Main content

Computer Economics data shows IT spending optimism amidst tight budgets and disruptive tech

Jon Reed Profile picture for user jreed July 21, 2017
Computer Economics just issued a somewhat upbeat report on IT spending. However, I see some storm clouds, so I dug into the findings with Computer Economics' Frank Scavo.

With the onslaught of tech hype from AI to blockchain to analytics, I always look forward to Computer Economics' annual IT Spending and Staffing Benchmarks Report (you can download the executive summary free).

In some years, the report brings concerning news - but this year's report had a quiet optimism. Yes, CIOs are still under the budget microscope and doing more with less, but they are also finding a way to advance their cause via cloud efficiencies, modernizing legacy systems and strategic use of outsourcing. A relatively strong economy (for now) underscores that optimism.

A good chunk of the report breaks down IT spending trends by industry, and not all industries are thriving (energy and utilities for example). The overall push to automation is having a notable impact on IT hiring - an issue for IT professionals.

To get a gut check on the report, I had a back and forth with Computer Economics President Frank Scavo.

Jon Reed: Overall, this seems an optimistic set of findings - even the decline in capital expenditures shows that operational spending in cloud is paying off, and as you say, stabilizing the ups and downs of IT spending. Modest growth - albeit with flat hiring - means IT is achieving some productivity gains. Even a concerning stat like "52% of IT executives feel that their IT budgets are somewhat or very inadequate to meet the needs of the business" is down from 60 percent in your 2016 survey. I'm looking for some bad news here but really not seeing it - am I missing something?

Frank Scavo: You’re not missing anything. Of course, if you ask any executive if his or her budget is adequate, a lot of them are going to say, no. So, you have to look at the change in that sentiment number year over year, and this year we are seeing it move in the positive direction. IT spending growth is not going gangbusters, like it was in the late 1990s or even in the mid-2000s. But overall, the situation is quite positive. IT budgets are growing modestly, and we are seeing productivity gains that are making budget dollars go farther.

Reed: Despite the relatively strong economy, CIOs are making do with what they have, rather than going to executives for more funding support. Did you get any insight into how CIOs are working with Lines Of Business, who have been known to press ahead with their own cloud and BI purchases?

Scavo: Actually, in our survey, we capture that line of business spending in our metrics, so no, that doesn’t explain the conservative spending growth. We’ve been doing this survey for over 35 years, and there is a definite pendulum swing with LOB spending. In the 1980s and even into the early 1990s, there were a lot of personal computer purchases that were outside of the IT budget. That was the beginning of so-called shadow IT.

But today, nearly all PC purchases are in the IT budget. Later it was smart phones and tablet computers, but now even that has mostly swung back into the IT budget. Now you do have some departmental cloud apps that are paid for by the business units. You see that with cloud HCM apps, for example. But in many cases, the spending may come out of the departmental budget, but the procurement and contract is negotiated through the IT organization.

Reed: Given cloud spending increases, no surprise that data center spending is decreasing. Reviewing Finding 11 on areas of IT spending emphasis, any surprises you see there? Any big gains or omissions from last year? See graphic:


Used by express permission of Computer Economics - report summary here.

Scavo: Actually, spending priorities are nearly the same as last year, so even with a different sample than last year, we are getting the same results. Keep in mind, security/privacy being No. 1 does not mean that is where the most money is being spent. It means that is the area where the largest net percentage of organizations are increasing spending.

It’s like Net Promoter Score: we take the percentage increasing spending and subtract the percentage decreasing spending to get the net percentage. On that measure, security/privacy takes the top spot. With all the high profile security breaches over the past year, that’s no surprise. Cloud applications take the number two spot, which shows that the move to SaaS still has a lot of steam left in it.

Advice for IT pros and budget holders

Reed: Your findings on the flattening of IT hiring could be a bit of a cold shower for job seekers. Yet even within IT hiring, you found areas of hiring growth. Any advice for IT professionals based on the skills demand you are seeing?

Scavo: If you are an IT professional, I would definitely be focusing on higher level skills: anything business-facing, like business analysis, systems analysis, project management, data analytics. Application development is good also, as long as is it is with newer technologies. If you are in what I call “blue collar IT” – things like server administration or desktop support—I would definitely think about upgrading your skills. If you are on the help desk, that’s fine if it is your entry level position, but look at it as a stepping stone.

Now, keep in mind, this is a survey of corporate (and public sector) IT organizations, not IT hiring in general, which would include IT service providers. So, for some of the positions our survey shows as declining, like data center jobs, the service providers may be picking up some of the slack. But with our research showing IT outsourcing levels in decline recently, I don’t think that can be much of it.

Reed: A good chunk of the report looks at how IT spending is playing out in various verticals. Any big surprises or interesting lessons there?

Scavo: Well, with the price of oil having plummeted, it’s no surprise, the energy and utilities sector is in the tank, showing no growth at all this year, which at least is an improvement over last year when it had negative growth in IT spending. On the positive side, the professional services sector is showing stronger growth. It just goes to show, IT budgets are driven a lot by economic conditions in each sector.

Reed: ny advice for IT managers based on your findings? Sounds like investigating cloud investments for productivity gains and building roadmaps for modernizing legacy systems are two takeaways.

Scavo: As we say in the report, if you are a CIO, don’t expect to get a larger slice of the corporate pie. As much as we like to say that IT needs to be at the center of business transformation, it doesn’t mean that businesses are willing to write a big check to get there. You have to do it by becoming more productive in your ongoing support.

Our study shows that IT leaders are getting the message. They are moving systems to the cloud, not investing in on-premises data centers, for sure. But there are also productivity improvements we are seeing in other areas, like help desk and desktop support. There is a lot you can do with automation and simply, best practices. Take those savings and invest them in innovation. That’s what the business expects you to do.

My take

I have no beefs with the data or Scavo's analysis. But I would caution readers who take a business-as-usual vibe from these findings. There is an urgency to IT right now. Automation has a way of arriving to a company or job role unexpectedly. The time to move "up the stack" or expand skills with new tools/machine learning is now.

For IT managers, working within existing budgets buys time - but modernization also carries urgency. Two years down the line, if executives struggle to pull "single source of truth" data for dashboarding, planning and decision making, the warm CIO seat is going to get real hot. This report implies we have some runway - we'd better use that runway well.


A grey colored placeholder image