INFORMATION TECHNOLOGY PRACTICE

CIO EXECUTIVE BOARD

20112012 IT Budget Benchmark: Key Findings

About the IT Budget Benchmark In July and August 2011, the CIO Executive Board fielded the 20112012 IT Budget Benchmarking Survey to assess IT spending, staffing, and outsourcing levels at more than 175 organizations globally, representing roughly US$38 billion in IT spend. About Us The CIO Executive Board identifies the best business solutions to challenging functional and IT management problems facing CIOs. Our solutions are vendor independent and sourced from our vast executive network that spans the C-suite. This unique position allows us to share best practices that offer tangible business value across industries and geographies. The CIO Executive Boards solutions are peer informed and immediately actionable, helping our members elevate corporate performance by becoming not just better IT managers but also better business leaders. The CIO Executive Board is a program within Corporate Executive Board. Learn More www.cio.executiveboard.com +1-866-913-8101

Executive Summary

Budget growth will be scaled back after 2011 rapid rises. 2011 was a unique year for IT budgets. Many organizations saw double-digit increases as they addressed a backlog of projects built up during the recession. With the buildup largely cleared and renewed economic uncertainty looming, 2012 opex budgets are expected to grow by a modest 2.9%. Capex will grow by 5.1% in North America and shrink by 14.2% in Europe. Information management projects outstrip process automation projects. In 2011, information management projects accounted for more of the IT project budget than process automation. This shift is expected to accelerate in 2012. A majority of organizations plan to adopt an integrated IT service model. Fifty-four percent of organizations plan to offer at least some end-to-end IT services by the end of 2012.

Capex Growth Spikes Then Flattens as Project Backlogs Clear 2011 saw an average 20.2% increase in IT capital investments as organizations addressed the backlog of projects left over from the recession. With this buildup largely cleared, IT capital expenditure growth is expected to flatten in 2012. North America will see a 5.1% growth rate, while in Europe, concerns about the economic outlook will lead to a 14.2% fall in capex spend. However, given the magnitude of increases in 2011, this still represents higher spend than in 2010. Most industries will follow a similar pattern; however, banks and companies in the software and IT services sectors both expect stronger capex growth in 2012. Both sectors are playing catch-up, as they did not see the 2011 capex spikes reported in other industries.
Figure 1: Median Change in IT Capital Expenditure from the Previous Year

40% 30% 20% 10% 0% (10%) (20%) 2009 2010 2011 2012

North America Europe

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20112012 IT Budget Benchmark: Key Findings

Professional Services Note The CIO Executive Board has worked to ensure the accuracy of the information it provides to its members. However, this project relies upon data obtained from the 20112012 IT Budget Benchmarking Survey, and the CIO Executive Board cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the CIO Executive Board is not engaged in rendering legal, accounting, or other professional services. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from any errors or omissions in their reports, whether caused by Corporate Executive Board or its sources.

Modest Increases in IT Operational Spending Two-thirds of CIOs expect to see increased IT operating expenditures in 2012, with a median rise of 2.9%. This is slightly less than one-third of the actual increases reported for 2011 (10%). The 2012 rise in opex in 2012, is driven, at least in part, by the cost of supporting new functionality created during the 2011 capex spike. Information Management Projects Outweigh Process Automation IT project budgets will be flat in 2012, but information management projects (investments in customer interface, business intelligence, and collaboration) will continue to account for more of the project budget than process automation projects (39% versus 32%). This shift in spending continues a trend from 20102011. Based on analysis in the Boards research into The Future of Corporate IT, this trend will continue for several years. A Majority of IT Organizations Will Transition to End-To-End IT Services An end-to-end service packages together all the technologies, processes, information, and related IT resources required to support a specific business outcome. By 2012, 54% of organizations will deliver at least some end-to-end IT services. A further 11% will have adopted a multifunctional shared services model where IT is integrated with other corporate shared services. By 2013, more than 70% of organizations will have moved away from a siloed service delivery model to a more integrated form.
Figure 2: Adoption of Integrated IT Services, 20102013
IT Is Delivered Within Business Services End-to-End IT Services

9% 36%

8% 41%

11%

20%

54%

51%

Infrastructure and/or Applications Services No Defined Services

38%

39% 25% 20% 9%

2013(E)

17%
2010

12%
2011

10%
2012(E)

Rapid Growth in Spend on Cloud Solutions and Mobile Applications

The benchmark reveals two small but fast growing categories of spend. Spending on cloud solutions (software as a service, infrastructure as a service, and platform as a service) will increase from 5.6% of the total IT budget in 2011 to 7.1% in 2012, with infrastructure as a service representing the largest category of cloud spend. Spending on building and supporting mobile applications and on converting existing applications to mobile versions, represents 2.7% of total IT spend in 2011. It is expected to rise in 2012 by more than onehalf to 4.2%.

2011 The Corporate Executive Board Company. All Rights Reserved.CIO0264611SYN This document may not be reproduced or redistributed without the expressed permission of The Corporate Executive Board Company.

www.executiveboard.com Client Site: www.cio.executiveboard.com