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2010 Brings Flat IT Budgets, but a Focus on Recovery

CIO Executive Board Releases IT Budget Outlook and CIO Priorities for 2010

ARLINGTON, Va.--(BUSINESS WIRE)--Oct. 15, 2009-- Entering the most uncertain budgeting season in history, the CIO Executive Board, a program of the Corporate Executive Board (NASDAQ: EXBD), collected and conducted detailed analysis on spending, staffing, technology adoption and performance data from nearly 200 large organizations spanning the globe and industries. Key findings include:

IT Operating and Capital Budgets Will Remain Flat in 2010: Operating and capital budgets will remain flat into 2010, mirroring the lack of growth IT organizations saw between 2008 and 2009. Adjusted for inflation, this represents a continued, year-over-year decline in real IT spending for 2010. The median IT operating budget as a percent of revenue in 2009 is 2.13%.

87% of CIOs are Preparing for a Recovery, But Cautiously: Although uncertain about the shape and timing of a recovery, 87% of CIOs say they are preparing for one -- 49% report revising governance models and prioritization criteria to handle increased project demand. However, with CFOs still focused on increasing cash reserves, CIOs are seeking to balance their response with cost containment, structuring flexible arrangements with sourcing partners (42%) and leveraging cloud-based models for processing and storage (26%) that will allow them to add capacity only as required.

Discretionary Spending, Contractors and Service Levels Targeted for Cost-Cutting: IT organizations tried to control costs in predictable fashion in 2009:

  • Cutting discretionary spending from 24% of the IT operating budget in 2008 to 20%.
  • Reducing the number of contractors by 12% from 2008 while holding internal staffing flat.
  • ‘Rightsizing’ service levels -- 26% of organizations proactively lowered end-to-end availability commitments for mission critical applications in 2009.

Maintenance Consumes Two Thirds of the Operating Budget: Maintenance spending rose from 58% to 66% of the total operating budget between 2008 and 2009, reflecting a lower appetite for investments aimed at delivering new business capabilities. But the news wasn’t all bad -- IT organizations managed to preserve 8% of the operating budget for Innovation in 2009 despite the harshest economy in recent memory.

Unified Communications, Desktop Virtualization and the iPhone are Beginning to Reach Maturity: CIOs report that unified communications (22%), desktop virtualization (10%) and the iPhone (9%) are starting to see broad deployment.

CIOs Are Forging Their Own “Recovery”: CIOs are joining their executive teams in forging their own “recovery.” The survey revealed four key priorities for IT organizations in 2010:

1. Readying IT for a fast, flexible response to the recovery

2. Exploiting IT to enhance the end-to-end customer experience

3. Harnessing unstructured information for competitive advantage

4. Crafting a productivity strategy for social media

CIO Executive Board Executive Director Shvetank Shah says, “Although talk of an economic recovery is gathering steam, organizations are taking a ‘wait and see’ approach to increasing IT investment. This means a second straight year of flat budgets, but it doesn’t mean that IT organizations will spend 2010 looking inward. They’ll continue to focus on containing costs to hedge against further economic uncertainty, but CIOs will also be looking to quickly reposition as the situation changes and use new analytics and social media capabilities to better understand and serve their customers and drive productivity internally.”

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Source: The Corporate Executive Board

The Corporate Executive Board
Joni Renick, 571-303-4074