Bulk of IT spend tipping away from chief information officers

Responsibility for IT budgets is slipping away from chief information officers as business units increase their involvement in technology strategy and purchasing decisions.

By InvestSMART · 1 Oct 2013

By InvestSMART ·
1 Oct 2013

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Responsibility for IT budgets is slipping away from chief information officers as business units increase their involvement in technology strategy and purchasing decisions.

IT departments are now directly responsible for less than 60 per cent of enterprise IT spending, down from 74 per cent, according to a survey of more than 1400 IT and business decisions makers in the Asia-Pacific region.

"Business leaders focused on business outcomes and innovation directly controlled 33 per cent of enterprise IT spending in 2012," the Forrester report says. "The influence of business leaders on IT spending at organisations across Asia-Pacific is climbing to levels never before seen."

The erosion of IT's powerbase has been going on ever since marketing departments began taking an interest in the hosting of their websites. Since then, business units have been increasingly involved in the purchase of customer relationship management and other software, and now cloud computing resources.

The Forrester report notes that many CIOs seemed to be oblivious to the trend. "Many of the Asia-Pacific CIOs we speak with do not see or accept the growing influence of the business, but the signs are clear."

It also identifies a large increase in the percentage of IT spending influenced by business leaders, in addition to that directly controlled. On average only 32 per cent of the budget channelled through IT is spent without significant business input, down from 49 per cent in 2010.

"The top reason that business leaders are spending more on technology is because they believe that it's too important for the business not to be involved."

Forrester advises CIOs to gain visibility into all the IT spending within their organisations and "create guardrails within which their business leaders can spend on IT more responsibly".

Full story: smh.com.au/it-pro

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Frequently Asked Questions about this Article…

What recent trend has Forrester identified about IT budgets and chief information officers (CIOs)?

Forrester found that responsibility for IT budgets is shifting away from CIOs toward business units. In a survey of more than 1,400 IT and business decision‑makers in the Asia‑Pacific region, IT departments were directly responsible for less than 60% of enterprise IT spending (down from 74%), while business leaders directly controlled 33% of enterprise IT spending in 2012.

Why are business units taking more control of IT spending and technology purchases?

The report says business leaders are focusing on business outcomes and innovation and believe technology is too important not to be involved. That view is driving increased direct purchasing and influence over IT decisions by marketing, sales and other business units.

Which types of technology are business units buying outside IT departments?

Business units have increasingly bought hosting for websites (often led by marketing), customer relationship management (CRM) and other business software, and cloud computing resources — areas where business teams see direct value and faster time to benefit.

How much of IT spending is influenced by business leaders, even when purchased through IT?

Forrester notes that only about 32% of the budget funneled through IT is now spent without significant business input, down from 49% in 2010 — indicating a large rise in business influence over IT spending overall.

What practical steps does Forrester recommend for CIOs responding to this shift in IT spending control?

Forrester advises CIOs to gain visibility into all IT spending across the organisation and to 'create guardrails' — governance frameworks and controls — so business leaders can spend on technology more responsibly while protecting standards like security and integration.

Why should everyday investors care about changes in IT governance and who controls IT budgets?

Shifts in IT governance can affect execution of digital strategies, security and compliance, and the speed of innovation — all factors that influence a company’s performance. Investors watching disclosures about IT oversight, cloud and CRM investments, or changes in CIO authority can get insights into operational risk and strategic priorities.

Is this change in IT spending control limited to certain regions or industries?

The Forrester survey highlights the trend across the Asia‑Pacific region, based on responses from more than 1,400 decision‑makers. While the article focuses on Asia‑Pacific, the pattern — marketing and business units taking technology control — has been observed more broadly as cloud and business‑facing software adoption grows.

What are the potential benefits and risks when business units manage more IT spending?

Potential benefits include faster deployment of customer‑facing tools, closer alignment of tech to business goals, and increased innovation. Potential risks include fragmented purchasing, weaker central oversight on security and integration, and inconsistent standards — which is why Forrester recommends visibility and guardrails from CIOs.