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The new beachhead for IT spending on maintenance? Under 45% of budget!

Another 2015 prediction poll is in, this one from CEB, a member-based business advisory firm, and the outlook is positive. According to the firm’s polling, CIOs are more optimistic than in recent years about their 2015 budgets, predicting a 3.3% increase. That’s up a smidge from the 3% budget gain they estimated for 2013-2014, and a notable step up from the 1.8% increase they predicted for 2012-2013.

horne_andrewThe budget estimates do not account for the money CIOs estimate is being spent on technology by departments outside IT, said Andrew Horne, managing director at CEB. Finance leads the pack with 4.5% of its budget allocated to technology, followed by HR (4.3%), marketing (4%) and operations (3.5%).

“It’s not cannibalizing IT but increasing the overall amount spent on technology,” Horne said. Indeed, he’s pretty sure the CIO estimate is low, and said he is working with CEB business members in these areas to get firsthand figures. “When we did this last year, we found out that many of those departments were actually budgeting twice as much as the CIO thought they were,” he said.

Maintenance budgets decrease (Hello, cloud)

So, budgets are increasing and the overall spending on technology keeps rising, a trend consistent with IT’s intercalation into just about every aspect of the business. Here’s the more interesting news from the CEB benchmark:

CIOs in general are making steady progress in reducing the money they spend on keeping the lights on: maintenance accounted for 57% of budget in 2014, compared with 63% of budget in 2011.

Moreover, a select group of companies in the benchmark, 17% to be precise, had reduced maintenance spending to about 44% of total IT budget.

“We think they are the trailblazers,” Horne said, adding that CEB checked the variables that might have accounted for the double-digit difference, including whether these companies were predominately startups with no costly legacy systems. They were not. “They looked like the other companies.”

This cohort is aggressively using the cloud to drive down maintenance costs, coupled with “flexible budgeting,” Horne said. “They are much better at moving money around throughout the year, and much more opportunistic about saving money where they can on the maintenance in order to focus on building new things,” he said.

Budgets shifting to technologies that ‘touch the customer

Another characteristic of the under-45% group? They make IT services transparent to the business, which allows the business to better understand what the IT function is doing but also exposes those services that are not supporting a business outcome. “This makes it easier for IT to have conversations with the business about sunsetting certain systems or reducing support,” Horne said.

So how are CIOs in general using the money they saved on maintenance? Spending on collaboration, analytics and customer interface technologies increased in 2014 and is expected to continue to rise, while the amount spent on process automation is going down.  “They are spending more on technologies that touch the customer,” Horne said.

Read more about IT 2014 – 2015 trends in SearchCIO’s coverage of the annual TechTarget IT Salary and Careers Survey:

 Email Linda Tucci, Executive Editor, or find her on Twitter at @ltucci

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