Too often, tech spending goes to outdated systems, projects that are soon scrapped.
Some companies have the latest computers and the fastest internet service. But a new study says that many large corporations are wasting massive amounts of money on ineffective or impractical technologies.
The study released last week by Genpact Research Institute found that $400 billion of the total $600 billion that corporations spend on technology went for systems that failed to meet the companies’ needs and/or was not justified based on return on investment calculations. Instead of upgrading, the study found that much spending was directed at maintaining outdated systems, according to CNBC. The study may have serious implications in business, where reserahc and development spending on technology is considered a marker of successful companies.
About two-thirds of corporate spending on systems including cloud computing, data management and social networking went to projects that were ultimately scrapped entirely, according to a Genpact spokesman. Since companies are using substantial resources and failing to get the expected returns, he said, clearly companies’ are not understanding their own tech needs. He also stressed that companies tend to spend far too much on existing equipment and systems, leaving breakthrough technologies underutilized.
He urged the tech sector to do a better job of making new technologies that work better with existing systems. He blamed Silicon Valley tech companies, whose stellar reputations belie the fact that they are not doing enough to help businesses transition to new technologies.
Total global technology spending is around $4 trillion, but that number is expected to shrink by about five percent this year, meaning that companies need to be spending their dwindling resources more intelligently.
A second study by Bernstein Research looked at sixty-eight large cap tech companies, finding that companies that invested more in tech spending actually saw their stock prices drop, compared to companies that spend less. The takeaway: company spending on tech research and development is not a good barometer of positive stock performance.
