Bigger budgets go to strategic IT
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After years of hearing that investing in IT was a smart strategic plan, business executives seem to have gotten the message, according to a new Gartner CIO survey released today -- but only when the dollars are going to technology efforts that have visible benefits for the bottom line, primarily externally facing initiatives involving customers or partners.The good news is that, despite the softening economy, IT budgets are going up 3.3 percent across the nearly 1,500 companies that Gartner surveyed. The data that matters for IT execs: Budgets for companies focused on bottom-line-oriented efforts are increasing 4.9 percent, said Mark McDonald, a Gartner Group vice president. Those organizations whose IT strategy involves only an efficiency focus will typically see budget increases of just 1.7 percent.The survey shows that a sea change has occurred in IT priorities, McDonald noted. The top three priorities in 2008 are improving business processes, attracting and retaining new customers, and creating new products and services. The sea change is the third priority, which was the No. 10 priority in 2007. Gone from the top three is reducing enterprise costs, which has slipped to No. 5. The decline of cost-cutting as a priority and the rise of innovation show the sea change that has occurred, McDonald says.But IT managers hoping for a return to the 1990s glory days of annual budget increases of 15-plus percent will be disappointed, McDonald said. In that era, IT budgets were driven by technology initiatives done almost for their own sake, as businesses both experimented with the new Internet and began to use technology widely within their walls. "Today, it's more about specific business needs," he said, "We're seeing strategies well grounded in business operations changes, not chasing a fad."And it's not CIOs driving the budget growth; it's the C-suite executives who now finally see IT as a business enabler, McDonald added. If anything, CIOs who promote IT as a force for business change were typically dismissed as self-interested. He noted, "Calling attention to yourself is never very positive."Although there is a mounting possibility that the U.S. economy may be entering a recession, McDonald doesn't believe IT will see its budgets slashed, as happened in the 2000-2001 recession. That recession came after years of unbridled IT spending whose specific business benefits were often unclear. The more moderate budget growth predicted for 2008 won't give businesses the same easy cuts they had then, he noted. "If you cut IT's budget by 10 percent, you might just see a 0.2 percent effect on the whole budget," McDonald explained, "You can get more bang for your buck by lowering [overall] operations costs through investing in better IT." That's why businesses are looking to increase IT spending for bottom-line-oriented initiatives, he said.
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Amid mixed indications of software industry's health, polled tech execs predict spending rise.
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Businesses are planning to scale back their IT spending in the third quarter of 2007, according to a survey released Friday by an investment research firm.
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Technology and business innovation go hand in hand.
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Services and businesses are boosting tech spending with network equipment purchases, researchers say.
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The company is in a phase of explosive growth, and that costs money.
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(InfoWorld) - SMBs in North America expect to increase their IT spending by an average of only 2 percent this year after boosting spending 8 percent in 2006, according to a Forrester Research survey. The survey of about 1,200 businesses with six to 999 employees released Tuesday showed that 62 percent of them have an optimistic outlook for their companies this year, up from 46 percent in a 2006 survey, but that doesn't translate into significantly more IT spending, said analyst Michael Speyer. "Last year's spending increased fairly robustly. The ... market is telling us now, 'Guess what? We're going to keep it steady now,'" Speyer said. IT spending will focus on new hardware purchases and added personnel. Hardware spending is expected to focus on replacing or upgrading servers and the regularly scheduled replacement of about 25 to 30 percent of companies' desktops and workstations. Software purchases will be mostly of network security and Web application products. Twenty percent of IT managers surveyed said improving the efficiency of their IT systems is a top priority, and 33 percent of them are focused on measuring the impact of their IT spending on business performance. Although virtualization is a big trend in IT, SMBs are less focused on it than are large enterprises, Speyer said. Virtualization, which, among other things, makes it easier to run multiple software applications simultaneously on one physical server, enables a company to consolidate the number of servers it operates. But SMBs are less likely to use virtualization for server consolidation because the potential savings are not as great as in enterprises. "If you look at a typical midmarket company, anything from 12 to 17 servers, there's not a whole lot of hardware there. Where server consolidation plays out is in the enterprise space where you have hundreds of servers," he said. Although SMBs may do some server consolidation, they may still buy some new servers for disaster recovery and security purposes and to run new software applications, the survey said. And although new technology is supposed to increase automation, SMBs will devote 29 percent of their IT budgets to full-time IT staff, the highest of any spending category, including hardware, software, and networking equipment. As IT systems grow, they get more difficult to manage, but SMBs don't have the in-house staff to manage systems as an enterprise does, Speyer said. So while they may have to hire more full-time employees or part-time contractors, they may also turn to system integrators or value-added resellers to take over some management functions. IT spending also varied by industry sector. Spending is expected to rise most steeply in the telecommunications sector (7 percent), business services (5 percent), and finance and insurance (3.4 percent). It is expected to decline in the manufacturing sector (-0.6 percent) and the media, entertainment, and leisure sector (-0.9 percent).
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Some 250 CIOs surveyed last month by CIO magazine said they expect their IT budgets to grow by 7.4% during the next year, down slightly from the 8.9% spending increase respondents predicted in August.
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Cybersecurity will be a major focus in President Bush's 2008 federal IT budget.
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The costs involved in running a data center now represent a large chunk of IT's total budget.
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The latest Tech Poll from CIO Magazine indicates that IT spending next year will rise -- but not as fast as CIOs thought earlier this year. A separate study from Equs Group Inc. paints a rosier IT spending picture.
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The software market continues to drive IT spending, according to market research firm International Data Corp.
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Many organizations allocate large resources to implement and deploy packaged ERP, CRM and SCM applications. Now these organizations need to move away from operational efficiency gains achieved and into leveraging their data for performance management and business intelligence.
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New federal regulations that could result in fines of up to $1 million a day for utilities that suffer blackouts are prompting an increase in IT spending, particularly on cybersecurity technology.
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Government-intelligence firm Input says state and local spending on transportation IT systems should rise from $1.8 billion in fiscal 2005 to $2.
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(Source: Planview) A recent Ventana Research study of CIOs and other IT leaders showed that companies that do not apply rigorous standards and metrics to their IT organization are in fact "sitting on a goldmine" - or perhaps letting it wash away. They estimate that in many cases companies may be able to save 3 to 5 percent of their annual IT budget through tighter management practices.  Download this on demand webcast to learn more.
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In some cases, fights in Congress have slowed progress, or the U.S. government has focused on other priorities. In other cases, the cost of IT projects has been an issue.