Slashing IT department budgets will offer only short-term savings and will often cost companies more in the long run, according to a report by management consultants Accenture.
The report assessed the views of 300 Fortune 100 chief information officers and found that some companies were falling into an "austerity trap" where they lowered spending while asking more from staff.
The result was that older systems were kept running for longer and IT staff were wasting more of their time fixing problems rather than building new systems.
"Our study indicates a significant difference in the level of investing versus maintaining between high and low performing IT organisations," said Bob Suh, chief technology strategist at Accenture and the executive who headed up the study.
"Poor spending quality is characterised by a high percentage of time spent on maintaining and fixing systems versus investing in productivity-driving change. "
As a result companies with the highest profits that invest in IT spend five per cent of their time fixing problems, compared to the average of 12 per cent.
Similarly the best companies spent 43 per cent of their new project time improving business productivity compared to an average of less than a third.
"More than half of government respondents told us that they are spending too much time fixing existing applications, and too little time building new ones," said Marty Cole, group chief executive at Accenture's Government Operating Group.
"They want to do more, but they are being given about 30 per cent more work with only about five to 10 per cent more budget. Consequently, innovation is being curbed and productivity is being undermined."
The report also debunks suggestions that the service sector is leading the way in IT. Manufacturing systems are more efficient in many cases and the service sector should be learning from this example.
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