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8/26/2004
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Top Execs Say IT Can Inhibit Growth

Some companies spend less on technology as a result, survey finds.

Business technology is supposed to facilitate corporate growth, not impede it, right? But 60% of C-level executives and other senior managers say that IT, at times, inhibits growth, and that attitude could limit IT spending, according to a study released this week by management consultants Bain & Co.

Bain interviewed executives from 359 mostly North American companies. Of the 203 respondents who view IT as a growth inhibitor, more than half say that the lack of information or transaction capabilities creates bottlenecks to growth. "Hopefully, the survey is a wake-up call for CIOs when 60% of business executives think IT choices have been obstacles to achieving growth," says David Shpilberg, Bain's global IT practice head.

The survey reveals that IT spending averages 7.4% of revenue in companies where executives view IT as a significant enabler of growth but only 4.7% of revenue in companies where executives see technology as an inhibitor. "The lack of measured results continues to keep a choke hold on IT spending in many companies," Shpilberg says.

Another finding: among executives who deem IT as a significant growth enabler, 42% of IT spending went toward new systems and capabilities versus maintenance of existing IT platforms. But spending on new systems and capabilities drops to 30% in companies where top managers judge IT as an inhibitor.

Why do some executives see IT as a bottleneck to growth? Bain offers four explanations:

• Poor business alignment. Two-thirds of executives believe IT managers don't understand their business needs or their companies failed to adequately coordinate business and IT changes.

• Weak value delivery. Two-thirds of respondents say existing IT is underused or systems failed to deliver promised capabilities.

• Capability sourcing gaps. One-third of executives contend a lack of IT or vendor skills exist in their companies.

• Ineffective complexity management. Nearly half of the surveyed managers believe complex legacy systems lacked the flexibility to keep up with business needs.

By a margin of 2 to 1, surveyed executives agree IT helps corporate growth when the technology is applied to core business processes such as retaining, growing, and acquiring customers within the same lines of business. But value fades when technology is applied toward growth farther from a company's core business. And more than twice as many respondents believe IT inhibits growth compared with those that don't when technology is unrelated to their companies' core business. Says Steve Berez, co-founder of Bain's global IT practice and survey leader: "There's no place like home when it comes to creating profitable growth."

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