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New dynamic in IT services see spending power come back into CFO hands

The CFO’s influence over IT services spending in on the rise as the industry undergoes a transformation of who it sells to and the services on offer, a new report claims.

The latest Forrester report New Dynamics Shape IT Services Spending found 41 per cent of firms expect CFOs to have more influence over IT services spending in the next 12 months, up five percentage points on 2011. In contrast, the CIO’s influence was 44 per cent, a dip over the same timeframe. Line-of-business executives including the chief marketing officer were also significant buyers and 21 per cent of respondents saw these individuals increasing their influence over the next year.

Forrester attributed the rise in the CFO’s influence to the transforming IT service industry led by who it sells to, the services being sold, and how those services are delivered. A major disrupter is the proliferation of vendors specialising in new technologies like predictive analytics, big data and mobile. Rather than interact with the CIO and incumbent suppliers, these vendors are selling to business decision makers and circumventing the IT department, Forrester stated. Interestingly, 16 per cent of those surveyed admitted to “unsanctioned buying” of these services by the business outside of IT.

Of the services on offer, software-as-a-service (SaaS) is the biggest growth area, with 46 per cent of respondents expecting to spend five or 10 per cent more on such offerings in the next 12 months and 11 per cent expecting to spend more than 10 per cent.

Forrester also found the business’ increased influence on services spending will ensure ROI and cost justification processes are more important than ever. Thirty-five per cent of those surveyed for example, saw more business outcome-based services contracts.

“While economic uncertainty drives cautious sourcing behaviour in the short term, mobile, big data and cloud – technologies that drive innovation – are radically changing the way businesses assess opportunities for IT services buying,” the report’s authors stated. “Business leaders will increasingly drive the buying agenda with a strong focus on business innovation and growth.”

The report criticised incumbent vendors for their focus on long-term complex outsourcing contracts and one-dimensional client relationships, which fail to address changing customer requirements. It also called on CIOs to up their vendor governance game.

“In the face of changing buyer dynamics, new delivery models and a shifting supplier landscape, CIOs will need to recast their vendor management group from a centralised procurement-centric organisation to a more decentralised supplier management group focused on delivery of business outcomes, not merely on costs,” the report continued.

Forrester’s findings were based on a survey of more than 1,000 North American and European IT services decision makers in mid-2012.

Follow CFO World Australia on Twitter: @CFOworld_AU, or take part in the CFO World conversation on LinkedIn: CFO World.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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Tags: Software-as-a-Service (SaaS), IT spending, Forrester Research, IT services market
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