Bigger budgets go to strategic IT

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 Wednesday -- 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 per cent across the nearly 1500 companies that Gartner surveyed. The data that matters for IT execs: Budgets for companies focused on bottom-line-oriented efforts are increasing 4.9 per cent, a Gartner Group vice-president, Mark McDonald, said. Those organisations whose IT strategy involves only an efficiency focus will typically see budget increases of just 1.7 per cent.

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 said.

But IT managers hoping for a return to the 1990s glory days of annual budget increases of 15-plus per cent 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 US 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 per cent, you might just see a 0.2 per cent effect on the whole budget," McDonald explained, "You can get more bang for your buck by lowering [overall] op

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