ERP funding losing out to ecommerce

Funds previously earmarked for enterprise resource planing (ERP) initiatives are being invested in ecommerce projects, according to a study published today.

The finding is one of the main conclusions in Gartner's IT Spending and Staffing Survey, which found that IT expenditure will take an increasing slice of overall corporate budgets during the next five years with ebusiness to the fore of investments.

"In 1999, ERP consumed 22.4 per cent of the IT budget, but the figure is declining steadily," said Kurt Potter, research director of Gartner's business management group. "Funds previously earmarked for ERP are being redeployed to ebusiness initiatives, which are steadily increasing."

The survey results show that the typical enterprise will devote 16 per cent of its IT budget to ebusiness. Gartner predicts that by 2005, 30 to 50 per cent of this budget will be devoted to ebusiness, with the IT, insurance and retail sectors investing most heavily in online projects.

For now, however, the implementation and the ongoing costs associated with ERP are still a significant portion of the average IT budget. According to the survey, the typical enterprise will devote 17 per cent of the IT budget on ERP in 2001.

Jon Collins, technical director of independent analyst Sundial Consultancy, said: "It's a good thing that companies are moving money away from ERP - which was good in theory but didn't always work. At least with ebusiness there is promise of great returns, which can boost top line instead of being a bottom line cost."

Gartner found that mainstream adopters of technology spend an average of five per cent of revenue on IT - far higher than the 2.9 per cent level reported in the 1988 survey. This figure translates to a cool $21,000 per employee with two thirds of this figure representing running costs and one third capital expenditure.

By 2005, Gartner predicts typical large European enterprise will spend 7.5 per cent of their revenues on IT, a trend largely driven by the increased importance of ebusiness.

Gartner canvassed 510 enterprises worldwide, with an enterprise average of $1.6bn in revenue and 6200 employees.