IT Budgets On The Rise Worldwide

CIOs expect IT budgets to increase by 2.5% in 2005, and believe their focus will be on supporting business growth and results, according to a survey by Gartner Executive Programs (EXP), a division of Gartner, Inc.

Gartner EXP, a membership-based organization of more than 1,900 CIOs worldwide, surveyed more than 1,300 CIOs representing more than $57 billion in IT spending, covering more than 30 countries for its report titled Delivering IT’s Contribution: The 2005 CIO Agenda.

“Business expectations are now forcing CIOs to transform the IS organization and 2005 is the year where CIOs must deliver more value and become a contributor rather than a commodity,” said Mark McDonald, group vice president for Gartner EXP. “They must do this without large up-front investments and CIOs are turning to business processes and business intelligence to meet this challenge.”

Effective IT

Contributing to business growth starts by providing secure, high quality and cost effective IT services, according to Gartner. This is mandatory and a baseline for IT’s credibility. It is reflected in the top technology priorities for 2005, where security features at the top of the list.

CIOs further believe that business process improvement and strategic use of business intelligence will be most significant in delivering IT’s contribution to business growth in 2005 through 2008.

Pressure for greater profitability, faster innovation and growth requires enterprises to be more agile. That means doing things better, not just cheaper and faster, thus forcing the move towards business process improvement and integration.

The focus on business intelligence reflects the need to identify and find new sources of business growth.

“Business process improvement has been a focus for IS organization for 20 years, however, it is no longer about making individual processes within a business unit or geography faster,” said McDonald. “The latest wave of business process change, business process fusion, provides the opportunity to re-engineer processes end-to-end from the customer perspective and integrate previously autonomous business processes, information and application software across business units and geographies.”

CIO Challenges 2005

CIOs also reported they face three critical challenges for 2005:

  • CIO/CEO Relationship – two thirds of CIOs see themselves as “at risk” based on the CEO’s view of IT and its performance. To address this, CIOs need to raise and stabilize the quality of IT services and provide measures that clearly demonstrate the contribution of those services and their ability to deliver growth. This needs to be articulated in business terms understood by the CEO.
  • People and Skills – Only 39% of CIOs believe they have the right people to meet current and future business needs. Additionally, only 20% of CIOs who put business process improvement in the top five priorities for 2005, believe the IS organization has the necessary skills to implement this.

    This skills gap must be addressed before enterprises can leverage this opportunity. Over half of CIOs also reported concerns around an aging workforce as a result of difficulty in attracting new people with the right skills to meet the new requirements.

  • The Changing Role of IT – The move towards greater involvement with business process and business intelligence will transform IT’s role in new ways. This will force changes in IT governance, business relationships and accountabilities, and the overall shape of the IT organization.
  • “Being a ‘new CIO leader’ requires finding the right balance across these roles,” McDonald said.

    The survey findings included responses from CIOs from more than 30 countries in a variety of industries: manufacturing (21%), financial services (19%), public sector (18%), consumer products and services (nine percent), professional services (seven percent), high tech and communications (five percent), utilities and chemicals (seven percent), healthcare and pharmaceuticals (four percent), education (four percent) and “other” (four percent).