CIOs eye more outsourcing, less hardware in 2013

CIOs eye more outsourcing, less hardware in 2013

Summary: For 2013, 45.8 percent of CIOs expect their IT budgets to increase and 21.8 percent see their budgets falling.

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For 2013, chief information officers are planning to spend more on outsourcing and less on hardware and consultants, according to the Society for Information Management (SIM).

The data comes via SIM's annual CIO survey, which will be presented at the group's conference Oct. 28 through Oct. 30 in Grapevine, TX.

SIM's CIO survey is instructive since it outlines 2012 actual IT spending and projections for the year ahead. Keep in mind that the average CIO tenure was 4.59 years dating back to 2006. That's a bit better than an NFL running back, but not by much. CEO tenure averages about 8 years.

Among the key takeaways:

Productivity and cost reduction was the top concern in 2012 followed by business alignment, agility, revenue generation and cost cutting.

Top applications in order for 2012 were business intelligence, cloud computing, enterprise resource planning, collaboration, customer relationship management and mobility.

47.9 percent of CIOs said that their 2012 IT budgets were up from 2011. Another 34.5 percent said their 2012 budgets turned out to be lower than 2011. And 17.6 percent said their 2011 and 2012 IT budgets were the same.

For 2013, 45.8 percent of CIOs expect their IT budgets to increase and 21.8 percent see their budgets falling. Another 32.4 percent expect their 2013 and 2012 budgets to be equal.

The actual budget allocations from CIOs show some interesting trends. To wit:

  • Spending on consulting services in 2012 was 9 percent of the budget, down from 11 percent in 2011, 10 percent in in 2010 and 12 percent in 2009.
  • In-house hardware, network, software and facilities spending was 24 percent of the IT budget in 2012, down from 32 percent in both 2011 and 2010.
  • Spending on internal staff in 2012 was 33 percent of the budget, down from 38 percent in 2011 and 43 percent in 2010.
  • Seventeen percent of the actual IT budget in 2012 was spent on outsourcing (offshore, domestic, captive hires too). Outsourced spending on domestic staff was 8 percent of the 2012 budget, up from 3 percent in 2011.
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For 2013, hardware spending, consultants, internal staff is expected to fall from 2012. Outsourcing will jump to 23 percent in 2013, up from 17 percent in 2012.

India garnered 43 percent of the offshore outsourcing spend in 2012, followed by Western EU at 13 percent, Philippines at 12 percent and Mexico at 5 percent.

Five percent of the 2012 IT budget was allocated to internal cloud computing on average, down from 6 percent in 2011. Four percent of the 2012 IT budget was allocated to external cloud providers, down from 5 percent.

As a percentage of revenue, corporations allocated 4.94 percent of sales to the IT budget. That's historically high relative to the average of 3.84 percent dating back to 2005.

The staff turnover rate in 2012 was 5.23 percent.

Education and training received 2.99 percent of the IT budget in 2012.

Forty three percent of CIOs reported to the CEO and 27 percent reported to the CFO. Nineteen percent reported to the chief operating officer.

CIOs spend 12 percent of their time on strategy, 24 percent on the relationship with the business and 13 percent on IT staff relations.

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Topics: CXO, Cloud, Data Centers, Enterprise Software, Hardware

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5 comments
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  • This really a good summary

    Larry
    This is really a good information and summary of the total picture. Thank you very much for this information. This helps a lot.
    Ram U
  • The last two charts are very revealing...

    ...and explain why IT at most organizations is always oversubscribed and strapped...

    The CIO, CFO and CEO all are consistently "engaged" in the allocation of the same resources thus each IT resource has multiple supervisors, all of whom know little or nothing about the other tasks to which the resources have been assigned and their relative importance to the organization, and in fact they almost certainly don't care whether the other tasks are more important or not because the allocators have a 'C' in the title. Don't even need to mention the general ignorance of C-series execs of the reality of IT...

    I recognize that Rank Has It's Privileges, but it means that the resources are being allocated inefficiently BY the very people tasked with allocating those resources efficiently - a paradox. It also leads to thrashing of the IT workforce, and clearly indicates the no-win situation IT resources are often in.

    This would be why I advised my children to avoid IT as a career, no matter how lucrative or exciting it may appear.

    I will echo Rama.NET and say this is a good article.
    MyopicOne
    • And then political and corporate leaders will say we need more talent here,

      while ignoring existing talent, talent that has suffered skill rot thanks to offshoring/outsourcing, giving taxpayer money to prop up companies that offshore, H1B fraud ("fraud" being the key word here, folks), compelling people to go back for more education in this field, companies lying to congress, etc, etc, etc...

      The last few articles I've read on tech forums pretty much say that 9 out of 10 hot jobs are all managerial (meaning workers, the talent that makes these companies big and stay there, are not really wanted. Labor is, in effect, spat on.)

      Still, my mindset and observations can be just as erroneous as others'. I'm only human, so let's see what happens.

      I would encourage your children to study something that might make a living wage that also fits into their God-given strengths and talents. Since living wages allow going back for needed education, acquiring updated tools, and other things to remain "economically viable". But back to the point: Skill is honed from the application of talent. That should be valued and given value. If it's in IT or any other field, take one's strengths and improve.
      HypnoToad72
  • Big shifts in IT spending

    Hi Larry – great article showcasing some of the big shifts we’re seeing in IT spending. This growth of budget portions dedicated to outsourcing, as you detailed, is a proof point to what we know: the emergence of a new age of the services economy. Our customers are much smarter today about their outsourcing needs, and are no longer focusing on getting the cheapest price point – they want intelligent, trusted business partners that “get it.” Competitive global companies need to enter new markets faster, integrate acquisitions quicker, adopt more efficient processes, and successfully interpret a mountain of private data. These functions are powered by advances in data analytics, which we think will drive a considerable business process shift in terms of what companies consider when procuring services. Not surprising that we see more resources allocated to these areas as the trend continues to emerge. It is a simple business strategy that will deliver impact for years to come.

    – Karen Arena, Vice President, Global Public Relations
    Xerox Corporation
    • We've observed that for years

      Even in the 1980s, there were articles about "the new service economy forming". Try doing a web search, many of those articles also said the rise of the service economy in a BAD way. Not a good one... but try being a service worker, then you will know how BAD it really will be. Chattel, anyone?

      Happy searching.
      HypnoToad72