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Forecast 2013: Building a better IT budget

Smart IT executives are carefully constructing their budgets for 2013 with both cost-cutting and business growth projects in mind.

September 24, 2012 06:00 AM ET

Computerworld - Eric Lindgren, CIO at PerkinElmer, will spend the next 12 months like many of his peers: hunting for cost savings that can be re-allocated to high-impact technology initiatives, such as mobility and analytics. As part of this effort, his IT group will continue to streamline the company's application portfolio, move last year's acquisitions onto its corporate-standard ERP platform and shift some fixed investments into more variable models via a private cloud.

Lindgren also designed his budget so he can either curtail or expand his investments depending on how the global economy performs. "We're going into the year with contingency plans so that if [the economy] worsens or performs better than we expected, we can react quickly," says Lindgren.

Data from 2013 Forecast Survey (Base: 334; June 2012), 2012 Survey, 2011 Survey, 2010 Survey and 2009 Survey. Mouse over graph to get data details; click on items in chart key to turn them on and off.

Throughout the U.S., IT organizations are facing similar situations. According to Computerworld's Forecast 2013 survey, there is a sense of cautious optimism as IT organizations move into the new budget year. The percentage of respondents who said they're seeing an increase in their IT budgets was higher in this year's survey than it was last year: 43%, versus 36% last year. And 64% reported that they plan to make a major IT purchase or upgrade in the next 12 months, up from 60% last year (see charts, below).

More are also taking Lindgren's flexible approach to budgeting: They plan to track economic indicators and adjust their spending levels accordingly, says Andrew Horne, managing director at The Corporate Executive Board. In a recent survey, the business advisory firm found that budgets were expected to rise by just 1.5% to 2%, but Horne believes respondents might expand their spending beyond what they initially report, as they did last year. "People are very cautious as they do their planning, but if they see company or economic performance doing better, they're becoming more agile about being able to invest more," he says. "More people are looking at rolling budget scenarios, to formally embed a degree of flexibility."

Clearly, lessons from the recession are still top of mind: "Containing costs" was cited as the far-and-away No. 1 business priority among the 334 IT executives who participated in Computerworld's Forecast 2013 survey, and "economic pressure" was the top management challenge. And, as in last year's survey, when respondents were asked to name the single most important technology project they would undertake in the coming year, the top two responses were virtualization and the cloud, both of which promise to reduce operating costs.

"All of us are facing the same challenge," says Joe Mahaffee, executive vice president and chief information security officer at Booz Allen Hamilton. "We've all got infrastructure we need to manage, increasing cost pressures and uncertainty in the market, but we're all focused on our growth agendas, whatever they may be. We've got to leverage technology in a more effective and efficient manner to allow that to happen."

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Fiscal Policy

IT Must Keep a Grip on Tech Spending in 2013

Thanks to trends like cloud computing, the consumerization of IT and the bring-your-own-device (BYOD) movement, a company's IT budget and its technology expenditures aren't always one and the same. In many cases, technology decisions and purchases -- particularly those involving mobile apps and the cloud -- are made by individuals or business units, not by IT.

"If you look at an enterprise's total [technology expenditure], what percent does the IT budget represent today?" asks Forrester Research analyst Craig Symons. "I would submit that many organizations would not be able to answer that, because they have no idea what the business is spending on technology outside of IT."

What percentage of your total enterprise IT expenditures occur OUTSIDE of the corporate IT budget?
0%-10%: 49%
11%-20%: 20%
21%-40%: 17%
41%-100%: 15%
Source: Computerworld 2013 Forecast survey of 334 IT executives; June 2012

In Computerworld's Forecast survey, almost half of the respondents said that 10% or less of total technology spending occurred outside of the IT budget. But Andrew Horne, managing director at The Corporate Executive Board, agrees that non-IT technology spending is a burgeoning -- and not yet quantified -- trend. "In the past, it would lead to shadow IT organizations, which were wasteful and insecure," he says. "But today, it's buying services from the cloud," which doesn't require the hiring of additional IT personnel.

Horne says the trend can be a healthy one, as long as the technology purchase is contained within one business area and doesn't cut across other processes or produce data that other functions could benefit from. Otherwise, he says, IT would need to get involved and integrate the new system.

What often happens, says Symons, is that the sales organization, for example, purchases a tool and thousands of tablets and IT doesn't hear about it for months -- and then only when the sales team discovers that the application would be more useful if it were tied to a corporate database.

This trend is also increasing the need for security controls. In a recent Forrester survey, respondents named risk management as their top IT priority for the coming year. IT professionals are concerned that corporate data is put at risk when employees, for example, use a cloud offering like Dropbox to get around the email system's limitations on attachment size. And with BYOD initiatives, Symons says that reductions in enterprise spending on mobile devices are offset by the need to invest in remote management systems and adopt corporate security policies. "All of a sudden, corporate data is sitting on a folder in the cloud," he says. "It creates all sorts of issues."

Mary Brandel

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