Hypergrowth companies throw big bucks at e-business

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America’s fastest growing companies are making a major budget commitment to e-business, of which more than 60% is allocated to information technology. Service companies have higher expectations than those in the product sector, and are earmarking considerably more in support.

PricewaterhouseCoopers’ says that 75% of ‘Trendsetter’ companies are involved in e-business, seeking to capitalize on the new economy. These companies plan to spend 11.1% of operating budget in support of their e-businesses over the next 12 months.

“This level of funding is projected to generate 14.9% of revenues for their corporate parents,” said G. Steve Hamm of PWC’s middle market advisory services. “In these days of extensive media coverage about dot-coms, it is interesting to note that only 4% of the hypergrowth CEOs we spoke with are allocating 80% or more of their operating budget to e-business.”

Viewed separately, 84% of Trendsetter service companies are involved in e-business, compared to just 68% of their counterparts in the product sector.

Service companies project that their e-business will contribute an average of 20.6% of corporate revenues over the next 12 months. To achieve this, they are committing 17.1% of their operating budget over that time.

In contrast, product sector companies expect to achieve less than half the revenue impact, 9.4% – on a more modest 5% budget allocation.

“Fast growth service companies are expecting a high payout – twice the revenue from e-business as their counterparts in the product sector. And because of this potential, they are prepared to invest three times as much,” noted Hamm.

Overall, information technology represents 62% of e-business budgeting, or 6.9% of operating budget for Trendsetter growth companies. Within this, plans call for a nearly even split between IT personnel (51%) and hardware and software applications (49%).

The e-business IT budget commitment for Trendsetter service companies is 10.6% of budget, split 57% for IT personnel and 43% for hardware/software. In contrast, product sector growth companies, with their lower expectations and support spending, are committing just 3.1% budget for e-business IT, allocated 56% for hardware/software, and 44% for IT personnel.

“Plans for sustained capital spending in support of e-business – particularly by service companies, which see a strong fit with their business – will continue to produce substantial dividends for our economy, going forward,” said Hamm.

PricewaterhouseCoopers’ Trendsetter Barometer is compiled with assistance from the opinion and economic research firm of BSI Global Research

Trendsetter Barometer

PWC

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