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U.S.: 6 IT Trends Tight Budgets Won't Kill
Source: informationweek.com
Source Date: Friday, October 19, 2012
Focus: Institution and HR Management
Country: United States
Created: Oct 23, 2012

At first glance, consulting firm Corporate Executive Board's 2013 IT budget benchmark findings make dispiriting reading. But underneath the headline numbers are clear signs that CIOs are pressing ahead with new ways to create business value.

CEB collected and benchmarked 2013 budget plans from about 200 companies globally, representing $52 billion in IT spending. Based on our analysis, the average corporate IT budget will increase 1.8% next year. After several years of annual budget growth of between 5% and 10%, the 2013 forecast seems small. However, it's important to remember that previously more substantive increases arose from IT organizations working through a backlog of projects that built up during the recession.

The 2013 projected budget increase reflects higher operational expenditures only--capital expenditures are projected to be flat, limiting the opportunity CIOs have for continued innovation. Room for maneuvering will be further limited by that old bugbear, maintenance spending. Spending on IT maintenance and mandatory changes for legal and compliance reasons will remain stubbornly high, at 67% of total IT spending.

Despite these constraints, CIOs are planning to drive significant change next year by moving money around while keeping total spending mostly flat. What's emerging is an IT organization that sees more opportunity to drive growth through employee collaboration, insight, and mobility, and less through traditional process automation. To do this, CIOs are increasingly making IT service-based and building new IT skills and roles. Evidence of this transformation shows up in six main areas in the survey.

1. Continued Focus On Information Over Process

In 2013, project portfolios will include less investment in process automation and more in information management and collaboration. For the third year running, information management and collaboration projects represent the largest category in the project budget. On average, this category accounts for 32% of IT project budgets, compared with 30% for process automation. How far might this trend go? Among the top 20% in terms of spending on information management and collaboration, they plan to devote 66% of 2013 project budgets to this category.

2. Applications Go Mobile

Spending on mobile application development will grow by 50% in 2013, to nearly 2% of total IT expenditure. This is solely spending within IT on developing new mobile applications and making existing applications ready for mobile. The figure doesn't include spending on mobile devices and the money that marketing teams spend on mobile and social media projects without IT's involvement.

3. Up In The Cloud
Fifty-four percent of IT organizations plan to increase spending in the public cloud next year. On average, 7% of total IT spending will be allocated to public cloud resources. The largest share of cloud spending will go to software-as-a-service, but spending on infrastructure-as-a-service is rising fast.

4. End-To-End IT Services Go Mainstream

In the last two years, we have seen an upsurge of interest in end-to-end IT services. This services model takes all of the technology (applications infrastructure, data, etc.) needed to deliver a specific business outcome and packages it together as a service. While many IT organizations have only experimented with the model, this tentative approach is changing. By the end of 2013, most organizations expect to offer at least some end-to-end IT services. And at roughly two-thirds of those organizations, services will account for more than 30% of the IT operating budget.

5. New Roles Emerge

The focus on service management and enabling employee productivity is driving changes in IT roles and skills. Seventy-eight percent of IT organizations already have or plan to create service manager roles; 59% are going a step further by creating or planning to create service architects. Eighty-four percent of IT organizations have or plan to have information architects, and 52% will have user experience designers.

6. More Will Be Done Outside IT

While IT bolsters key new roles in 2013, companies expect a decrease in IT employees as a percentage of total employees. The survey doesn't show an increase in outsourcing, which suggests a different trend in which more IT work is being done, formally or informally, within the company but outside IT.

This impressive to-do list shows that CIOs are increasingly impatient with the current performance of IT, and they're willing to push through change that is significant, and in some cases, somewhat risky. But an even riskier strategy is to not make budget choices that drive change.

(By Andrew Horne, managing director at the Corporate Executive Board)
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