IT spending grows at fastest rate in five years

Agile IT departments are emerging with the ability to flex their budgets quickly to meet new business demands

IT departments are set to increase their spending by 3.3% in 2015, the highest growth seen for 5 years, a major study of 200 worldwide organisations with a spending power of £46 billion reveals.

The increase, up from 3% last year, and 1.8% in 2013, reflects the growing importance of digital technology in companies' business strategies, according to the CEB, the member-based advisory group which conducted the research.

Businesses leaders see technology as playing an increasingly competitive role in 2015, Andrew Horne, managing director of CEB (formerly the Corporate Executive Board) told Computer Weekly.

“Each year we ask senior executives what their priorities are for the next year, and this year, 70% of their business priorities next year can only be implemented by investments in technology,” said Horne.

Shift from maintenance to innovation

This year IT departments spent 33% of their budgets on innovative projects, up from 31% in 2013, and only 20% in 2000, as companies continue to reduce their IT maintenance costs and reallocate funds for projects that bring more business value.

Real spending levels on IT innovation are likely to be higher however, as other parts of the company invest in technology, adding up to 40% to existing company IT budgets.

“Increasingly, just looking at the IT budget does not give the full picture. Groups like sales and marketing are going out to suppliers with their own technology budgets,” said Horne.

Company finance departments are spending 4.5% of their budgets on IT, HR 4.3%, marketing 4% and operations 3.5%, the research claims.

Shorter planning times

Technology is moving so quickly that companies no longer plan IT investments more than a year and a half ahead, the survey shows.

“In the past you would see companies making plans 3 or 4 years out. This year the road maps stop after 18 months,” said Horne.

The growth of high capability IT departments

This trend has seen the emergence a new generation of “high capability” IT departments, that are able to re-allocate their IT budgets in an agile way to take advantage of emerging technologies.

Some 83% of these new style IT departments can move cash around quickly enough to make mid-course adjustments to their IT budgets in response to changing business demands.

The majority of these companies are creating new IT roles, including service managers, business architects and user experience designers, to deliver better business services.

And 75% of them have re-organised their processes to provide their business customers with complete end to end services, rather than simply delivering hardware and software.

Cloud services

High capability IT departments are also investing more heavily in cloud services, with some 45% deploying all three forms of cloud service  - infrastructure as service (IAAS), platform as a service (PAAS) and software as a service (SAAS).

Download the CEB's budget report

Across the board, one-third of companies spent at least 6% of their IT budgets on cloud technology this year, up from 23% last year.

Spending on cloud services is likely to continue to increase in 2015, said Horne. “I think that will go up a lot as more companies take up IAAS and PAAS,” he said.

End-customer experience

CIOs are allocating more of their budget to making work-based IT systems easier to use, as more employees expect their technology at work to be as user friendly as consumer technology.

The CEB predicts that user experience-designers will become mainstream in 2015, following a jump in spending on customers interfaces from 15% to 17% of the IT budget in 2014.

Overall IT staffing numbers could increase by another 4% by the end of the year, the organisation predicts.

Mobile apps

Investment in mobile phone applications is moving more slowly, the research shows. Although the majority of companies are developing mobile apps, few companies invested more than 6% of their total IT budget on the technology in 2014. “Most companies are experimenting,” said Horne.

Impact on CIOS

The study shows that CIOs are taking on more non-IT responsibilities as companies step up their spending on digital technology.

Nearly 60% are responsible for at least one other area - often procurement -  and the share of CIOs taking on responsibility for business analytics has grown from 15% to 30% in just 12 months.

Keeping a check on spending

Despite the boom in IT spending, it will become increasingly important for CIOs to keep control of costs as IT investment increases, the CEB warns.

“At some point there will be another downturn. CIOs need to be sure as they are growing IT efficiently and are being careful about making costs flexible, so they can scale them down and not let too much waste build up,” he said.

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