CIO spending priorities shifting: Gartner

Economic conditions are changing CIO spending priorities according to research from Gartner.

In its midyear survey of more than 500 CIOs globally, the research firm found that CIOs spending priorities have changed as the need to upgrade infrastructure is seeing funds appropriated from reduced operating budgets.

Gartner Executive Programs group vice president, Mark McDonald, said that commercial and public sector CIOs planned to increase capital expenditures (CAPEX) by three per cent in 2010 and plan to pay for that increase with a 1.3 per cent cut in operating budgets.

“CIOs felt they could no longer delay infrastructure upgrades and other capital investments and they funded them at the expense of operating budgets,” McDonald said in a statement.

According to McDonald, IT organisations, particularly on a larger scale, are not increasing IT budgets; instead, CIOs are ‘swapping’ one set of budgets items for another, indicating potential upside limits on corporate and government purchases of equipment.

“Size certainly matters in terms of IT budget outlook,” McDonald said. “Smaller firms report significantly stronger IT budget growth percentages than their larger counterparts.

“The larger the firm, the tighter it is at managing its IT budget in general, particularly IT operating expenses,” he said. “This continues a trend we have observed since 2008 as larger IT organisations started reducing their resource requirements through consolidation, waste elimination and other measures. CIOs of the largest firms indicate that opportunities in these areas remain.”

Looking to the future, the outlook of CIOs has improved since the beginning of 2010 with more than 40 per cent seeing some form of economic recovery. The survey noted, however, that a majority of 60 per cent still see economic challenges ahead.

According to the survey, industries hit the hardest by the global financial crisis in 2008 and 2009 have shown promise of rebounding in the first half of 2010, including the consumer/retail, financial services and manufacturing industry’s CIOs indication of “modest growth” in IT budgets during the first six months of this year.

The utilities and healthcare sector, going through deep structural change, continue to invest in IT regardless of the economy, while government and education CIOs reported budget decreases in light of tight economic conditions.

The survey also found several CIOs reporting that the traditional view of an IT budget as a planned administrative expense is changing. While 49 per cent of CIOs still finalise their IT budgets in the last quarter of the fiscal year, 26 per cent bucked the trend and finalised their budgets in Q1 of 2010. This indicates IT spending to be more ‘fluid’ and respond to changing business conditions.