by Gary Beach

IT Spending: CIOs Explains Their Budget Increases

Sep 29, 2010

Businesses are projected to increase technology spending by 8.2 percent in the coming year. What’s caused the turnaround? CIO publisher emeritus Gary Beach talked to CIOs around the country to find out.

I have had fun the past few months traveling the country and sharing my “2011: A Return to a Growth Agenda” stump speech with CIOs and senior IT executives. I’ve also had the opportunity to talk with many of you in preparation for appearances on CNBC’s “Squawk on the Street.” You’ve had some interesting things to say about budgetary issues that I’d like to share as many of you are finalizing your 2011 budgets.

CIO’s most recent Economic Impact Survey projected that businesses will increase their technology investments by 8 percent in the coming year. What most impressed me was the year-over-year projected increase for businesses with $1 billion or more in sales. This time last year, firms in that category predicted a 2 percent contraction in IT investment. Now, they forecast a 5 percent gain! (For more survey results, see “IT Spending Continues to Rise.”)

One IT executive explained the 8 percent projected increase best: “For the first decade of the 21st century, the business rationale for IT investment was largely cost reduction or running the IT shop more efficiently. [Spending] was largely focused on IT and consumerization like smartphones, social media, Google and others. The focus of IT investment for the coming decade will be on driving business innovation and business growth.”

Others I spoke with offered a different reason for the rise: Windows 7. The operating system became generally available in October 2009, when most businesses, still reeling from the recession, were in no mood to update. Now, with companies sitting on cash and looking at desktops largely running Windows XP (launched in October 2001), they are making the decision to upgrade. One CIO said switching to Windows 7 “was like throwing a large stone into a still pond, with the ripples being the new personal computers, monitors and applications” a business must also buy during a desktop upgrade.

Several other IT leaders mentioned moving to cloud-computing environments as a reason for the budget increase.

Hooray, hooray for long-suffering IT staff who saw their salaries frozen or cut during the recession! A good number of CIOs pointed to increased staff compensation as a major reason for the budget growth.

What does your budget look like for 2011? If you’re planning less than a 5 percent increase, you’ll be at a competitive disadvantage.

Gary Beach, Publisher Emeritus