Big Spenders (Sort Of)

Retailers are more frugal with their IT money than firms in other industries are, but they do splurge on some things, according to Forrester Research Inc.’s “Tech Spending Summary: Retail,” a report issued in June 2003. At mid-year, the retail sector was allocating 4.8% of its revenue to information technology, compared to other industries’ 5.6%. Retailers also spend less of their total IT budget on R&D than other firms do — 3.9% versus 4.2%. But a sizable 40% of retailers will deviate from their IT budgets this year, spending more than expected on apps and PCs. And 29% of retail companies — a far higher number than the 16% of firms in other sectors — are hiring full-time IT staff. This despite stringent budget restrictions: 44% of retailers require formal approval for all new IT outlays, compared to only 29% of companies in other industries (although, among retailers who set a fixed amount for executive approval, the latter is required only for investments higher than an average of $971,000). Retailers are also big on number crunching — 93% use ROI for IT cost justification, compared to 84% of firms in other industries, and 61% focus on payback periods, as opposed to 55% of merchants in other sectors.

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