by CEB

CIOs focus their budgets on transformation and collaboration

Nov 15, 20124 mins
Cloud ComputingIT LeadershipIT Strategy

The past few years have seen surprisingly healthy increases in IT spending CEB research shows, but the outlook for 2013 is more modest. Undeterred, CIOs are moving money around within their budgets to press ahead in two key areas: redefining how IT creates value and better equipping IT to meet fast-changing demand.

CEB collected and benchmarked 2013 budget plans from approximately 200 companies globally, representing more than £30 billion in IT spending.  Based on our assessment, on average CIOs expect total IT budgets to grow by 1.8 per cent. This is below the 6 -to-10 percent increases of the past two years when many organisations upped spending to clear a backlog of demand after the recession-related budget cuts.

Traditionally, IT budgets funded enterprise systems for process automation, a trend typified by the multi-year ERP project. While these projects haven’t gone away, progressive organisations see fewer opportunities for process automation in future. They recognise the nature of work is changing, and as a result, new technologies are needed. That is a grand statement, so let me elaborate: in many organisations today, most employees have jobs that require analysis and judgment  and that can only be achieved through collaboration, often with counterparts beyond as well as within the boundaries of their organisation. In this environment, tools for insight, collaboration and mobility become essential.

This trend can be seen in the 2013 budget outlook in two ways:

  • Information and Collaboration Projects Grow: In 2013, project portfolios will include proportionately less investment in process automation and more in information management and collaboration. For the second year running, information management and collaboration constitute the single largest category of project spend, accounting for 32 per cent of the total.
  • Increased Mobility for Applications: Spending to develop mobile applications will grow by 50 per cent in 2013 to nearly 2 percent of total IT spend.

Wanted: Flexibility

IT projects are becoming smaller but more numerous. At the same time, business leaders and frontline employees alike want more freedom to provision their own technologies. This, coupled with rapid organisational change and seemingly endless economic uncertainty, make IT flexibility essential. In their 2013 budgets, CIOs are investing in the organisational capabilities and skills needed to create this flexibility.  We see this in:

  • End-to-End IT Services Reaching Scale: End-to-end IT services take all the technology (applications infrastructure, data, etc.) needed to deliver a specific business outcome and package it together as a service. Individual services can be enhanced quickly, and if necessary, continuously. This makes IT more flexible while remaining efficient as the services are enabled by shared technologies.

In the past, CIOs showed interest in the model, but many experimented, rather than implementing it wholesale. This tentative stance is changing. In 2013, the majority of organisations will offer at least some end-to-end IT services, and those furthest along report that services will account for more than 30 per cent of IT operating spend.

  • Greater Use of Cloud Sourcing: In 2013, the majority of organisations plan to increase spending in the public cloud in 2013 to an average of seven per cent of total IT expenditure. SaaS is still takes the largest share, but IaaS and PaaS are catching up fast.
  • Emergence of New IT Roles: Enabling employee productivity and delivering services requires new IT roles and skills, so 2013 budget plans include more money for roles such as service managers, service architects, information architects, and user experience designers.
  • More IT Being Done Outside IT: Despite these new IT roles, the ratio of IT employees to all employees is declining. IT employees will account for a smaller percentage of total employees in 2013 than in previous years.

All this goes to show that a flat budget need not put the brakes on IT transformation. There may not be much extra money to go around, but CIOs are making sure that their most important priorities – creating new sources of value, and increasing flexibility – are not being short changed.

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