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Managing technology providers to meet business initiatives: A CIO guide

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More technology spending in the hands of the business instead of IT

Gartner Inc. predicts that by 2015, 35% of technology spending won't be controlled by IT but by the business. Here's why.

By 2015, Gartner Inc. Research Vice President Brian Prentice predicts, the percentage of technology spending by the business -- outside of the control of IT -- will reach 35%. In this first part of a two-part Q&A, Prentice explains the drivers behind the uptick (in 2000 the percentage of technology spending by the business was 20%), and talks about where the money is being spent. In part two, Prentice explains how the IT department...

and the CIO's value proposition stand to change with this shift in IT spending. His prediction is based on a collection of research, not a specific survey of Gartner clients.

How much of this technology spending is expected to be driven by the consumerization of IT?

Brian Prentice: The 35% includes consumerization, but we also considered the growth in cloud computing -- where the decisions are coming from in the organization in terms of cloud implementations, particularly with SaaS [Software as a Service]. The number of things brought in by individuals -- such as media tablets -- clouds some of the technology spending. But what we're talking about here is the actual IT budget of the company and where the money is being spent on IT, not by individual employees but by who in the company is making the decision on that spend.

brian prentice, headshot, imageBrian Prentice

Which business groups will account for the majority of this technology spending?

Prentice: We haven't looked at this on a department-by-department basis. We aggregated this as a whole, but the obvious example is marketing. Marketing managers are driving a significant amount of IT spend. Also [influencing this spend is] a fair portion of external-facing solutions, like Web and increasingly, mobile apps. Those are often driven by marketing departments, and they work closely with digital design agencies.

IT departments are brought in to support the integration of these customer-facing systems into the enterprise systems, but IT is not leading these projects in most cases. [Human resources] is another department that is making many of their own decisions, such as SaaS-based e-recruitment tools, or even hiring their own consultants to do a better job on an employee-facing portal. Finance [groups] are buying SaaS solutions and client tools, and reaching out externally for that.

What's happening is the business now gets it, and they're getting it in a very profound way.
Brian Prenticeresearch vice president, Gartner Inc.

Then there's another interesting area that we call 'IT/OT' [information technology and operational technology]. These are situations where a whole set of machinery -- and this could be warehouse-based, supply chain-oriented or manufacturing systems -- are really blurring the lines between what is an IT system and what is a piece of traditional operational technology. It is the line-of-business managers that have the domain expertise to make the decisions on those operational systems, not so much the IT department.

When asked whether cloud-based services, for example, are being purchased outside of IT, one CIO recently said, 'Yes that is happening, but that contract for those services still has to be approved through my office.' Another CIO said that he is being asked to make sense of, and put governance around, all the SaaS solutions bought by business. Despite business groups buying technology themselves, would it seem that the IT department is still very much involved?

Prentice: We're not predicting the demise of the IT department. We're highlighting what CIOs have been asking for, for a long time: business and IT alignment. It's always been, 'Why don't people better understand and appreciate the value of IT?' What's happening is [that] the business now gets it and they're getting it in a very profound way. The thing is that it is not manifesting in the way many CIOs expected, which is all these people have a light bulb that goes off, and they rush over to the CIO and say, 'We get the value of IT, we want to make sure you get more money and sit down and help us.'

What's happening is that people are understanding the value of digitization, the value of information, the value of analysis of that information, and they are understanding it within the context of their job. Within their domain expertise, they are significantly more empowered to get these things done than the IT people who understand the technology but maybe not necessarily the domain within which the IT operates. So, the IT department is in a position of having to adapt and change, and that is to work collaboratively with the business to allow the business to be able to bring to the table what they do best.

At the end of the day, IT is going to have to back off a bit and say, 'Look, there are some things we aren't that great at, but there are things that we are really good at, like the integration of systems, the overall management of the data as an asset to an organization, and the experience with the contracts and the terms and conditions that vendors try to manipulate.' We still see a very important role of the IT function, but it's starting to evolve.

What is it that the business expects of IT and the CIO moving forward?

Prentice: IT organizations are allocating probably 80% of their budget to 'keep the lights on.' If we think of it from a portfolio perspective, companies are running the business, growing the business and transforming the business. How does IT support each one of those initiatives?

If you are working in a monopoly regulated utility, then 80% [put toward] keeping the lights on might match the IT investment profile that the CEO has for the organization. If you're in a startup organization, that's not going to cut the mustard. The CIO has to make sure that the money being spent in IT matches the investment profile that the CEO and the rest of the business has. If you really need to chop that 80% down and reallocate 30% to grow the business and put 10% to transformational activities, that's because that's the expectation that the business has. At some point there has to be a matching of the resources, the efforts and the focus to what the business overall is trying to get done.

Next Steps

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Essential Guide

Managing technology providers to meet business initiatives: A CIO guide
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