Retailers Expected To Spend Less On IT In 2005Retailers Expected To Spend Less On IT In 2005

Retailers worldwide are expected to spend a bit less this year on information technology, as they reap the benefits of reduced infrastructure costs from technology bought in 2004, a market research firm said Wednesday.

The retail industry is projected to spend 1 percent less on IT this year than in 2004, when the industry opened its purse 5 percent wider than in 2003, the Meta Group said. Spending is also expected to be less than the overall IT spending growth for all industries, which is projected at 4 percent to 5 percent more than last year.

"If you look at spending (by retailers) in general, it's still a general movement upward," Meta analyst Jed Rubin said. "It's not a massive reduction. It's essentially stagnant."

In general, retailers are expected to benefit from IT investments made last year in desktop replacements, data center consolidation, networking hardware and software, and other infrastructure technology. The reduction in operational expenses from the improvements is expected to be used to buy technology this year, keeping overall spending flat, Rubin said.

Areas in which retailers are expected to spend money are Internet technology for supporting customers buying over the web and for logistics and supply chain management.

Spending on radio-frequency identification technology, which is the use of electronic tags to track inventory movement through supply chains, is not expected to have a major impact globally, Rubin said. Most RFID spending is by large retailers, such as Wal-Mart Stores Inc. and Target Corp., and their suppliers.

"Spending globally will be on the web, logistics and supply-chain management, in general, and not RFID," Rubin said.

The retail industry tends to be cautious in its technology spending. While the average organization is projected to spend $14,107 on technology per employee, retailers are projected to allocate less than half that amount, $6,695, per worker, according to Meta.

In general, retailers also have fewer IT workers. The average company's IT staff represents about 5 percent of the total workforce, while in the retail sector, that figure is closer to 3 percent, Meta said.

"We're coming out of a year where the economy did not pick up as originally expected," Rubin said. "IT spending in retail is typically reactive, so what we're seeing is organizations saying let's hold off on big investments, until we see a good reason not to."