Information Technology's role in making UK companies competitive is the subject of a new report issued by the CBI today. The report, called 'UK Competitiveness: The Role of IT Services', shows how IT helps British firms better meet customer needs, enter new geographic markets and build value in their offerings, said the CBI.

Baroness Shriti Vadera, Under-Secretary of State for Business and Competitiveness, commented: "The development and take-up of IT is critical for business growth and efficiency. We need to make sure that all firms - large and small - have access to technology that will improve productivity and, importantly, the skills to use it effectively."

John Cridland, Deputy Director-General of the CBI, added: "This report shows that the main driver for developing IT services is now the ability to help companies focus on customers and add value, rather than simply cutting costs. At a time of tougher economic conditions and ever-increasing international competition, it is vital that all firms understand how they can use IT to drive performance and create goods and services customers want.

"The report highlights ways for government to help companies better exploit the benefits of IT. Business wants clearer and more consistent policies on e-commerce, support for overseas activities, and measures to address technology and skills weaknesses, and security vulnerabilities."

Key findings in the report include:
Investing in internet-enabled IT services has given UK companies major competitive advantages: 63% of respondents cited improved customer retention and satisfaction, 60% cited better tailoring of products and services to customer needs, and 57% cited the development of new marketing and delivery methods.

Customer focus rather than cost-saving is now the major driver of IT development. More demanding global customers were cited as a driver of IT development by 52% of respondents, and more demanding national customers were cited by 51%. Responding to these demands, 56% of companies say they are now capable of serving customers through digital marketplaces.

Other major drivers of IT development were the varied costs of different locations (cited by 47%) and low-cost international competition (35%) as UK companies seek efficiency and competitive advantages.

The survey shows the main barriers to the extensive development of Internet- based services are geographic dispersion of staff, information assurance concerns and differing regulatory requirements - but the UK's self regulatory regime for domain names registration and dispute procedures is seen as a significant plus in providing a fast and simple registration process.

Mid-cap companies appear to have benefitted less from IT in than either small or large companies in terms of entering new product markets and new geographic markets. They are also the least likely to outsource IT functions.

UK companies increasingly recruit foreign IT staff, with 59% now employing them, up from 52% two years ago. The report also shows that 25% of companies hire Indian IT staff and 11 per now hire Chinese IT staff. But only 13% of companies cite an inadequate UK skills base as the reason for hiring foreign staff; the main drivers were international growth (cited by 61%) and individual project requirements (46%).

Over two-thirds of companies spend a considerable amount of their IT budgets on outsourcing, with 24% of those who do spending 11-20% of their IT budget on outsourcing, and 17% spending 21-40% .

But companies often prefer to outsource to UK-based providers of services. For improving internal service delivery, 67% prefer a UK-based provider, for standardising IT services the figure is 57%, and for adding customer value it is 55%.