It's IT budgeting time for 2015 -- and Barr Snyderwine is reaching for the stars.
"I'm going to present over 20% in increased IT spending" to the executive team, says the CIO at Hargrove Inc., a trade show and event services company in Lanham, Md. "I'm going to present everything I think we should be doing." On his wish list? Mobile technologies that will make it easier to access floor plans and information from the trade show floor. Those technologies will have to be integrated with internal workflow systems "so it's a little harder [and more expensive] to roll those out," Snyderwine explains.
He's also throwing in some "teasers," such as a request for 100 Microsoft Surface tablets. "Those are fabulous devices, but a little pricey. We deal with a lot of graphics, so to put them on tablets at show sites, blow them up, see them and [manipulate] them -- that could be a really killer app for us," Snyderwine says. He admits that the use case for such a splurge "isn't there yet," but he figures "it's worth putting out there."
When it comes to new technology, business leaders don't know what they don't know, he says. Therefore, it's part of his innovation strategy to make all parts of the organization aware of new technologies that can improve business processes and bring in new customers. And why not? With the economy slowly improving, IT leaders are more optimistic that corporate purse strings will loosen up in 2015, and they're eager to bring new technologies into the fold in addition to just keeping the lights on.
Computerworld's annual Forecast survey of IT executives shows that IT budgets are indeed continuing to make a nice recovery. Some 43% of the 194 respondents said that they expect their IT budgets to increase. That's up from 36% in last year's study. This year's average anticipated uptick is 13.1%, and overall, the expected changes in IT budgets reported by all respondents average out to 4.3%. IT is expected to again kick up spending on security tools, customer-facing technologies and information exchange/collaboration technologies that comprise the so-called SMAC stack -- social and mobile tools, analytic systems and cloud computing. Meanwhile, it's likely that hardware spending will continue to drop and services budgets will continue to rise.
Here's a look at what IT leaders say is on tap for 2015.
High-profile security breaches at Home Depot, Target, Michaels and myriad other companies -- along with the explosion of mobile technologies -- have propelled security spending to the top of the IT priority list for 2015. Nearly half (46%) of the IT leaders who responded to our poll said that they will invest more next year in access control, intrusion prevention, identity management, and virus and malware protection. "Whenever there are these high-profile incidents, it does tend to drive IT security spending even more quickly than it already was," says Stephen Minton, an analyst with the IDC Global Technology and Industry Research Organization. Security spending has been a constant growth area for the past decade -- rising at double-digit rates every year, he adds.
Balancing security and agility are top spending priorities for next year at Georgetown University in Washington. That's a tall order considering the IT department endured a 5% spending cut in 2014 and will see no new funds next year. But by squeezing out IT efficiencies and centralizing some functions, the department was able to free up several million dollars for new projects.
"We get roughly 45 million hits against our network on a yearly basis," says CIO Lisa Davis. "We know that we're a target -- in terms of higher education and being on an unclassified network -- so we have to be very diligent in how we're managing [security]. But at the same time, we want to bring agility and have the freedom and openness that we want to support our academic and research environments."
So Davis says that she's focusing a portion of her budget on a more proactive security posture that includes investing in a FireEye threat prevention platform that will "allow us to be responsive to security threats on our network so that we really understand what's going on."
2. Cloud Computing
Companies continue to move away from big infrastructure investments in favor of cloud-based systems. More than 40% of the respondents to the Computerworld Forecast survey said that their organizations will spend more on software as a service (SaaS) and a mix of public, private, hybrid and community clouds in 2015.
Nevitt & Associates, an agricultural asset management company in Queen Creek, Ariz., will increase IT spending by 15% in 2015 after two years of flat budgets, says CIO David Dodds. As much as half of next year's IT budget will go toward licensing for cloud-based offerings such as Microsoft's Office 365 software suite and Dropbox's file hosting service.
"I want to be the IT guy who's out of the IT business," Dodds says. "I don't have to have servers, and [employees can] bring whatever computer they have or I'll just buy them a Chromebook. We can connect to a virtual desktop that's always ready, clean, updated and secure -- and all I have to worry about is my Internet connection." He says he hopes to see his dream become reality in two years, but right now most of his IT dollars are still spent "just trying to keep the lights on."
For many companies, migrating to the cloud doesn't require new IT dollars -- just a shift away from infrastructure spending. "When companies move things to the cloud, they're spending less on traditional on-premises technology. So instead of buying their own servers, storage and systems, they're buying infrastructure as a service or software as a service," says Minton. There are exceptions, though. Small and midsize companies -- which may have the most to gain from the increased capabilities and lower maintenance needs of hosted systems -- would require budget increases to move to the cloud. "So it does drive some new spending," he adds.
3. Business Analytics
Big data is still a big deal for enterprises. Some 38% of the IT executives we surveyed said they will dedicate IT dollars to enterprise analytics, data mining and business intelligence in the coming year.
"The theme for IT spending in 2015 is all around digital business," says Richard Gordon, a U.K.-based Gartner analyst. "So you're seeing spending in things like analytics. There's a wave of data coming from customers and social media. And as the Internet of Things rolls out, there will be even more information on customers. Businesses are scrambling to figure out how they can extract value from that information."
Georgetown's Davis says higher education is just beginning to understand the value of big data and how to use analytics. In 2015, the university will marshal the resources and dollars necessary to kick off an enterprise CRM project that will include a business intelligence and analytics platform from Blackboard Inc.
Davis says the Blackboard tools will allow Georgetown to follow students' data threads while they're enrolled as undergraduates and after they become alumni. "We'll be able to leverage those data sets so we understand what our undergraduate students are doing, what activities they're in and who they're networking with until they graduate," she says. When they're out in the worlds as alumni, the university will be able to track their careers and "determine the likelihood of them giving back to the institution," she adds.
4. Application Development
More than one-third (38%) of our respondents said that they will spend money on developing, upgrading or replacing applications, including mobile apps. At trade show company Hargrove, Snyderwine says he plans to spend the largest chunk of his 2015 IT budget (30%) on application development.
Customers visit the Hargrove website to order carpeting, chairs and labor for their displays, and he says "it's time for a refresh" of the company's three-year-old customer-facing app. Snyderwine says he wants to build new apps and upgrade others to get more functionality and a "modern Windows 8-type interface," and he will probably use a third party to do that. "I need different skill sets that I don't have in-house, so I'm going to outsource a lot of that," he explains.
For its part, Cross Country Home Services, a Sunrise, Fla.-based home warranty provider, plans to increase IT spending 10% to 15% next year as it ventures into new lines of business and the consumer channel. One of its top priorities will be developing mobile apps for its traditional and new offerings.
For instance, the company's new total home management website, TotalProtect.com, can be used on mobile devices, but "it's a different experience than using a mobile app," says CIO Joel Steigelfest. "We want people to be able to enroll or initiate a claim through their mobile device, so we're doing more of that kind of investment," he explains.
Mobile spending rounds out the top five budget items for 2015 identified by respondents to the Computerworld Forecast survey. Some 35% of the respondents said that their organizations plan to invest in RFID technology, remote access tools, Wi-Fi, mobile/wireless devices and mobile device management systems. "There's a lot of investment around not so much the devices now, but more on the infrastructure and custom application development," Minton says. Companies also plan to spend on technology to support bring-your-own-device programs -- most notably the systems necessary to provide secure mobile access to internal systems, he adds.
Not Making the Cut
While spending will increase in some areas, it will inevitably decline in others. Hardware was the area most commonly cited as a target of cuts in the Computerworld Forecast survey, with 24% of the respondents saying that their employers will decrease spending on servers, desktops, laptops and other types of equipment. And with more companies thinking about outsourcing IT operations or moving systems to the cloud, 19% of those polled said legacy systems modernization or replacement will be put on the back burner and 16% said that they will spend less on data center consolidation and optimization.
"We're making concerted efforts to spend less money on on-premises infrastructure and . . . data centers," says Georgetown's Davis. "We want to leverage cloud solutions or technologies in order to find ways to be more efficient and effective."
But hardware spending isn't going away anytime soon for the majority of companies. "Moving everything to the cloud is not going to happen overnight," says Minton, who estimates that 70% to 80% of IT budgets usually go toward maintenance and upkeep.
"We think it's going to take as long as a decade for the whole journey to the cloud to pan out," he explains. In fact, IDC predicts that spending on physical hardware will rise slightly in the first half of next year before slowing down again, because the tight budgets of recent years left many companies overdue for upgrades to their on-premises servers and storage systems.
IDC expects spending on PCs and desktops to follow the same trajectory. "We're definitely going into a little bit of a resurgence in PC shipments that will be a temporary thing and then die off by this time next year," Minton says.
Investments in on-premises software will also cool off: 15% of the Forecast survey respondents said they expected cuts in spending on ERP and CRM systems, individual point applications, Web services and service-oriented architecture, open-source tools, operating systems, e-business software and content management tools.
There was a tie for fifth place on the list of the areas most commonly earmarked for cuts next year: 14% of the respondents said their organizations would dial back spending on unified communications technologies, such as email, instant messaging, telephony and videoconferencing, and another 14% said they foresee a decline in expenditures on storage, including network-attached storage and storage-area networks.
Cost Containment Still a Top Priority
Even though many of them will have more money to spend next year, 53% of the IT professionals surveyed said that containing costs is among their top priorities. Next on the list of priorities were automating business processes (cited by 47% of the respondents) and optimizing existing investments (cited by 44%).
For example, the police department in Charlotte, N.C., is looking to purchase body cameras for more than 1,000 officers -- a big issue for police departments across the country. But body cameras require a huge investment in storage, networks, hardware and maintenance, says Jeff Stovall, CIO of the Charlotte city government.
"That level of change in investment is not going to come without a sacrifice somewhere else," says Stovall. "That's where prioritization comes in: What's really important to the city versus what's really important to the individual department?"
Charlotte increased IT spending by 13% for the fiscal year ending June 30, 2015, but after that, the budget will probably remain flat, Stovall explains. His primary goal for the second half of 2015 will be to drive transparency into how each city department is spending on its own IT projects, and how that spending aligns with the city's priorities. "Transparency forces prioritization discussions at the level of the city manager," Stovall says. "That is different from the stovepiped prioritization discussions of the past."
The key is open communication, says Jason Hayman, market research manager at TEKsystems, a Hanover, Md.-based IT services, staffing and talent management company that analyzes IT spending.
The whole C-suite needs to communicate the priorities of the organization and then decide what tools are going to be used to meet those goals. Once an application is chosen, everyone must agree on who's in charge and how the technology will be supported, he adds. Business units have been known to go rogue and purchase their own systems, Hayman says. And then, "all of a sudden they're calling IT saying, This system needs to plug in with other applications,'" he notes. "It causes back-office issues or technical issues, and the CIO didn't even know this was going on, or budget for it."
It boils down to making sure there's transparency and communication within the business units. Executives from all areas of the organization need to be on board and say, "Here is what we're going to do, here are the objectives and the applications we're going to invest in," Hayman says. "[Then] the CIOs can make their best judgments."
As Snyderwine gets set to present his hefty IT budget proposal to the Hargrove executive team, he acknowledges a dose of reality. While he'd like an increase of 20%, he says, "I think I'll probably come in at around 10%." But that won't dull his optimism. "I'm not presenting gadgets; I'm presenting use cases of what technology does for the customer -- and they're looking at the sales numbers," he says. With the right pitch, technology and sales should be able to move forward together, he says. "As we say in the trade show business: The show must go on."
And while IT leaders are finding ways to squeeze out extra budget dollars for their own innovation strategies, there's often even more innovation spending going on outside the department's purview -- a growing trend in large organizations. Today, 30% of IT spending happens outside the IT organization in large enterprises, and that figure could grow to 50% over the next few years, says Gartner's Gordon. In many cases, business units are bypassing IT and buying technology themselves to deliver products and services more quickly. The implications for IT departments include a loss of control over enterprise technology and perhaps a decrease in the amount of money allocated directly to IT for innovation.
Gartner sees the rise in what some observers call shadow IT as part of a shift toward what it has dubbed "bimodal IT" -- a moniker that conveys the idea that organizations need two speeds of IT: traditional and agile. Traditional IT is focused on strong efficiency and safety, approval-based governance and price for performance. Agile IT, on the other hand, is focused on supporting prototyping and iterative development, rapid delivery, continuous and process-based governance, and value to the business.
Gartner finds that organizations are most successful when they have two modes of IT -- with different people, processes and tools supporting each. "Often, that duality requires spreading out IT projects throughout the business," Gordon says.
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