about expanding their business, connecting with customers and gaining greater insights."

The government is seemingly doing its best to help businesses expand, with the Chancellor announcing further corporations tax cuts, a reduction in fuel duty, plans to scale back red tape and the creation of new enterprise zones. It is now up to the private sector to go for the jugular – identify market opportunities and exploit them to the best of their ability. Undoubtedly, IT has an important role to play in supporting such expansion plans.