High-performing companies set example for IT budget management

scissors cutting the word "budget" in half
While IT budgets are tight, increases aren't disappearing for high-performing companies. (Image: daoleduc/Getty Images)

Overall, businesses’ information technology investments are down, but high-performing companies still look to invest, reports show.

A survey by TEKsystems, a provider of IT staffing solutions and services, found that 40% of IT leaders expect their organization’s tech budget to increase in 2018, compared to 49% who thought so in 2017. Forty-four percent, compared to 39% last year, thought the IT budget would stay the same, while 16%, compared to 12% last year, expect it to decrease.

“It’s clear that 2018 will not be the year of increased IT budgets—those expecting IT budget increases are close to the lowest levels seen in the previous five years,” according to an announcement of TEKsystems’ annual “IT Forecast” report, based on the survey results.

What’s more, the 1,000-plus IT leaders the company surveyed in October 2017 showed less confidence in their IT departments’ ability to meet and support core IT, lines of business and new initiative demands. Confidence in meeting core IT requirements fell by 10% to 76% in 2018, while confidence about new initiatives remained flat at 59% year-over-year. Confidence in lines of business support fell slightly to 72% from 76% for 2017—still higher than the 60% rating for 2016.

“Organizations must examine this closely as the ability to simultaneously support core IT activities and new initiatives will have a significant impact on the business,” according to the statement. “These new initiatives, including Internet of Things (IoT), artificial intelligence (AI), augmented reality/virtual reality (AR/VR) and Blockchain, could weigh heavily on future success and partially determine whether they will disrupt—or be disrupted.”

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In fact, 71% of respondents said their organization has nothing concerning blockchain planned for the next 12 months, but 31% said their department is in the implementation phase for IoT. Topping the implementation phase list is security at 72%; cloud computing and mobile applications, both at 62%; and big data analytics at 59%.

IT leaders don’t feel any less pressure to enable innovation, however, with 85% responding that it’s expected of their departments. Only a third believe they’re transforming a part of the business today, though, and less than half—41%—expect IT to truly drive innovation two years from now.

“Improving efficiency, implementing new—and improving existing—IT applications and infrastructure top the list of business objectives IT will most need to support in 2018,” the report states. “Efficiency is a priority, and improving it—by introducing new technologies, strengthening existing infrastructure, tightening up internal processes or by reducing costs — will create room for IT to increase its role in transforming the business.”

IT budget increases aren’t disappearing, of course. Chief information officers at HPCs—public companies whose stocks outperformed the S&P 500 by 10% over a three-year period—are more likely to have annual budget increases, according to Deloitte’s “2016-2017 Global CIO Survey.” HPCs’ IT budgets account for a lower percentage of overall revenue—2.47%, compared to 3.30% of global companies—indicating that CIOs use their funding more efficiently, the report states. Additionally, they have more control over their budgets: CIOs at U.S. HPCs control 87% of the tech budget, compared to 77% for their counterparts at other companies.

Deloitte suggests that businesses looking to rework their IT budget strategies:

  • Consider optimizing their budgets. “CIOs with smaller budgets may find that necessity is the mother of not only invention, but also innovation,” a CIO Insider report states. 
  • Let business lead IT. “Align IT capabilities and priorities with strategic and operational business priorities, and let business strategy determine how best to leverage technology investments and assets to deliver value,” the report states. “In addition to creating buy-in and support for IT strategy, this also spreads accountability for investments across the business.” 
  • Implement financial management for IT. “In addition to financial planning, this can include the measurement, management, and communication of return on IT investment.”
  • Centralize spending and collaborate with leaders from other parts of the company. “This encourages innovation outside of the IT function within provided “guardrails” that help prevent costly rebuilds and integrations down the road.” 
  • Use a portfolio approach to manage IT investments. “CIOs can communicate performance of technology investments that other leaders can easily understand, for example, in terms of value, risk, and reward.”

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