CIO technology spending focused on reducing risk, boosting efficiency

Doing more with less remains the mantra for CIOs as we dig into our IT Priorities Survey on technology spending. The big priorities? Mitigating risk. Essential upgrades. Cutting costs.

This article can also be found in the Premium Editorial Download: CIO Decisions: New tactics for managing lean IT budgets:

The Wall Street crowd might be ready to spend again, buoyed by bailouts and record bonuses, but CIOs don't seem

inclined to go on any technology spending sprees in 2010, our annual IT Priorities Survey of senior IT executives and managers shows.

With two-thirds of the 171 respondents facing flat or declining IT budgets this year, CIOs and senior IT managers remain focused on technologies and projects that mitigate risk, boost efficiency and reduce IT costs. For example:

  • Compliance is the top management initiative for 2010, cited by 33% of respondents, followed by business process automation (29%) and data retention and lifecycle management (26%).
  • Disaster recovery/business continuity is the most likely infrastructure project to get the go-ahead this year for 53% of our respondents, followed by server virtualization (43%) and Windows server 2008 (26%).

The widespread migration to the cloud we've been reading so much about? That isn't happening for CIOs in 2010, with only 12% of respondents likely to implement an internal cloud this year and a mere 8% planning to work with an external cloud computing provider.

The conservative focus for technology spending in 2010 extends to the realm of security, where data protection (40%) and network-based security and antimalware deployments (40%) trump mobile endpoint security (19%), a so-called hot commodity.

Software spending, which took a beating in 2009, shows few signs of making a roaring comeback. The two top priorities of our survey respondents are business intelligence (26%) and custom applications (24%), but both of those categories were outpolled by "none of the above," cited by 27% of respondents. Meanwhile, service-oriented-architecture (SOA) remains a low priority (11%), contrary to reports from Gartner Inc. and Forrester Research Inc. that CIOs are showing deep interest in what the analyst firms consider "lighter-weight" solutions like SOA.

IT budgets focus on cost-cutting and risk reduction

In follow-up interviews this month with survey respondents on their 2010 technology spending plans, CIOs remain risk-averse. Several, like Tom Gainer, CIO at FirstBank Southwest, a regional bank based in Amarillo, Texas, have given the green light to only the most critical projects. Gainer, whose 2010 budget is actually less than in 2009, plans to bolster network security and upgrade the bank's Voice over Internet Protocol and virtual private network. Later this year, the bank will migrate to Windows 7 as part of a long-postponed computer refresh.

Who can blame CIOs for their caution? While IT budgets were not singled out for cost reduction in 2009, as they were after the dot-com bust, many IT departments were strained to the breaking point.

A good example is Sharon Gietl, CIO at The Doe Run Co., a St. Louis-based mining company, where "the recession caused us to re-budget four times as a corporation and department," she said. IT resources and projects were realigned on an almost real-time basis to keep the company above water, she said.

The relentless pressure to cut costs did not abate in 2009. Stamford, Conn.-based Gartner, which initially forecast modest IT budget increases for 2009, recently pronounced the last 12 months the worst year for IT budgets since it began tracking the numbers in 1999. According to Gartner, IT budgets dropped by 8.1% in 2009, essentially erasing four years of growth.

Our survey corroborates the significance of the economic downturn. Asked to gauge the impact of the economy on their budgets, 52% of our respondents said it was "significant" and another 30% said it was the 'biggest single factor." When asked to describe their IT approach in 2009, 51% said they weathered the recession by "doing more with less." Another 23% said they survived by "doing more with the same." When they did try new technologies or products in 2009, 42% of respondents said it was "to reduce cost."

Asked to gauge the impact of the economy on their budgets, 52% of survey respondents said it was 'significant.'

That isn't likely to change quickly in 2010. Cambridge, Mass.-based Forrester, which is forecasting between 6% and 7% growth in IT budgets in 2010, said that although the tech outlook has brightened, CIOs do not plan to move forward with new projects and investments unless their business executives report that business is getting better. For the start of 2010, the few IT investments that will get approved will be directly related to reducing business costs, said Forrester analyst Andrew Bartels. If the economy picks up, Bartels has said he expects CIOs will get leave to spend over their official budgets, and shift from cost-cutting to supporting business growth.

That isn't likely to change quickly in 2010. Cambridge, Mass.-based Forrester, which is forecasting between 6% and 7% growth in IT budgets in 2010, said that although the tech outlook has brightened, CIOs do not plan to move forward with new projects and investments unless their business executives report that business is getting better. For the start of 2010, the few IT investments that will get approved will be directly related to reducing business costs, said Forrester analyst Andrew Bartels. If the economy picks up, Bartels has said he expects CIOs will get leave to spend over their official budgets and shift from cost-cutting to supporting business growth.

One technology trend that may end up saving money and helping the business grow? Storage virtualization: 35% of the IT executives said they intend to invest in it in 2010, well above the 19% who named storage security as their top priority or the 12% investing in iSCSI.

What's behind the interest? As TechTarget editorial director Mark Schlack recently noted in his piece on 2010 IT budgets, the investment in storage virtualization likely stems from companies' continued adoption of server virtualization to save money and their growing interest in desktop virtualization. Overall investments in storage did not fare as well, with 45% of respondents saying they don't plan to invest in storage security, iSCSI or storage virtualization this year.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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