StORES Magazine - September 2007 - (Page B4) 2007 Retail IT Budgeting Study Retailers plan moderate increases in IT budgets and capital costs in 2007 Growth in IT capital costs is moderate, with planned increases of just 3 percent this year, compared with 7 percent between 2005 and 2006. Retailers plan to spend 2 percent more in 2007 than in 2006 for their total IT budgets – the line items of IT operational costs, IT depreciation expenses and total labor costs. Planned increases in all areas of the IT budget are conservative in comparison to the 7 percent average planned increase retailers reported in the 2006 study. One factor is that retailers are now realizing operational efficiencies from capital investments over the last several years in areas like telecommunications, store networking, store hardware (such as POS systems) and packaged enterprise software, resulting in a 4 percent decline in IT operational expenses between 2006 and 2007. The reduction in operational spending is offset by a planned 7 percent increase in IT labor budgets. Depreciation expenses are growing 2 percent due to substantial increases in capital expenditures in recent years. Retailers budgeted 1.9 percent of their total revenue for IT spending in 2006, compared with a reported 1.28 percent in 2005. The role of packaged applications in retail continues to expand. Retailers anticipate that 62 percent of overall 2007 IT spending will be focused on implementing and supporting packaged software. This is a dramatic shift for the industry, as retailers traditionally rely on in-house application development. In addition, the retailers surveyed are allocating 98 percent of IT budgets to North America versus the rest of the world, indicating that they either are expanding overseas slower than planned, or technology budgets are owned outside their core IT department. FIGURE 2 Retail IT spending on packaged applications vs. in-house development Develop in House 37.7% Implement Packaged Applications 62.3% FIGURE 3 Retail IT budget allocated to North American vs. non-North American locations Non-North American Locations FIGURE 1 Retail IT budget trends 2006 IT labor expenses IT depreciation expenses IT operational expenses $30,936 26,117 23,495 2007 $33,187 26,628 22,450 2.1% North American Locations 97.9% B4 STORES / SEPTEMBER 2007 WWW.STORES.ORG http://WWW.STORES.ORG
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