As the economy begins to pull out of the recession, food retailers and wholesalers are showing a greater propensity to spend on technology, according to SN's annual technology survey conducted last month.

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The online survey of food retail and wholesale subscribers to Supermarket News and the SN daily newsletter, which forms the basis of this 16th annual State of the Industry Report on Supermarket Technology, indicates that more than half (54.4%) of the respondents plan to increase their IT budgets this year by up to 10%, and 62% overall expect to spend more on IT. That represents an uptick from last year's survey, when about one-third (34%) said their IT budget would grow up to 10%, and 49% overall said it would increase.

The SN survey received input from 34 retailers, 21 wholesalers, 9 combined retailer/wholesaler companies and 15 respondents who did not identify the primary business of their organization.

The rebound in IT investment reflected in the survey correlates to the findings of other studies. For example, Forrester Research, Cambridge, Mass., predicted last month that IT spending in the U.S. will grow by 6.6% in 2010, after declining by 8.2% last year. “All the pieces are in place for a 2010 tech-spending rebound,” said Andrew Bartels, vice president and principal analyst, Forrester Research. “In the U.S., the tech recovery will be much stronger than the overall economic recovery, with technology spending growing at more than twice the rate of the gross domestic product this year.”

The SN survey results also demonstrated the impact the recession had on IT spending last year. Almost half of respondents (46.8%) said they had undertaken moderate cutbacks in IT spending because of the recession. And a larger percentage of respondents (43%) said their budgets were 1% of sales or less than stated that last year (34%).

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One way businesses can reduce their IT spending is to employ applications on a software-as-a-service (SaaS) basis — essentially renting their software, rather than paying for a full license and installation. A significant percentage of respondents (43%) said they use SaaS for up to 25% of new applications. But almost a third (30.4%) said they don't have any applications running via SaaS.

Another way to cut IT costs is to use computer virtualization, which allows a single physical computer with a single operating system to be subdivided into many “virtual” computers, each with its own operating system. Last year, 11.4% of respondents said they tested or launched virtualization. Associated Grocers of Baton Rouge and Winn-Dixie Stores are among the food distributors that have adopted this strategy.

FOCUS ON INVENTORY

The impact of the economy is also seen in the type of applications regarded as high priority by significant percentages of respondents.

For example, business intelligence, which helps retailers understand their business through deep analysis of key performance indicators, was deemed a high-priority application by 22.8% of respondents last year, sixth on the list. It jumped to second place on the 2010 list of high-priority applications, selected by 34.2% of respondents.

“We are seeing an increased number of queries about BI, especially after the economic downturn,” Shilpa Rao, solutions manager of merchandising in the retail practice of Tata Consultancy Services, a Mumbai, India-based firm with offices in New York, said last fall. “They want to leverage BI to understand where their costs are and measure them.”