Businesses are increasing their spending on technology, with cloud services as the big beneficiary.
Hardware and software spending is declining as spending on cloud services rises, particularly on SaaS, according to the most recent annual survey from the Society for Information Management (SIM).
Analytics/business intelligence and cybersecurity are the top two IT spending priorities, something that has been true for the several years. But marching into this mix now is “innovation” spending, an IT category signaling business expectations for IT.
SIM, which surveyed some 1,200 IT managers including 500 CIOs, said that innovation shot up from the eighth most important management concern in 2014, to fourth in 2015 to third this year.
It’s not exactly clear, from the survey alone, what constitutes innovation spending, but Craig Pedersen, director of IT at Hunter Douglas and a SIM member, believes it’s about improving the top line.
“Innovation, in my mind, is more focused on the business and revenue generation,” Pedersen said. His firm makes window treatments including blinds and shades. For this business, innovation spending might be adding visualization technologies that make it easier for a customer to understand how a new blind, for instance, will appear in his or her home, he said.
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IT spending overall is increasing. Over the last three years, IT spending has risen above 5% of revenue, but it’s not clear why.
It may well be because technology’s importance to the business is such that it’s driving increases to a “new normal” budgeting level, said Leon Kappelman, a professor of information systems at the College of Business at the University of North Texas, part of the team that developed this survey.
But Kappelman can’t rule out the possibility that a shift to cloud services is requiring more upfront investment on integration, or that IT is still catching up from the under-investment from years around the recession.
The rise in spending noted in the SIM survey, however, is in line with global data from IDC, which said spending on IT products and services was due to increase this year as businesses push digital transformation efforts, cloud and big data.
Cloud services spending now accounts for just over 12% of an IT department’s spending, and that’s due to grow to 15% next year, according to SIM.
Hardware and software spending, in contrast, accounts for 32.5% of IT budgets this year, and is forecast in the SIM survey to decline to 31% next year. Hardware and software spending ranged from 37% percent to 47% percent over the previous five years.
The percentage of IT department spending on employees is flat, said Kappelman, as cloud spending goes up. Although SIM doesn’t have headcount data, they believe hiring is rising because the spending is going up overall.
The average job tenure of CIOs is on the steady rise, and is now at 5.63 years. In 2013 it was 5.20 years. In 2007, it was 4.10 years.
CIOs may also be gaining more clout in their organizations. In 2007, about 40% of CIOs reported to the CEO. That figure is now at nearly 46.5%.
Approximately 29% of CIOs report to CFOs, according to SIM.