Spending on IT infrastructure is set to increase as companies bite the bullet and acknowledge they have simply run out of capacity. The findings come from Gartner Group, which surveyed 1,600 CIOs in the fourth quarter of 2009. By Helen Beckett [Published 16/09/2010]
Storage, networks and servers to gain
Commercial and public sector CIOs plan to increase capital expenditures by 3 per cent this year and smaller organisations plan significantly stronger IT budget growth. Areas of the infrastructure crying out for reinforcement include data storage, network bandwidth and server performance. A lot of companies are also anticipating the cloud and making infrastructure adjustments for this.
"The fact is that companies have been delaying upgrades for the past three years and have simply run out of time and space", said Mark McDonald, group vice president and head of research at Gartner executive programs. Delayed upgrades include software platforms, such as Windows 7, as well as hardware infrastructure.
Data transaction volumes leap
McDonald cited the case of a large insurance client that had taken a 20 per cent hit on revenues and yet saw the volume of data transactions grow by 40 per cent. "It broke the rule that data infrastructure grows at the same rate as business and profits. The traditional view of an IT budget as planned administrative expense is showing signs of weakness in this economic environment".
The reason behind this disconnect is that organisations have opened up their systems to customers and the supply chain. A transaction does just happen internally but may happen in any part of the supply chain, and so volumes cannot be controlled or curtailed.
IT spending fluid in future
In the past, companies have finalised their IT budgets in the last quarter of the fiscal year. While 49 per cent of CIOs reported their budgets followed this pattern, many did not with 26 per cent of organisations finalising their IT budget in the first quarter of 2010, and 11 per cent of CIOs reporting that their IT budget have not been finalised at all. This indicates that IT spending is expected to be more fluid and respond to changing business conditions.
"Economic conditions are changing CIO spending priorities as the funds to upgrade infrastructure is being appropriated from reduced operating budgets," said Mark McDonald, group vice president and head of research at Gartner executive programs. Size also matters in terms of IT budget outlook," said McDonald. "The larger the organisation, the tighter it is managing its IT budget in general, and IT operating expense in particular.
CIOs' views on the future have improved since the start of the year, with more than 40 per cent seeing some form of economic recovery. However, the survey, which questioned CIOs about their economic outlook, changes in spending plans and spending priorities, found that 60 per cent of all respondents continued to see economic challenges.
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