IT departments are "significantly underestimating" the budgets allocated to technology in others parts of the organization, as more business leaders bypass the CIO and IT staff to execute their own projects, according to research.
CIOs globally estimate that the "shadow" IT spend in other areas of the business represents another 20 percent on top of the official IT budget. However, the real figure is closer to 40 percent, according to the latest findings from member-based advisory firm CEB, which surveyed 165 organisations representing more than APS29 billion in IT spending.
CEB said business leaders are keen to test out technologies for themselves, whether that be cloud services, CRM applications, document sharing tools or even just giving out iPads to their teams to increase productivity.
"IT departments need to look at how they can support these business-led efforts and provide the flexibility that employees and business leaders need, while managing them in a way that is both secure and cost-efficient for the business," said CEB.
The marketing, HR, operations and finance functions are most likely to dedicate their own budgets to technology, CEB found. For example, six percent to nine percent of the overall HR budget is now dedicated to IT, as businesses exploit the growing number of cloud-based HR systems and look to talent analytics to better understand both existing staff and new recruits.
Andrew Horne, managing director at CEB, said: "While the idea of 'shadow spending' has in the past been seen as a risk or threat, on the contrary it is often a sign of healthy innovation and presents a valuable opportunity for IT to work more closely with business partners to develop new capabilities."
Horne said: "Failing to recognise the extent to which tech-driven projects are happening outside of the IT department can be a real worry, yet trying to maintain total control is equally a step in the wrong direction.
"By getting this balance right, CIOs can help the business to be more flexible, identify potential cost savings and ultimately implement change and innovation more easily."
The study also found that total IT budgets for the year ahead are set to increase by three percent, driven almost entirely by rises in operating expenditure, while capital expenditure remains flat at 0.3 percent.
Spending on mobile applications is set to accelerate in 2014 though, with almost two-thirds (65 percent) of employees dissatisfied with the mobile capabilities available to them for work purposes.
The number of CIOs dedicating over four percent of their budgets to this area has more than tripled from 2012, due to the growing focus on flexible working
This story, "CIOs Blind to 40 Percent 'Shadow' IT Spending at Their Firms" was originally published by Computerworld UK.