CIOs eye more outsourcing, less hardware in 2013

For 2013, 45.8 percent of CIOs expect their IT budgets to increase and 21.8 percent see their budgets falling.
Written by Larry Dignan, Contributor

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.

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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