SUBTLE SPENDING
Some OC Businesses Are Investing in Computers, Software This Year
By RAJIV VYAS
Several Orange County businesses say they expect technology spending to hold steady or creep slightly upward this year.
Most of the spending is set to go toward back-office software, network security and complying with privacy and other federal mandates, according to a recent canvassing of local businesses.
While local technology spending figures aren’t available, companies contacted for this story indicated they expect tech spending to be more or less in line with national projections.
According to market researcher Intern-ational Data Corp., U.S. companies are expected to spend 4% more this year on technology than they did last year.
In 2001, U.S. companies invested $429 billion on software, computers and other technology, according to IDC.
“By historical standards this is a very low rate of growth,” said Steven Minton, an IDC analyst. “But it is better than the 4% decline we had last year.”
Historically, U.S. technology spending has grown by an average of around 11%, Minton said. This year, spending is pegged to hit $444 billion.
Most of the growth in spending stands to go toward new software and services, according to IDC. Next year, tech spending is pegged to grow 9%.
“We are investing significantly in information technology,” said John Hollenback, executive vice president in charge of technology at Santa Ana-based The First American Corp.
“Since we have been spending a lot in the past few years, this year would remain around the same level” as last year, he said.
For the past couple of years, First American has invested in automating its back office and developing software for its title business that would speed up day-to-day operations and transactions.
This year, the company’s tech spending would be geared toward buying new desktops, upgrading its systems and implementing software it has developed, Hollenback said.
Spending on Systems
The story is similar at Newport Beach-based InSight Health Services Corp., a provider of medical imaging services.
“Our (tech) spending will be up slightly because we are just finishing the rollout of our new system,” said Steven Plochocki, InSight’s chief executive.
InSight is putting in a system to allow managers and workers to better execute orders and transactions and provide easier access to data.
This year, most of InSight’s spending has been on software development and computer upgrades.
The other reason why InSight’s spending is up this year: regulatory compliance issues that require healthcare companies to set up systems to protect the privacy of clients and improve security.
“Everybody in the healthcare industry should have seen their IT spending go up this year because of the compliance requirements,” Plochocki said.
Because of the economic slowdown and tighter budgets, other OC companies are looking at boosting their tech spending by getting more out of every dollar they spend or even outsourcing.
Irvine-based Rainbow Technologies Inc., for one, plans to invest in new technology as a way of boosting productivity. The company is installing customer relationship management and enterprise resources planning software.
Even so, Rainbow, a maker of computer security products, said its tech spending this year would be around the same as last year.
Japan’s Union Bank of California, OC’s third-largest bank, said it plans to up its tech spending this year, according to a local spokesman. Most of the spending is set to go toward Web development, imaging and databases.
The bank has upgraded its front-end item processing system that it uses to process paper work for other community banks. Union Bank also is investing in upgrades of computers and software for the integration of offices it acquired in the past couple of years.
Santa Ana-based PacifiCare Health Systems Inc. is going the outsourcing route. Earlier this year, the health insurer signed two separate tech pacts valued at $1.2 billion.
The two agreements, one with IBM Corp. and the other with Keane Inc., are designed to help the company boost efficiency and save around $400 million in 10 years.
IBM Global Services is set to provide tech services and day-to-day management of PacifiCare’s computer systems. Keane is set to provide software services.
Flat Spending in 2003
For 2003, several companies said they expect tech spending to be flat or decline after system upgrades and software rollouts this year.
“We anticipate spending to be down in the next two years because we would have completed the roll out of our system,” InSight’s Plochocki said.
