CIOs must make do and mend, not step out and spend

Beverley Head
Tuesday, 17 November 2009 11:22

IT Industry - Market

Spending on information technology will rise by 2.6 per cent next year – but half of all CIOs should expect their IT budgets to stay the same or even contract next year before a slow improvement in 2011 according to industry analyst Gartner.

Delivering the keynote address at the Gartner Symposium being held in Sydney, Peter Sondergaard, senior vice president of research, said that 2010 will be all about “balancing cost, risk and growth.”

With enterprise IT spending tipped to grow by just 1.3 per cent for the next five years in Australia, the local IT market should not expect to return to 2008 levels of business before 2012. Gartner warned that the “Make do and mend approach of the last 12 months will have to continue.”

For the IT industry 2009 has been its worst on record according to Gartner which says spending will decline during the year by 5.2 percent. While Gartner wasn’t anticipating champagne bottles be cracked open any time soon, it did forecast that the IT industry will grow again in 2010 – by 3.3 percent to $US3.3 trillion.

But to get any budgets across the line CIOs need to articulate the need for IT investment in terms of the benefits to the business according to Sondergaard. “IT needs to demonstrate the positive line of sight to a business objective and use relevant measures for business executives.”

It would no longer be good enough to measure IT spending as a percentage of revenue, rather CIOs needed to measure “IT investment per account holder in a bank, IT investment per tonne of goods transported, or IT investment per hospital bed.”

Analyst Andy Kyte added that when IT departments were developing business cases for any new applications development they needed to share with the business the true cost of ownership of the application over its lifetime. He said analysis had shown that the upfront development costs of enterprise applications was only around 8 per cent of the total cost of running the application over 15 years.

If business wasn’t prepared to foot the bill of those lifetime costs, enterprises would be saddled with costly orphan applications.

In terms of issues currently exercising CIOs, Sondergaard said analysis of Gartner search strings found that cost was still the number one issue, followed by cloud computing, and then CRM, ERP and supply chain management systems. While inquiries about cost had peaked in April, he said that there has been “A steady rise in interest in cloud services. Next year is when we will all move from the discovery phase to small pilots.” Interest in new enterprise applications meanwhile emerged in August he said, which suggests some optimism about future investment.

Gartner suggested an additional three important topics for CIOs to consider were improving their capabilities in business intelligence, continued investment in virtualisation as a cornerstone for future cloud infrastructures, and for organisations to get to grips with the rise of social media and pattern recognition which could help them identify leading indicators useful for executive decision support.