TotalCIO

Sep 27 2011   2:25PM GMT

SIM CIO survey: IT budgets trend up, BI reigns as top CIO investment

Linda Tucci Linda Tucci Profile: Linda Tucci

When asked, “Are you better off than you were three years ago?” most IT organizations answer in the affirmative. IT budgets, hiring and salaries are on the rise at the majority of companies, according to the latest annual CIO survey from the Society for Information Management (SIM).

In 2009, more than half of organizations surveyed suffered budget cuts. In 2011, however, 56% of IT budgets increased, a healthy percentage compared with 2010, when 34% of organizations saw their IT budgets go up, and to 2009, when 25% of organizations reported IT budget increases. These results are based on SIM interviews with CIOs at 275 organizations in late June.

“It’s probably the biggest jump I have ever seen, and puts us back at pre-recession levels,” said Jerry Luftman, distinguished professor at the Stevens Institute of Technology, who conducts the research for SIM’s annual benchmark.

IT leaders expect the positive trend to continue into next year. Despite talk of a double-dip recession, 84% of the CIOs surveyed expect 2012 budgets to equal or exceed 2011 levels. In one area, IT budgets did decline in the 2011 CIO survey: The percentage of corporate revenue allocated to IT dropped from 3.8% in 2010 to 3.5% in 2011. Luftman has attributed the decrease to a rise in corporate revenue last year and to the historically high percentage of corporate revenue allocated to IT over the past three years — which, at nearly 4%, was well above the average 3.6% of the past six years.

On the hiring front, turnover remains quite low, at 7%, partly because retirement-age boomers can’t afford to retire and partly because there are fewer job openings for senior-level positions, Luftman said. CIOs tell him that when an experienced staff member does retire, they are using that senior-level salary to hire two “newbies,” who cost less and often come in with the newer skills and technology expertise CIOs need. On the bright side, however, overall spending on salaries is trending up:

  • IT staff salaries increased at 66% of organizations in 2011 compared with 2010.
  • 67% of organizations expect staff salaries will go up again in 2012.

BI a hard nut to crack

Given their plushier budgets, what are CIOs spending money on? Business intelligence (BI) outstripped cloud computing; ERP systems; mobile and wireless apps; and customer relationship management, or CRM, systems as the top technology investment by CIOs in 2011, according to the survey — and by a long shot.

“BI was a standout — it was 50% higher in the rankings than all the others, which were relatively close in ranking,” Luftman said.

But it appears the upstarts are poised to give BI a run for its money. Mobile and wireless apps took fourth place, up from ninth last year and 13th in 2009. Cloud computing occupies second place, up from fifth place a year ago and 17th place in 2009, the year it made its debut on the SIM survey. The wide disparities in the amount companies are investing in cloud, however, show how nebulous this new computing model remains, Luftman said:

  • 20% spend more than 10% of their IT budgets on cloud.
  • 21% spend between 1% and 10%.
  • 43% are doing nothing with cloud.

In one respect, BI’s top standing in the SIM survey is no surprise. The technology has ranked first or second on the SIM list of the top five CIO investments since 2003, Luftman said. The reasons for the heavy investment in BI, however, keep changing, he added — a mark of just how hard it is to extract potentially valuable insight from the reams of data collected by businesses . “Initially, BI ranked high because of the complexity of getting your databases in order,” he said.

As organizations have mastered the technical challenges of their BI investments, they have recognized they don’t have the talent to support the technology, Luftman said. “You can’t throw a tool up and expect magic to come out.” The portfolio of required skills goes beyond understanding databases and the way the technology works (important as that is) to include statistical and in-depth business knowledge. People with that combination of skills are “few and far between,” he said. The large volume and the velocity of data generated by companies — Big Data — adds to the challenge. “It is one of the more complicated technologies that we have been engaged in in perhaps in 50 years,” Luftman said — and SearchCIO.com can attest to that in our coverage of Big Data.

CIOs still have serious worries. Of the Top 10 IT management concerns of 2011, the first four focus on using technology to help the business compete. IT and business alignment claimed the top spot in 2011, followed by business agility and speed to market. Reducing business expenses through business process management and re-engineering took the third spot; and increasing business productivity and cost reduction came in fourth. Rounding out the Top 10 management concerns, in order, are these:

5. IT strategic planning.
6. IT reliability and efficiency.
7. Enterprise architecture/infrastructure capability.
8. Security and privacy.
9. Revenue generating IT innovations.
10. IT cost reduction.

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