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Tech Spending on the Rise
Integration technology standards drop prices; companies opening wallets; surprising in today's economy, says Yankee Group
Posted Aug 21, 2002
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Companies are opening up their wallets to transactional technology, according to a recent Yankee Group report commissioned by e-commerce software and services provider Sterling Commerce. In the survey, 63 percent of businesses reported that their e-commerce technology budgets increased in 2002 compared to last year, and half of the respondents expected these same budgets to increase next year. Tech spending is centered on system-to-system efforts -- that is, technology interfacing with customers, service providers and suppliers. Ninety-two percent of respondents cited improved electronic communications with partners as a priority. Even cash-strapped wholesalers and retailers are investing in technology that can reduce the order-to-cash cycle. "It's sheer volume," commented a specialty retailer and survey respondent. "It would require thousands of people to process orders manually...the volume would be impossible without the EDI system." Moreover, the study found that many companies are extending EDI systems to manage inter-business automation scenarios. This trend will accelerate as IT budgets expand and Java and XML technologies mature, according to the Yankee Group. In fact, the maturation of XML standards through both standards bodies and influential companies is driving down system-to-system integration costs and fueling spending. Several companies experienced dramatic labor cost change as they gained experience with XML technology, says Jon Derome, senior analyst at Yankee Group and author of the study. For instance, one interviewee claimed that the labor involved in automating XML-based transaction sets fell from $25,000 for a first effort to less than $1,500 for a comparable tenth effort. Yankee Group surveyed 26 companies in industries ranging from high-tech to consumer packaged goods and pharmaceutical. All companies interviewed posted more than $1 billion in revenues last year. The trend in increased spending is also evidenced by continued demand for CRM , order management, demand forecasting, sourcing and procurement solutions, the study concluded.
Still, increased spending surprised Derome. "Considering the state of the economy, I didn't expect this going into the research," he says. "It seems companies are finding ways to fund these kinds of projects." Tom Kaneshige also writes for Line56.com
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