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While IT budgets have varied over time and across industries, the one constant is that the largest chunk remains devoted to IT salaries and benefits. With that in mind, InformationWeek 500 winners are continually striving for greater efficiency and more streamlined businesses processes. This year's survey revealed an expansion beyond overseas outsourcing to an embrace of global strategies.
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For nearly 20 years, the InformationWeek 500 has tracked the IT practices of the nation's most innovative IT organizations. The longevity of the InformationWeek 500 provides an opportunity for deeper analysis of trends by comparing data from multiple years. While there was a significant change to the qualifying application in 2005, there's substantial data we can analyze over time, including IT budget data.
With the boom and bust of the late '90s and early years of this decade, many companies turned their focus toward improving efficiency and lowering costs. To streamline business processes and optimize efficiency, the InformationWeek 500 increased their use of automation, reengineered existing applications, and improved data integration between systems and departments. Many brought in strategic consultants to help streamline business processes, and some outsourced a portion of IT operations either domestically or offshore.
More of the InformationWeek 500 companies are contracting with outsourcers who provide services offshore and conducting business process outsourcing offshore compared with previous years. And while some InformationWeek 500 companies find outsourcing to be an effective strategy, others are pursuing global opportunities. Global strategies include everything from having workers or subsidiaries outside the United States to hiring a non-U.S. supplier to build an overseas operation. In 2006, half of the InformationWeek 500 companies have a global supply chain, and two out of five exchange information with non-U.S. suppliers and partners in real time.
IT budget patterns and spending also can be trended over time. As a group, InformationWeek 500 companies represent more than $150 billion in annual IT spending. In 2006, the average InformationWeek 500 company has almost $10 billion in annual revenue and spends 3.21% of that revenue on IT. The amount spent on revenue varies greatly by industry, and over the years each industry has seen peaks and valleys in IT spending. One constant--the largest part of IT budgets is traditionally devoted to IT salaries and benefits.
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Spending Overview
InformationWeek 500 IT dollars spent
| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
Average company revenue | $12,471 | $9,427 | $9,652 | $9,087 | $9,776 | $9,469 |
Average IT dollars spent | $484 | $320 | $353 | $334 | $293 | $304 |
Average IT budget as a % of revenue | 3.88% | 3.39% | 3.66% | 3.68% | 3.00% | 3.21% |
Note: Dollars in millions. Additional data from InformationWeek 500 Survey, 2001-2005.
Data: InformationWeek Research survey of InformationWeek 500 executives.
Average dollar breakdown of IT budget 2003 to 2006
| 03 % | 03 $ | 04 % | 04 $ | 05 % | 05 $ | 06 % | 06 $ |
New product/technology purchases | 17.00% | $60.20 | 16.49% | $55.08 | 17.77% | $52.07 | 17.20% | $52.29 |
IT consulting/outsourcing | 14.70% | $51.70 | 13.89% | $46.39 | 14.81% | $43.39 | 14.70% | $44.69 |
Research & development | 3.30% | $11.70 | 3.26% | $10.89 | 4.32% | $12.66 | 3.90% | $11.86 |
Salaries & benefits | 32.10% | $113.20 | 33.51% | $111.92 | 33.93% | $99.41 | 35.10% | $106.70 |
Applications | 20.00% | $70.50 | 19.82% | $66.20 | 17.11% | $50.13 | 17.30% | $52.59 |
Everything else | 12.90% | $45.70 | 13.03% | 43.52 | 12.06% | $35.34 | 11.80% | $35.87 |
Note: Dollars in millions. In 2003, $353.0 million; in 2004, $334.0 million; in 2005, $293.0 million; and in 2006, $304.0 million.
Data: InformationWeek Research survey of InformationWeek 500 executives
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Buying Power
InformationWeek 500 IT spending
| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
Average IT dollars spent | $484 | $320 | $353 | $334 | $293 | $304 |
Total IT dollars spent | $242,000 | $160,000 | $176,500 | $167,000 | $146,634 | $152,000 |
Note: Dollars in millions. Additional data from InformationWeek 500 Survey, 2001-2005.
Data: InformationWeek Research survey of InformationWeek 500 executives.
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Tech Spending
Average percentage of worldwide annual sale revenue earmarked to IT budget
2006 | 2005 | 2004 | 2003 | 2002 | Industry |
2.0% | 1.8% | 1.5% | 2.1% | 1.7% | Automotive |
6.0% | 10.0% | 8.6% | 7.1% | 7.6% | Banking & Financial Services |
3.3% | 4.3% | 6.0% | 3.5% | 3.8% | Biotechnology & Pharmaceuticals |
1.8% | 2.0% | 1.5% | 2.1% | 2.1% | Chemicals |
0.8% | 0.5% | 0.5% | 1.4% | 1.8% | Construction & Engineering |
3.9% | 5.0% | 4.0% | 3.4% | 3.5% | Consulting & Business Services |
2.0% | 2.5% | 1.9% | 2.1% | 2.8% | Consumer Goods |
1.1% | 1.5% | 1.2% | 1.7% | 1.4% | Distribution |
3.3% | 3.0% | 3.0% | 3.7% | 5.0% | Electronics |
2.1% | 2.5% | 2.0% | 2.1% | 3.0% | Energy & Utilities |
3.5% | 3.0% | 3.0% | 3.3% | 2.7% | Health Care & Medical |
2.5% | 2.0% | 1.5% | 2.0% | 2.5% | Hospitality & Travel |
3.0% | 3.5% | 4.0% | 4.4% | 4.2% | Information Technology |
3.4% | 3.0% | 3.4% | 3.6% | 4.0% | Insurance |
2.0% | 2.0% | 2.7% | 3.0% | 4.8% | Logistics & Transportation |
2.0% | 2.0% | 1.8% | 2.4% | 2.7% | Manufacturing |
3.7% | 3.0% | 2.5% | 3.3% | 5.6% | Media & Entertainment |
1.0% | 1.0% | 1.0% | 1.4% | 1.5% | Metal & Natural Resources |
1.6% | 1.0% | 1.4% | 1.6% | 1.4% | Retail: General Merchandising |
1.5% | 2.0% | 2.5% | 2.7% | 1.8% | Retail: Specialty Merchandising |
5.4% | 6.0% | 4.9% | 4.6% | 4.6% | Telecommunications |
Note: Percentages represent medians. Additional data from InformationWeek 500 Survey, 2002-2005.
Data: InformationWeek Research survey of InformationWeek 500 executives
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Data: InformationWeek Research survey of InformationWeek 500 executives
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