Research: The Morphing IT Budget

Dec 16, 2010


The New Transparency: Transforming the IT Budget

Change is coming in how CIOs spend money. The most high profile is a shift from capital to operational expenses as compute resources move to the cloud, but the buck doesn’t stop there. We also see more IT organizations measuring or budgeting for per-transaction or discrete service costs, and there’s increased interest in chargebacks, an undertaking that must be handled with care. Executives are getting smarter about technology, and they know internal IT is no longer the only game in town.

Meanwhile, there’s a weird disconnect between how IT sees the budgetary landscape—in a word, bleak, with layoffs, frozen positions, furloughs, hacked line items—and the reality we found in our October InformationWeek Analytics IT Budget Survey. In that poll, 45% of 422 respondents say they’ll see increases in fiscal year 2011, compared with 24% expecting decreases. Our November InformationWeek Analytics Outlook 2011 Survey shows an even brighter picture, with 55% of those 552 respondents with increases vs. 19% facing cuts.

Money’s available. But to get its share, IT needs to take a fresh look at how business executives are evaluating technology investments. CIOs must engage in governance practices and show that a given project will have strategic value to the larger organization. When the business does well—and especially when it does well because of IT—there’s more incentive to invest in technology. When IT appears not to be part of the solution? Well, let’s just say there are hundreds of service providers angling to step in.

“Our operating budget has been reduced 50% in the past three years, and our capital budget has been reduced from $1 million per year to $50,000 per year,” says one survey respondent. “Pressure to provide more service with less is higher than ever.” To avoid this fate, benchmarking is critical. Executives are becoming sophisticated about technology, and newly minted MBAs exit business schools educated about IT—its expense and its promise. Become a team player and take the long view, and you can not only avoid budget cuts, you can ensure that you get an appropriate level of resourcing to serve the organization. Here’s how.  (R1901210)

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