IT spending in discrete manufacturing

China’s recent advances in the discrete manufacturing markets are causing North American manufacturers to increase investment in IT, according to AMR Research . “Sales growth must come from emerging geographic markets and higher levels of product customization geared to specific market segments,” says AMR in its report, General Discrete Industry Outlook: Lifecycle Value Strategies Must Drive IT Investment. The survey states that the most important driver for IT investment in discrete industries is the ability to deal with new competition (35% of survey respondents cite this category). Customer-driven issues are next at 26%, which includes the need to increase market share.

Source: AMR Research, 2004

The report goes on to say that industry consolidation and productivity gains create competitive pressure to eliminate waste. IT investment must align with discrete manufacturing initiatives surrounding issues of global competition by reducing application portfolios to improve data for decision support, increasing connectivity to broaden collaboration, and enhancing performance management to support corrective action.

Other data in the survey include:

Average IT spending in 2004 remained flat at 2.4% of revenue, but overall IT budgets will increase 5.7% in 2005. Hardware and networking show the most aggressive increases, but all budget categories show growth.

Enterprise performance management (EPM) is a high priority among discrete manufacturers, as better utilization of data received the most response. Product development, supply chain, and sales channel management also scored high.

Desktop software shows the highest upgrade activity and the second highest 2005 budget increase at 4.2%, right behind customer management at 4.9%.

Discrete manufacturers are only moderately outsourcing, but 54% plan to increase the amount of IT work that is outsourced in 2005. However, only small amounts of the outsourcing budget will move offshore.

—David Greenfield, editorial director, Control Engineering, dgreenfield@reedbusiness.com

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