Compliance driving IT spending: study

Around 70 percent of global IT spend over the next two to three years will be driven by regulatory compliance requirements as companies look to cleanup their infrastructure and squeeze more out of existing applications. according to PricewaterhouseCoopers' (PwC) Technology Forecast (2003-2005).

At the same time, the new eXtensible Business Reporting Language (XBRL) standard and improvements in integration technologies -- which give companies a real-time view of their operations -- will drive further spending.

Speaking in Sydney on Monday, Terry Retter, director of strategy and technical programs at the PricewaterhouseCoopers Technology Centre in the US, said systems are going to have to be cleaned in order for organisations to be compliant with new standards such as Basel II.

The impact of the rollout of Basel II, (the new global banking standard) on organisations will be greater in Europe than the impact of the Y2K bug, he claimed.

'We're doing this at a time when worldwide economies are down and for the first time in history IT spending levels have dropped (2002 on 2001),' Retter said. 'Most of the money is going to be spent on cleaning up infrastructure. We're not going to see spending on large projects, which is going to have a significant impact on the software industry.'

'What we're seeing now in the cleanup of the dot com boom and bust - we'll see spend in the future cleaning up a lot of [disparate] systems.' he said. 'CEO's are saying, 'no large projects -- we'll leverage what we have in place to make the applications go further'.'

In Australia, the IT services market is where it's at, he said. According to the latest Gartner research -- quoted by PwC -- services revenue outpaces all other segments. Unlike the hardware and software sectors, which have undergone massive consolidation, services will continue to experience sustained growth, he said.

By 2006, the IT services market in Australia would be worth around $17 billion, of which a large chunk is expected to be spent on process management exercises, according to the report.

The theme of this year's PwC forecast 'The Intelligent Real-Time Enterprise' predicted that the effect XBRL will have on the business community will be more significant than the transition from paper and pencil analysis of financial information to the use of electronic spreadsheets.

XBRL and web services will allow companies to present financial reports in standard electronic formats. These would be retrieved automatically and processed in real-time. In the next three to five years, XBRL will move from for early adopter phase to become the generally accepted way to report business information.

The reseller channel -- with the exception of larger integrators -- may continue to feel the squeeze across Asia-Pacific from B2B sales, as major IT buyers still have a tendency to buy direct. 'What resellers have to sell is going to be more difficult to define [in the future],' he said.

While the integrator and reseller channels are still viable, the trend for organisations to roll out 'component' applications in smaller projects will present challenges for channels that are creating products for the SME market. 'This marketplace is not ready for a component architecture,' he said.

Retter said that while the B2B model itself did not succeed, linking up one to many exchanges starts to make sense and would present opportunities for service-oriented companies. He said there would be opportunities in the South East Asia market integrating applications and systems with players in the United States and Europe. 'There will be some value-added opportunities there,' he said.