2012 corporate it spending outlook db it investor call

INFORMATION TECHNOLOGY PRACTICE
CIO EXECUTIVE BOARD TM

2012 Corporate IT Spending Outlook
Alexander Stille
European Research Director, CIO Executive Board

In conjunction with

5th January 2012

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Research IT Spending Staffing and
Spending Trends
Methodology Levels Sourcing Trends


2011-2012 Budget Benchmark
Benchmarking Survey Process

Data Set

• 178 Companies participated in the benchmarking exercise
• Of between $1 billion and $370 billion in revenue
• Controlling total IT budgets in excess of $55 billion
• Surveys completed / validated by Group CIO and IT CFO


Partial List of Organizations Participating in
the Benchmark


Participant Profile
Respondents by Region Respondents by Business Strategy
Percentage of Responding Organizations Percentage of Responding Organizations

Respondents by Information Intensity Respondents by IT Adoption and Risk Profile
Percentage of Responding Organizations Percentage of Responding Organizations

N = 178



Research IT Spending Spending Trends Staffing and


Key Insights

1. Modest Increases in IT Operating Expenditure Forecast for 2012. Two-thirds of CIOs
expect to see increased IT operating expenditure in 2012, with a median rise of 2.9%. This is
down from 10% realized growth in 2011 Opex, as companies reset spending after 2008 / 2009
freezes.

2. IT Capital Expenditure Flattens After a Year of Significant Investment. Following large
increases in capital expenditure from 2010 to 2011, CIOs are expecting to maintain capex
spending at near current levels as they have addressed the backlog of projects left from the
recession.

3. Information Management projects Outweigh Process Automation. IT project budgets will
be flat in 2012, but the budget mix is switching to smaller information management projects
rather than process automation projects,

4. Despite Continued Volatility, IT Staffing Allocation Remains Constant. Despite continued
economic pressure and increased sourcing interest, the allocation of staff across IT is predicted
to remain surprisingly stable.


Capex Flattens After a Year of Increased
Following a large increase in
Investment
capital expenditure from 2010
to 2011, CIOs are expecting to
maintain capex spending at
near current levels, with an
expected growth rate of 0.6%
for 2012.

• 2011 IT capital investments
increased as organizations
addressed the backlog of projects
left over from the recession.

• Organizations in the U.S. expect
larger increases in capex spending
for 2012, whilst European
organizations are anticipating a
sizable reduction in spending driven
by continuing economic uncertainty.

• More than one-third of respondents
expect large increases in capital
expenditure for 2012, where
recovery in spend did not happen
during 2012.


Modest Opex Growth After a Year of Increased
The 2.9% median expected in
Spending
IT operating expenditure for
2012 is a fraction of the 10%
Median Change in IT Operating Expenditure From the Previous Year
realized growth in 2011.

• The 2012 rise in operating
expenditure is driven in part by the
cost of supporting the new
functionality created during the 2011
IT capital expenditure spike.

• European organizations plan to hold
operating budgets flat in 2012
following large increases in
operating expenditure in 2011,
driven primarily by centralization
activities.

• Organizations expecting a higher
than median increase in IT
operating expenditure for 2012 are Percentage of Organizations Changing IT Operating Expenditure from the Previous
those whose products/services have Year
a high information content, as well
as innovation-focused
organizations.


Changes in IT Operating Spend by Industry
2012 IT operating expenditure
is expected to grow at 2.9% at
the median, though this
masks underlying deviation Median Change in IT Operating Expenditure From the Previous Year by Industry
across industries.



Research IT Spending Spending Staffing and
Methodology Levels Trends Sourcing Trends


The Focus on Information Over Process
IT organizations spend more
in customer interface,
business intelligence, and Breakdown of the IT Project Budget by Enablement Types
collaboration projects than 2011 - 2012
they do on process
automation.


Increased Investments in Mobile Application
Investments in mobile
Development
application development are
expected to expand in 2012
to over 4% of total IT Percentage of Total IT Expenditure Allocated to Mobile Application Development
expenditure, on average. 2010 - 2012

• Organizations are expecting
the increase in 2012 spend on
mobile applications to be driven
by:

1. Converting currently existing
applications to mobile versions
2. Preparing for mobile
application development
through foundational efforts
such as investment in new
hardware, training, SOA
services, mobile development
frameworks etc.

KEY FINDINGS | IT EXPENDITURE | CAPEX & PROJECT BUDGET | OPEX | OUTSOURCING & OFFSHORING | STAFFING & ORG STRUCTURE | APPENDIX

Spending on ‘the Cloud’ is Increasing
On average, roughly 6% of IT
operating expenditure is Percentage of IT Operating Expenditure Allocated to Cloud Sourcing
allocated to cloud sourcing. 2010 - 2012

• Infrastructure-as-a-Service (IaaS)
includes fundamental computing
resources like processing, storage,
and networks, where the consumer
does not manage the underlying
cloud infrastructure but has control
over the deployed applications and
the operating systems, e.g. Amazon
EC2.

• Platform-as-a-Service (PaaS)
includes consumer-created or
acquired applications using
programming languages and tools
furnished by a provider, where the
consumer does not manage the
underlying cloud infrastructure but
has control over the deployed
applications, e.g. Microsoft Azure.

• Software-as-a-Service (SaaS)
includes applications accessible
through a web browser where the
consumer does not manage the
underlying cloud infrastructure or
even individual application
capabilities, e.g. Salesforce.com.



Research IT Spending Staffing and
Spending Trends


IT Service Models Continue to Develop…
In 2011, 41% of IT
organizations report that Expected Prevalence of IT Service Models
they currently have end-to- 2010 - 2013
end IT services.

• End-to-end IT services are
defined as services that are
delivered across IT’s
functional towers (e.g.,
applications, infrastructure).
These services unite
applications and
infrastructure across IT silos.

• As service models change,
CIOs expect this to drive
increases in ability to
outsource more individual
service components, and to
need to increase spending
on tooling and measurement
for service delivery.

Note: Bars may not sum exactly to 100% due to rounding.


…But is not Increasing Short-Term Sourcing
CIOs expect significant
Decisions
increases in outsourcing
over the next 3-5 years,
Percentage of Organizations Mean Percentage of Infrastructure
but are not expecting to Outsourcing Infrastructure at Spending Outsourced
increase sourcing deals Various Spend Thresholds
in the short-term.


INFORMATION TECHNOLOGY PRACTICE

CIO EXECUTIVE BOARD – CONTACT DETAILS

CIO Executive Board
www.cio.executiveboard.com
European Research Director:
Washington, D.C.
Telephone: +1-571-303-3000 Alexander Stille
Fax: +1-571-303-3100 stillea@executiveboard.com
Chicago
Telephone: +1-312-730-9000
Fax: +1-312-730-9100

San Francisco
Telephone: +1-415-239-5825 European Sales Director:
Fax: +1-415-239-5826

London Tim Kelso
Telephone: +44-(0)20-7632-6000
Fax: +44-(0)20-7632-6001 tkelso@executiveboard.com
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Telephone: +91-124-479-6000
Fax: +91-124-479-6001

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Fax: +61-2-8216-0701

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© 2011 The Corporate Executive Board Company. All Rights Reserved.

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2012 corporate it spending outlook db it investor call

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