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CIOs juggling with grand plans but flat budgets

December 14, 2009 Leave a comment Go to comments

CIOs report that IT budgets will remain depressed for the coming year – but many say they are preparing for major projects using cloud computing, social media and analytics. Jessica Twentyman, whose work has appeared in leading publications like The Financial Times, Sunday Telegraph, Director, Computer Weekly and Information Age, investigates.

In recent months, there have been grounds for cautious economic optimism, with the U.S., France and Germany all posting positive quarterly growth in GDP. But CIOs expect to wait a while longer before they see the green shoots of renewal in their own departments. According to a recent survey of IT heads at 200 large global companies by research and training company Corporate Executive Board (CEB), IT operating and capital budgets will remain flat in 2010. Adjusted for inflation, this represents a continued, year-on-year decline in real IT spending.

But although they’re uncertain about the shape and timing of a recovery, almost nine out of ten (87%) of respondents said they are preparing for one. Almost half (49%), for example, are revising governance models and “prioritization criteria.” in order to handle an expected increase in project demand.

“Although talk of an economic recovery is gathering steam, organizations are taking a ‘wait and see’ approach to increasing IT investment,” explains Shventank Shah, Executive Director at CEB. “This means a second straight year of flat budgets, but it doesn’t mean that IT organizations will spend 2010 looking inward. They’ll continue to focus on containing costs to hedge against further economic uncertainty, but CIOs will also be looking to quickly reposition as the situation changes and use new analytics and social media capabilities to better understand and serve their customers and drive productivity internally.”

Technology that differentiates

Shah’s predictions tally with research from Gartner, which recently listed the top 10 technologies and trends that will be the most strategic for businesses in 2010 (see sidebar). Like CEB, Gartner sees analytics and social media as two areas that should be high on the CIO agenda. Gartner believes these key technologies, alongside cloud computing, could provide significant competitive differentiation but could also involve disruption to IT and/or the business. They could also require major investment and, where adopted late, could come with significant risk attached.

That suggests that there’ll be no let-off in the pressure on CIOs. How they rise to the challenges of 2010 will depend very much on how they view their roles, says David Henderson, Technology Strategy Partner at IBM. The company recently conducted face-to-face, one-hour interviews with over 2,500 CIOs from 78 countries to produce a new study, entitled “The New Voice of the CIO.” From its results, researchers were able to draw some conclusions about the traits and habits of CIOs in companies where profit before tax has been high in recent years.

“We’re seeing the gap widen between two kinds of CIOs,” says Henderson. “On the one hand, there are the more traditional CIOs, who continue to view their department as a silo, where all that matters is cost and service levels. On the other, there are those who take a more business-centric approach, spending more time outside their department in dialogue with colleagues, customers and suppliers, looking for areas where they can add real value. Our overwhelming conclusion is that the latter group is the more likely to succeed in tackling the challenges of the next few years – and this is clearly shown in the financial performance of the companies they work for. These are the ones we call ‘high-growth’ CIOs.”

High-growth CIOs

When it comes to the role they perform, high-growth CIOs excel in three key areas, according to the IBM study: making innovation real, raising the return on investment (ROI) of IT, and expanding business impact.

CIOs surveyed by IBM reported that they spend about 20% of their time creating and generating “buy-in” for innovative plans. “But high-growth CIOs do certain things more often than low-growth CIOs: they co-create innovation with the business proactively suggest better ways to use data and encourage innovation through awards and recognition,” says IBM’s report into its findings.

When it comes to ROI, meanwhile, the high-growth CIOs are both “savvy value creators” and “relentless cost-cutters.” They spend 61% more time helping their organizations to transform corporate data into actionable information than their low-growth counterparts. At the same time, 22% more high-growth CIOs than low-growth CIOs expect to implement standardized, low-cost business processes across their organization over the next five years.

In business impact terms, 47% more high-growth CIOs than low-growth CIOs responded “high” or “very high” when asked how the senior management of their organization would rate technology’s contribution to the business. And in five years, almost two-thirds expect their business models to be well-established, unique and difficult to imitate, compared to half of low-growth CIOs.

“The voice of the CIO is being heard in new ways, as CIOs are increasingly recognized as full-fledged members of the senior executive team. Successful CIOs are much more actively engaged in setting strategy, enabling flexibility and change, and solving business problems, not just IT problems,” the report concludes. Or, as one high-growth respondent (the CIO of a large global electronics company) puts it: “In IT, we are not magicians, but we are certainly jugglers.”

Top of the CIO Agenda in 2010

Cloud computing
Advanced analytics
Client computing
Green IT
Reshaping the data center
Social computing
Security, and more specifically, active monitoring
Flash memory
Virtualization
Mobile applications

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