IT budgeting in 2015: What the surveys tell us
In recent years the CIO's typical remit has evolved from managing in-house IT infrastructure and traditional client-server business applications to overseeing extended enterprises encompassing the cloud, mobile devices and wide-area networks. At the same time, organisations are accessing and analysing an increasing amount and variety of data — from sources like websites, social media networks and, increasingly, the Internet of Things.
In an ideal world, this process should see IT departments gradually transform themselves from cap-ex-heavy cost centres to op-ex-driven profit centres, as core business operations become more efficient and new technologies deliver opportunities for business innovation.
But how are CIOs actually responding to these trends? Are they forging the kinds of relationships with CEOs and the board, and with new IT-related CxO colleagues (such as chief data officer, or chief information security officer), that will allow them not only to keep businesses up and running, but also to drive them forwards? And in particular, are their budgets and budgeting processes keeping pace with such 'business-leader' ambitions in a global economy that's still shaking off the effects of the 2008-2009 recession?
We've taken a look at several recent surveys and research reports in order to gauge how closely theory and practice match up when it comes to the digital transformation of business IT.
Spiceworks: The State of IT 2014
Spiceworks, the Texas-based networking site for IT professionals, surveyed 1,121 IT pros in May 2014 for its State of IT 2014 report. The survey sample was split between North America (698 respondents) and EMEA (423 respondents), and covered a wide range of sectors — the top ten were manufacturing, IT service provision, education, non-profit, healthcare, finance, government, construction, retail and software.
Spiceworks' survey reported an average IT budget of $253,389, with 42 percent of IT departments planning an increase in 2015, 28 percent expecting to stay the same and 16 percent planning cuts. Average IT spend per employee ranged from $2,770 for small businesses with 19 or fewer employees to $698 for large companies with over 500 employees (average $1,526).
Despite the increasing complexity of the business IT landscape, IT professionals are not rushing to expand their fiefdoms. The survey average is 4.2 staff per IT department (3.7 in North America, 4.4 in EMEA), ranging from 11.9 in large companies (>500 employees) to 4.8 in medium-sized companies (250-499 employees) to less than three in smaller companies (<250 employees). Less than a third (28%) are planning to take on staff in 2015, 60 percent expect staff levels to stay the same, while 4 percent will make cuts and 8 percent are undecided.
The forces shaping IT budgets and staffing levels are evident in Spiceworks' 2014 survey. Cloud adoption is high at 61 percent overall (65% in North America, 56% in EMEA), and is particularly prevalent in companies with less than 250 employees. Web hosting (80%), email hosting (58%) and productivity solutions (51%) are the most commonly used cloud services, with online backup and recovery, productivity solutions and infrastructure hosting figuring highest in IT professionals' plans for the next six months.
Virtualisation adoption is 74 percent overall (71% in North America, 79% in EMEA), reaching 90 percent in large companies with over 500 employees compared to just 54 percent in small businesses (<20 employees). Smartphone (74%) and tablet (63%) penetration is predictably high, and pretty consistent with respect to company size. Finally, BYOD is supported in 68 percent of organisations, with small businesses (<20 employees) being the most BYOD-friendly (83%). Among BYOD-supporting companies, the most prevalent user-owned devices are smartphones (60%), followed by tablets (51%) and laptops (38%).
Deloitte CIO Survey 2014
Deloitte, the professional services firm, canvassed over 900 IT professionals in 49 countries (excluding the USA) on issues surrounding budgets, priorites and innovation for its recent Global CIO Survey 2014. Deloitte's sample includes much larger organisations than the Spiceworks survey described above, with 46 percent of companies generating $1 billion or more in revenue.
Over three-quarters of CIOs (77%) report that their 2014 IT budgets are either the same or increased from the previous year, which is pretty much the same result as the 2013 survey. The majority (55%) of IT budgets are allocated to 'business as usual' operations, with the rest split between supporting business change (23%) and business growth (22%). Not surprisingly, a very similar pattern emerges when CIOs are asked to identify the most important elements of their job: 55 percent list "Delivering business outcomes through business services", while "Transforming IT from a cost centre to a profit centre" and "Investing in emerging technologies" come much further down the rankings:
As a result, opportunities for creativity are somewhat limited, with 46 percent of CIOs reserving less than 10 percent of their IT budgets for innovation. Having said that, CIOs also perceive the business leadership's attitude to risk to be a greater barrier to innovation than IT budgets.
CIO priorities for the next 12-18 months are headed by 'Drive new business needs' (71%) and 'Drive digital strategy' (47%), with 'Reduce IT cost' slipping to fourth place below 'Strengthen risk & security' — a reversal of their relative positions in the 2013 survey. Given the money, CIOs report that they would invest preferentially in analytics and big data (30%), mobile apps (17%) and private cloud (15%); BYOD and social media were well down the list, along with more left-field activities like augmented reality and gamification.
When it comes to their self-image, CIOs are feeling relatively positive, with half (49%) judging themselves to be 'Strong partners to the business' — a 10 percent increase on the 2013 survey. However, the survey reveals some interesting patterns in CIOs' relationships with internal and external stakeholders in their organisations.
For example, although 79 percent of CIOs rate their relationships with the CEO as 'very important', only 42 percent perceive it as currently 'very good'. Similar discrepancies exist with two other board-level posts — CFO (65%/51%) and COO (62%/47%). On the other hand, there are good matches between the perceived importance and actual strength of relationships with IT-related posts such as chief information security officer, chief data officer and chief digital officer — which is important if CIOs are to broaden their remit in the future.
As far as external stakeholders are concerned, there are big discrepancies between the perceived importance and actual strength of CIOs' relationships with suppliers (60%/30%), customers (55%/16%) and vendors (45%/30%) — relationships that, if improved, would almost certainly have a beneficial effect on IT budgeting.
Gartner: Every Budget is an IT Budget
Gartner's research on IT budgeting marches under the banner 'Every Budget Is An IT Budget', highlighting the fact that IT now underpins all day-to-day business processes and new business initiatives. This in turn emphasises the 'bimodal' nature of business IT today — that is, 'business as usual' versus 'disruptive innovation' in pursuit of a competitive advantage.
When it comes to responsibility for IT budgets, Gartner notes that most organisations will strike a balance between two extremes: distributing IT spending control among the enterprise's business units; and centralising all IT spending under the control of the CIO.
To guide IT budgeting during the current transition to 'digital business', Gartner suggests that organisations learn from past upheavals like the PC revolution of the 1980s, the development of enterprise client-server computing in the 1990s and the advent of e-business in the new millennium. The research firm wheels out its trusty Hype Cycle diagram to illustrate the concepts involved, pointing out that without "combined and critical engagement between IT and the rest of the business", the Peak of Inflated Expectations (from hasty IT acquisitions) will be higher, and the Trough of Disillusionment (when operational difficulties surface) will be deeper, leading to a poorer quality of digital services and reduced competitive advantage:
The solution, according to Gartner, is for IT departments to take budgetary responsibility for the information capabilities (such as data security, integration, quality and sourcing, and lifecycle management) that business units require in order to fulfill their objectives (such as brand development, market research, product/service development, operational efficiency and support).
Tech Pro Research: 2015 IT Budget Trends
Tech Pro Research (TPR) recently surveyed 147 IT professionals from around the world (respondents came from North and Central/South America, Europe, Asia-Pacific, India and Africa), covering a range of sectors (the top five were IT & Technology, Finance/Banking/Insurance, Education, Government and Manufacturing).
More than half (55%) of TPR respondents anticipate 2015 IT budgets of up to half a million dollars, while 38 percent expect to have over $1 million to play with. When comparing IT budgets to 2014, 62 percent of TPR respondents expect an increase in 2015, although only around a quarter (27%) will see more than a 10 percent budget rise. Only 15 percent of respondents expect their IT budgets to decrease in 2015.
When it comes to creating and approving IT budgets, the division of responsibilities is pretty clear: budgets are mostly created by the head of the IT department (46%) or the CIO (26%), and approved by the CEO (54%) or the CFO (26%):
Most of the initiatives that TPR respondents expect to undertake in 2015 look more like the evolution of 'business as usual' than disruptive innovations — although moving servers or data to the cloud, lowering the cost of IT infrastructure and training IT staff could free up resources and talent to explore new business-IT projects:
Get the full story on the Tech Pro Research survey here.
Upcoming survey
IT staffing, talent management and services company TEKsystems conducts an annual IT forecast, surveying IT professionals in North America in September and publishing the results the following January. You can access the 2013/14 report, which includes a section on budgets and spending, here; look out for the 2014/15 report in January.
Outlook
The overall picture is one of rising — or at least flat — IT budgets, with the balance of allocation currently favouring 'business as usual' operations over innovation. That's not to say that IT experimentation isn't on the menu: IT professionals' priorities clearly show more and more business processes moving to the cloud — which should, in time, free up resources and talent to focus on new initiatives. Big data analytics would seem to be the biggest disruptor on the horizon, as it will require significant investment in both compute resources and data science expertise. Finally, as these changes play out, the quality of IT professionals' relationships with internal and external stakeholders in the business will assume ever-increasing importance.