Tech Spending at Firms Seen Rising

Many U.S. companies plan to raise capital and technology spending in 2005 as they seek to comply with new federal accounting laws passed after the slew of bookkeeping scandals over the last few years.

Consumers may feel the effect of the technology spending, as more than three-quarters of those companies plan to pass along at least half or all those increases, according to a survey of U.S. chief financial officers.

The decision to increase technology spending comes at a time when some companies’ profit margins are slimmer because they are paying more for indispensable items such as energy.

Between the rising spending on technology and higher producer prices, companies need to pass on their increased costs even more than they did last year.

The CFO Outlook Survey was conducted by Baruch College’s Zicklin School of Business and Financial Executives International, a trade group representing CFOs.

“I believe the types of companies that are passing costs down were mostly manufacturing,” Burton Rothberg, assistant professor of accounting at Baruch’s Zicklin School.

“That makes sense if you think about it, because the price increases are coming from things like oil and [other] commodities,” he said.

According to the quarterly survey, which polled 185 CFOs of public and private companies, U.S. companies, on average, plan to increase technology budgets by 12% over the next 12 months. The figure was 7% when the 12-month outlook was last published three months ago.

Rothberg said part of the technology spending might result from the Sarbanes-Oxley Act, a law that among other things requires new kinds of audits of control systems.

“Apparently quite a few [companies] have been buying new technology products to do this. My guess is that it would probably be more software than hardware, but probably some hardware is in there too,” Rothberg said.