SPECIAL REPORT Tech budgets 2017: A CXO’s guide...four CIOs covering different geographic areas. In June, the company began the global rollout of its Infrastruc-ture-as-a-Service

Copyright ©2016 CBS Interactive Inc. All rights reserved.

Tech budgets 2017: A CXO’s guide

SPECIAL REPORT

2 TECH BUDGETS 2017: A CXO’S GUIDE


Tech budgets 2017: A CXO’s guideCopyright ©2016 by CBS Interactive Inc. All rights reserved.

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Published by TechRepublic

October 2016

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Contents

04 Is the IT budget ready to power digital transformation? The journeys of four CIOs

08 IT budgeting 2016–17: What the surveys tell us

16 How to craft a winning IT budget

19 Using the IT budgeting process to your advantage

21 Does the CIO still call the shots when it comes to IT spending?

25 Additional resources



Is the IT budget ready to power digital transformation? The journeys of four CIOsBy Alison DeNisco

The digital transformation is upon us, with many CIOs expected to lead the charge. These technology leaders

must determine how much of next year’s budget will drive internal and external innovation to meet staff and

customer needs—and we’ve found a wide variety in investment levels across different industries.

While 72% of CXOs report that it is “critical” or “very important” for an organization to turn to a digital business

model, only 15% said their company is agile enough to build such a system, according to an August survey

from Unisys and IDG Research.

Another recent study found that 52% of companies surveyed looked to their CIO and CTO to lead their

organization’s digital transformation, but only half said they actually had a business-wide digital transformation

strategy.

Evolving customer preferences, opportunities for growth in new markets, and competitive pressure are the top

drivers of digital innovation for companies, according to a September report from Altimeter.

“The CEOs of the world have been asked to become more technical, and look at the world from a digital

aspect,” said Neil Jarvis, CIO of Fujitsu America. “Because of this, we’ll start to see more CIOs move into

different CXO positions, and ultimately CEO positions. If you don’t know technology or the way analytics work

as a CEO, you’re probably going to suffer.”

Some 61% of technology decision makers said their company’s IT budget will be increasing in 2017,

according to a new Tech Pro Research survey. Increasing productivity with technology was one of the top IT

priorities going into the new year, the survey found.

TechRepublic spoke with four CIOs about their 2017 budget goals and how much of it will go into their

company’s digital transformation.

Moving to the cloudNeil Jarvis, CIO of Fujitsu AmericaPercent of budget for digital transformation: 40%

Information technology equipment and services company Fujitsu employs 160,000 workers worldwide, with

four CIOs covering different geographic areas. In June, the company began the global rollout of its Infrastruc-

ture-as-a-Service and Platform-as-a-Service cloud platform, Fujitsu Cloud Service K5. Next year, 40% of

Fujitsu America’s technology budget will go toward new digital initiatives such as this, Jarvis said.

http://www.techrepublic.com/article/72-of-cxos-committed-to-digital-transformation-only-15-believe-they-can-do-it/

http://www.techrepublic.com/article/two-thirds-of-businesses-see-digital-transformation-looming-half-say-cios-should-lead-it/

http://www.techrepublic.com/article/cmo-not-cio-leads-digital-transformation-says-new-report/



“Our corporate strategy is to roll out a client-centric digital strategy,” Jarvis said. “All of the things I’m doing

internally are the same issues we hear our clients discussing. We’re trying to show our clients that we are

ahead of them on that journey.”

Internally, Jarvis is now delivering Office 365 on a new network that will ride on top of the K5 cloud

environment. “We’re moving away from the desktop form, putting all of our internal apps in the cloud, and

moving secure information there as well,” Jarvis said.

The availability of data is propelling Fujitsu’s digital transformation, Jarvis said. “If we want to look at data that’s

relevant to a client, an industry, financials, or a geopolitical issue, we can do that,” Jarvis said. “There’s a need

for our ability to look at that data quickly, efficiently, and in different ways at the drop of a hat.”

About 25% of Jarvis’s budget will go to keeping existing operations running. Much of the rest will likely go to

salaries, he said. “In the past we’ve spent more on existing systems than digital innovation,” Jarvis said. “But

we as transformational CIOs are looking to partner with businesses on digital efforts. Traditional CIOs just want

to keep systems running.”

Building appsFrancois Tricot, CIO of CevaPercent of budget for digital transformation: 80%

Veterinary pharmaceutical company Ceva employs 4,000 people based in 42 countries. CIO Francois Tricot

said his goal is to deliver corporate IT in a way that is indistinguishable from consumer IT, and that “digital

transformation was key in meeting that goal.”

Tricot built an internal “Quick Apps Team” to create apps using QuickBase, which does not require code.

“It allows our team to deliver apps customized to staff’s needs within days or weeks—much faster than the

solutions we were using prior,” Tricot said. “I think that’s one of the ultimate goals of digital transformation—

getting solutions out more efficiently.”

The team developed an app store for employees that allows them to easily access the software they need

to manage and complete projects in sales, marketing, supply chain, human resources, quality control,

research and development, administration, and regulatory compliance. In the six years that the team has used

QuickBase, Ceva saw a 30% drop in IT spending, and higher user satisfaction rates. The Quick Apps team

has developed more than 300 apps used by over 2,000 employees.

Ceva’s IT team recently launched a project called Quantum, sponsored by the CFO, to push for more

digital services. “I would not be surprised to find that 80% of our IT budget next year will be linked to digital

transformation,” Tricot said. This includes work on business intelligence, performance management, CRM,

marketing web sites, supply chain performance, and talent management. Cloud computing has largely driven

the company’s transformation, Tricot said.



Breaking down siloesCharles Eckstrom, interim CIO of Orange County, CAPercent of budget for digital transformation: Currently unknown, but an increase over years past

Orange County, California’s local government manages $6.1 billion dollars and services 3.1 million residents.

Up until last year, all 24 government departments had their own IT staffs, and built applications in siloes with

lots of overlap. Interim CIO Charles Eckstrom began building a shared services team this year, and currently

supports five of those department’s tech needs.

Orange County is building its own internal Azure cloud platform, a rarity for local governments, Eckstrom said.

“We will start to see savings on the infrastructure side,” he said. “Not only will we not be buying physical or VM

server equipment, but we’ll see how many apps we can get running in the cloud as well.”

As of mid-September, the team had one app in the cloud, with plans to move a large enterprise procurement

app up by the end of the month. The team owns more than 100 apps total, and plans to build more

enterprise-wide ones.

Shifting to the cloud to host servers will ultimately offer a tenfold decrease in cost, Eckstrom said. It will also

decrease the county’s data center square footage.

Other digital focus areas for 2017 include data analytics, business intelligence, and a CRM solution for county

residents—all of which are uncommon in local governments, Eckstrom said. In terms of CRM, his team

envisions building a portal in which residents can see dashboards of all of their interactions with different

county agencies, from the status of building permits to library books.

“This is what our constituents are demanding,” Eckstrom said. “People don’t want to call a centralized

number, they want to get on their tablet or smartphone and interact with the ease of self-service.”

It’s still early to indicate exactly how much of the 2017 budget will go toward these digital initiatives, but it is

definitely an increase over years past, Eckstrom said. The team does not plan to spend less on existing opera-

tions, but rather refocus that money on more enterprise-wide projects.

Enhancing data storagePeyton McNully, CIO of the HudsonAlpha Institute for Biotechnology Percent of budget for digital transformation: 20%—30%

The HudsonAlpha Institute for Biotechnology in Huntsville, Alabama is a nonprofit genetics and genomics

research institute with 800 employees. It specializes in whole genome sequencing, which produces about 4.5

petabytes of new data each year—but the nonprofit has limited funds to invest in storage, according to CIO

Peyton McNully.



“A majority of the science associated with genomics is very slanted toward new software and computational

workloads,” McNully said. “Speeding that up is now more of a DevOps-type architecture of speed, agility, and

nimbleness, which we’re trying to achieve on the research side.”

Between 20% and 30% of the 2017 IT budget will go toward digital transformation initiatives, McNully said. It

will likely start with proof of concepts, and then planning what to scale out in coming years.

The nonprofit has also begun using tools such as Terraform to build operating systems from templates. This

makes it less necessary to back up every machine running on an enterprise stack. If it’s templative, you can

rebuild it, saving terabytes of storage and thousands of dollars on the back end, McNully said.

On the enterprise side, the goal is to get as close to the end user as possible, giving them the abilities to

perform basic IT functions like resetting passwords, McNully said.

“What we’re trying to do with selected projects on a quarterly basis is make small tweaks and changes we can

roll out to deliver more value to the business line faster,” McNully said. “We think 20% to 30% will allow us to

do that, especially since bandwidth and storage are cheaper and denser than ever.”

Too often, companies think digital transformation means completely throwing out existing systems, McNully

said, while it could be something as simple as creating a website for people who forget their badge.

“Find a way to set very small attainable goals you can build off of and show immediate near-term value, with

as little invasiveness as possible into your team’s existing schedule,” McNully said. “As the company sees that

value is materializing, it becomes easier to begin to ask for more and plan for more.”



IT budgeting 2016–17: What the surveys tell usBy Charles McLellan

As IT budget time comes around again, businesses find

themselves navigating uncertain political and economic waters:

economic growth in China, a major driver of the world economy,

remains sluggish; the US Presidential election is finally heading into

the home straight, with wildly different potential outcomes; and

Europe remains in a ‘phoney war’ phase following the UK’s vote to

leave the EU, with no sign of a coherent exit strategy and therefore

Article 50 as yet untriggered.

The 23 June ‘Brexit’ vote caused a rapid readjustment of analysts’

IT spending forecasts for 2016.

“Canalys’ IT spending forecast, based on the UK remaining in the EU, was in the range of US$90 billion to

US$100 billion in the UK. Canalys now expects this to fall by up to 10 percent in 2016, based on the public

sector and businesses cutting expenditure to reduce risk,” said principal analyst Matthew Ball in a June 27

statement. “The outlook for 2017 could be even worse, with up to a 15 percent decline as IT budgets are set

lower on the prediction of a tough year ahead and ongoing uncertainty,” Ball added.

Canalys research analyst Claudio Stahnke outlined the wider context for this readjustment: “Trade disruption,

political instability, recession, stagflation, talent pool reduction and the collapse of the EU are all potential

outcomes that need consideration. The UK is taking a big gamble on its future. The unprecedented nature of

the move to leave makes the true extent of the outcome an unknown. Though there are a number of different

scenarios that could play out, what is certain is that we are only at the very start of defining the UK’s new

relationship with the EU.”

Gartner’s Brexit-adjusted forecast put worldwide IT spending at $3.41 trillion for 2016—the same level as

2015. According to Gartner, the Brexit vote will quickly affect IT spending in the UK and Europe, with other

changes taking longer to unfold. “With the UK’s exit [from the European Union], there will likely be an erosion in

business confidence and price increases which will impact UK, Western Europe and worldwide IT spending,”

said Gartner research vice president John-David Lovelock in a statement. Staffing may prove the biggest

headache for UK CIOs, according to Gartner: “The long-term uncertainty in work status will make the UK less

attractive to new foreign workers. Retaining current non-UK staff and having less access to qualified new hires

from abroad will impair UK IT Departments.”

According to Gartner,

the Brexit vote will

quickly affect IT

spending in the UK

and Europe, with

other changes taking

longer to unfold.

http://www.tradingeconomics.com/china/gdp-growth-annual

https://en.wikipedia.org/wiki/United_States_presidential_election,_2016

https://en.wikipedia.org/wiki/Brexit

https://en.wikipedia.org/wiki/Brexit

http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-European-union-and-comments/title-6-final-provisions/137-article-50.html

https://www.canalys.com/about/staff/matthew-ball

https://www.canalys.com/about/staff/claudio-stahnke

http://www.gartner.com/newsroom/id/3368517

http://www.gartner.com/analyst/24314/John-David-Lovelock



Here’s how Gartner’s current forecast for 2016 breaks down:

Note that IT Services and Software are growing the most, by 5.8 percent and 3.7 percent respectively; Data

Center Systems and Communications Services are relatively flat (2% and -1.4% respectively), while Devices

are contracting significantly at -5.3 percent.

In a July 12 webinar, Gartner’s Lovelock posted a slide depicting the different phases of the Brexit process,

which emphasises that it’s likely to be a long-drawn-out affair:

Data: Gartner / Image: ZDNet

Image: Gartner

http://www.gartner.com/webinar/3347122/



To put Brexit in context, Lovelock noted that the UK accounts for just 5.3 percent of global IT spend,

compared to 32.4 percent for the US. The rising US dollar caused a bigger drop in global IT spending in 2015

(-5.5%) than if the UK had ceased all spending on IT, he added.

Let’s look at some recent surveys of IT spending in various territories—bearing in mind that much of the data

will have gathered before the Brexit vote began to influence IT executives’ decision-making.

SurveysComputer Economics IT Spending & Staffing BenchmarksMarket research firm Computer Economics has published an annual IT

Spending & Staffing Benchmarks report since 1990 and is a valuable

source of IT budgeting metrics for North American organisations. The

2016/2017 report was based on survey responses collected between

January and May 2016 from 201 organisations, split equally among

small (operational IT budget <$5m), medium ($5m-<$20m) and large

(>$20m) organisations from the US and Canada. Leading industry

sectors in the survey sample were professional & technical services

(16%), financial services (15%), discrete manufacturing (13%), retail &

wholesale (12%) and public & nonprofit (12%).

Headline findings from Computer Economics’ 2016/2017 survey are

that while 62 percent of the sampled organisations are increasing their operational IT budgets this year, 23

percent are cutting them, resulting in a net increase of 39 percent (down from 52% last year) and a median

year-on-year growth rate of two percent (down from 3% last year). Smaller organisations are lagging behind

mid-size and large enterprises in terms of operational IT spending growth (1.7%, versus 2.9% and 2.7%

respectively). As far as industry sectors are concerned, professional/technical services, financial services and

healthcare services are enjoying above-average growth, while retail/wholesale, government/nonprofit and, in

particular, discrete manufacturing are seeing below-average growth.

The net percentage of IT executives expecting to exceed their IT budgets this year is just one percent, but

that’s an improvement on last year’s figure (-4%), and way ahead of the emerging-from-recession 2012 result

(-15%). Another take on IT executives’ outlook is the percentage who feel that their budget is ‘somewhat’

or ‘very’ inadequate to support the business, which remains high—60 percent, versus 56 percent last year.

Overall, the organisations surveyed spent 2.5 percent of their revenue on IT (up from 2.3% last year, but

broadly in line with revenue growth).

Operational IT spending per user has been dropping in recent years, from $10,205 in 2012 to $7,209 last

year. The 2016 figure is $7,581, suggesting either a nascent rebound or a new ‘normal’ for current levels of IT

efficiency.

Image: Computer Economics

http://www.computereconomics.com/

http://www.computereconomics.com/page.cfm?name=it%20spending%20and%20staffing%20study



As far as capital investment in IT is concerned, 42 percent of organisations are increasing their spend, 32

percent are cutting back and 26 percent are staying about the same. For the third year in a row, the median

growth rate in capital budgets is zero, suggesting a shift away from building IT infrastructure to renting it.

Perhaps the most telling finding from Computer Economics’ 2016 survey concerns IT organisations’ spending

plans for different areas. Business applications lead the way, with network infrastructure also prominent, but

data center infrastructure and end-user technology are no longer priorities for IT executives:

The slow growth of operational IT budgets partly reflects macroeconomic conditions, but that’s not the whole

story says Computer Economics: “Business leaders are seeing the value of IT and they are investing for the

future. While constrained by the sluggish economy, they are investing in security, cloud, networking, business

intelligence, and mobile applications.”

A recurrent theme in recent years has been the need for IT executives to deliver more from less—finding

cost savings in order to invest in new, potentially business-transforming, technology. “The ongoing adoption

of cloud technologies may simply be allowing IT organizations to serve more users for less money. This

seems especially likely considering that IT capital spending continues to show little growth,” says Computer

Economics.

In North America at any rate, the expectation from this survey is that organisations will spend more of their IT

budgets on business applications (especially SaaS) and networks, and less on client devices and data centres.

Although IT department headcounts are not rising to any great extent, Computer Economics expects more

spending on “talent, especially managers and developers who can lead the transition to cloud, mobility, and

big data solutions.”

Harvey Nash/KPMG CIO Survey 2016Now in its 18th year, KPMG claims that the Harvey Nash/KPMG CIO Survey is the world’s largest global IT

leadership survey. It’s certainly extensive: the 2016 survey gathered nearly 3,400 responses from CIOs and

technology leaders across 82 countries.

Image: Computer Economics

https://home.kpmg.com/xx/en/home/insights/2016/05/harvey-nash-kpmg-cio-survey-2016.html



When it comes to innovation, a majority (59%) of KPMG’s respondents

report being held back due to lack of resources or funding. Very large

organisations, with IT budgets exceeding $250 million, are somewhat less

affected, with 53 percent percent reporting resource/funding limitation,

but mid-market ($100m-$250m) and smaller (<$100m) organisations find

it significantly harder to fund innovation (66% and 62% respectively). As

might be expected, very large organisations are more likely to have formal

structures in place for funding technology innovation—both within and

beyond the IT department.

IT budgets generally are in a state of flux, KPMG reports, with 45 percent

of respondents reporting budget increases in 2016, in line with recent

years (see chart), and 22 percent reporting declines. As other 2016

surveys have noted, KPMG finds that increasing amounts of the overall IT budget are being controlled or

managed by decision-makers outside the IT department: for 38 percent of CIOs, over 11 percent of the IT

budget is beyond their control, while 10 percent control less than half of the overall IT spend.

As far as industry sectors are concerned, technology/telecoms and advertising/PR firms spend the highest

proportion of overall revenue on IT (17.9% and 17.6% respectively), while manufacturing and utilities prop up

the table (3.3% and 2.9% respectively).

To facilitate innovation and responsiveness in IT development and delivery, the preferred strategy for CIOs is

to implement agile technologies (59% of respondents), with buy-rather-than-build (including SaaS) coming in

second (37%). SaaS is the most popular ‘as a service’ model for significant investment (49%), KPMG reports,

but PaaS shows the most growth from the previous year (37% from 20%).

Image: KPMG

Image: KPMG



Spiceworks 2017 State of IT reportSpiceworks, the professional network for IT managers, has just published its 2017 State of IT report, which

draws on survey responses from 886 respondents in North America (65%) and EMEA (35%). Companies of all

sizes are represented, but the vast majority (93%) have fewer than 1,000 employees, and only five percent are

enterprises with over 2,500 employees.

Spending on IT hardware, software and services will remain at 2016 levels next year in both North America

and EMEA, even though 60 percent of Spiceworks’ IT pros expect their company’s overall revenue to increase

in 2017. Most respondents (64%) also expect their headcounts to remain the same in 2017, although 30

percent will take on more IT staff.

Hardware and software projects remain the biggest spending areas, although IT pros will allocate slightly less

of their budget to these areas in 2017, and significantly more on hosted/cloud-based projects (17% versus

14% in 2016):

In hardware, spending on desktops is down from 21 percent of budget to 18 percent in 2017, leaving desk-

tops, servers and laptops at roughly similar levels (18%, 17% and 16% respectively). Virtualization (15%),

productivity (13%) and operating systems (13%) will be the main recipients of software investment, followed by

CRM/ERP (10%), database (10%), security (9%) and backup/DR (9%).

In managed services, IT services remain top of the allocation ranking at 17 percent of the budget (down from

19% in 2016), followed by consulting (15%), storage/backup/archiving (14%) and hosting (14%)—all of which

see slight increases over 2016 levels. Email hosting (19%), online backup/recovery (14%) and web hosting

(11%) will be the main investment areas for hosted/cloud-based services—a typical mix for the largely SME-

based survey population.

When asked about the drivers of new hardware, software and/or service purchases in 2017, the leading

response from IT pros was end-of-life (70%), followed by growth/additional need (64%) and upgrades/

refresh cycles (59%). ‘New technology features’ were well down the list, cited by just over a quarter (27%) of

respondents.

Image: Spiceworks

https://www.spiceworks.com/marketing/state-of-it/report/



The timing of Spiceworks’ survey allowed it to ask questions aimed at political and economic uncertainty,

including the economic slowdown in China and the UK’s Brexit vote. Nearly half of respondents (47%) feel that

global political instability causes their organization to reconsider the countries in which they store business

information or data, while 37 percent will reconsider what countries they purchase tech products and services

from and 28 percent feel it directly affects their willingness to make any IT purchases.

IT buyers in North America and EMEA are least likely to invest in products and services from Brazil, India and

China, according to Spiceworks’ survey (see chart). And while North American respondents see EU countries

and the UK as not far behind this trio, EMEA respondents look less unfavourably on EU countries—although

there’s a slight bias against the UK.

When asked about the importance of IT solutions and services to current and future business plans, the

top-rated category for 2017 is security, followed by networking, storage, virtualization, software and hardware.

Categories expected to show the biggest gains in importance in the future are cloud-based or hosted

services, training & development and mobility/BYOD.

Tech Pro Research 2017 Tech Budgets surveyThe latest IT budgeting report from ZDNet sister site Tech

Pro Research (TPR) is drawn from 233 survey respondents

representing a cross-section of industries, global regions and

company sizes ranging from very small firms to very large

enterprises.

The survey, conducted in July, looks at the key drivers of IT bud-

getary decision making in 2017, examining companies’ upcoming

projects and business initiatives, and funding plans.

Image: Spiceworks

Image: TechProResearch

http://www.techproresearch.com/

http://www.techproresearch.com/



Here are TPR’s key findings:

• Anticipated 2017 IT budgets were varied: 20 percent of respondents said their company’s budget was under $50,000; 23 percent said their company’s budget would be between $100,000 and $499,999 and 24 percent said their company would spend between $1 million and $9.9 million on IT in the upcoming year.

• 61 percent of respondents said their company’s IT budget will be increasing in the upcoming year. The largest portion of this group said their budget will increase by 1-10 percent.

• Some technology spending is being reallocated to individual user department budgets, and no longer shows up in the central IT budget, signaling that end business units are gaining more decision-making power in determining technology purchases.

• Among respondents, improving efficiency and business processes, and achieving network security are major priorities for the upcoming year.

• Protecting and securing networks and data will be respondents’ top challenge in 2017.

• When asked how vendors could better assist them with the budgetary process, almost three-quarters of respondents said they want vendors to provide clear-cut pricing and licensing models that are easy to

understand.

Tools for IT budgetingIf, as some of these survey results indicate, business units are

increasingly making their own IT spending decisions, then it’s more

important than ever that CIOs have a detailed handle on capital

and operating expenditure, TCO and ROI, and other measures of IT

budgetary performance across the whole organisation. For one thing, if

an IT deployment—wherever it originates—runs into problems, the CIO

is likely to be tasked with sorting out the repercussions. Also, CIOs can

hardly be expected to minimise ‘business as usual’ IT costs in order to

free up resources for innovative projects—a widespread requirement—

without the appropriate analytical tools.

This specialist area of business intelligence is called Technology Busi-

ness Management (TBM), a term coined by SaaS TBM provider Apptio,

which also founded a non-profit organisation, the TBM Council, to

establish and promote standards and best practices. Earlier this year,

the TBM Council published a book, Technology Business Management: The Four Value Conversations CIOs

Must Have With Their Businesses, which describes a practical framework for delivering innovation and business

value from IT investments and resources.

In a blog at the turn of the year, Apptio’s CEO Sunny Gupta asked whether 2016 would be “The Year of

Mainstream TBM”. Given the multiple internal and external pressures CIOs are facing at the moment, hopefully

the answer will turn out to be “yes.”

Image: TBM Council

http://www.apptio.com/

http://tbmcouncil.org/

http://tbmcouncil.org/learn-tbm/tbm-book.html

http://tbmcouncil.org/learn-tbm/tbm-book.html

http://www.apptio.com/blog/2016-year-mainstream-tbm



How to craft a winning IT budgetBy Mary Shacklett

Few CIOs relish the budget review process. It can be a cooperative and collaborative process at best—or a

contentious and even confrontational process at worst. Nevertheless, everyone agrees that budget-setting

(and getting approvals for vital projects) are all part of advancing the technology enablement of companies.

By their very nature, budgets are an exercise in compromise. CIOs must come away with approvals for

projects that are essential for the company’s success, while being a champion for possibly non-essential

projects their staff views as important. Advancing vital initiatives for the company while maintaining the morale

and the faith of the IT staff can be a tough balancing act.

Put simply, a successful IT budget is one that gets the most return on investment. To accomplish that, IT

investments must deliver tangible value to the company that everyone (not just IT) can see. Successful

budgets shouldn’t contain funds for projects that the IT staff can’t work on in the next year. Over-procuring on

a regular basis isn’t viewed favorably by the the CFO and others.

Keeping these things in mind, the CIOs who create the most successful budgets do several things:

Set up budget contingencies and anticipate argumentsThe first rule of thumb for anyone who creates budgets is that you will not get everything you ask for. The job

of the CFO and other budget reviewers is to vet budgets, which they do by asking for justification of projects.

CIOs should enter budget meetings with a ‘best case’ scenario that presents maximum IT spend options.

They do this because they know they will be asked to reduce their budget. Their hope is that the final IT

budget will actually align with what they realistically expect.

However, in years where revenue is down for a company, it’s often necessary to budget IT more conservatively.

In these cases, CIOs come up with a contingency plan. They know which projects they might have to cancel

or delay, and which projects must absolutely move forward. CIOs who enter budget meetings with these

contingency options in mind are more effective in getting what they need.

Collaborate with stakeholders before budgets are presented for reviewThe ‘glass house’ days of IT are gone in most organizations. Today, businesses recognize that IT is an enabler

for strategies and operations, so best-of-breed CIOs actively collaborate on the technology budget with end

users. These end users can be vital allies in budgetary reviews (for example, the Marketing VP can join the CIO

in arguing the importance of establishing an analytics program for sales and market forecasts).



Gain a working knowledge of financeTo argue budgets with the CFO, strong CIOs understand

the balance sheet and income statement ramifications of IT

investments based upon how they are expensed (capital, longer-

term investments that are amortized or operational expenses that

are totally expensed within the year’s operating budget). These

CIOs also understand the cost of various financing options. When

I was a CIO, I worked with a vendor that was able to furnish a very

attractive lease through the vendor’s own financing arm that gave

our company lower payments and guaranteed a buyback of older

technology so we would not have to amortize and depreciate it.

The reduced payments and the ‘old tech’ buybacks were enough

to gain funding for the project.

Cross-examine staff recommendationsI once questioned my storage manager on why we were investing in new disk drives when we would only be

populating each drive to around the 33 percent level. He showed me a three-year projection (the length of the

asset’s life cycle) that extrapolated past corporate data growth and illustrated that by the end of year three,

we would be near capacity on these drives. I was convinced. When CIOs get answers like this from their staff,

they’re better-prepared when they walk into budget negotiations.

Revisit aging assetsMaking sure your house is in order is part of any budgetary process. What aging assets are coming off

depreciation schedules? Will this have a favorable impact on budget formation? If these assets are coming

off the books, do they also need to be replaced? Most IT departments keep track of the large assets—but

the tracking of old PCs, printers, and other equipment that might be collecting dust in the IT backroom or in

remote sales offices, is often overlooked.

Determine whether expenses are operational or discretionaryEnergy costs for the data center, lease expenses, and to a degree, core IT staff, are all ongoing operating

expenses that the IT budget carries year after year. Then there is the discretionary part of the budget: the

projects that are approved one by one, and that upon approval begin to incur costs for staffing, outside

training/consulting, equipment, software, and so on. In formulating the budget, many CIOs first determine

what the baseline of expenditures will be, and what portion of the IT budget should be projectized for either

Energy costs for the

data center, lease

expenses, and to

a degree, core IT

staff, are all ongoing

operating expenses

that the IT budget

carries year after

year.



budget approval or disapproval. In cases where project work is vital, CIOs are aggressive and ask for funding

that starts on day one of the new budget. For lower-priority projects, the choice is often to defer project work

until a call can be made later in the budget year. CIOs with strong scheduling skills have a natural advantage in

this phase of budget negotiation.

Challenge vendorsIT vendors understand the budgetary challenges that CIOs face. Before penciling in a project that involves

the services or products of a given vendor, many savvy CIOs test the waters to see what types of financial

flexibility the vendor can provide. In some cases, vendors offer free proof-of-concepts of their products to

get the products in the door. These POCs can be instrumental in demonstrating business value to the CFO

and other business executives. There are also vendors that offer buybacks of old technology that lightens the

load on corporate balance sheets. In still other cases, vendors might offer deferred payments and attractive

financing options—or subscription or per use pricing that gives you the ability to control your spending and

avoid expensive capital investments. In still other cases, vendors allow you to pay by use or subscription, even

if you elect to in-source a system that you run on premises.

The budgetary process can be complicated and exhausting, especially when it is time to secure buy-in and

funding. But strong CIOs understand its necessity, and use a variety of strategies and tactics to acquire the

annual resource pools needed to run IT and produce tangible investment returns for their companies. There

are no ‘magic bullets’ in this process. It is usually a case of hard work, collaborating with others and making

the best possible choices for IT and the company.



Using the IT budgeting process to your advantageBy Patrick Gray

IT budgeting can be a painful process. There’s never enough money for all the organization’s priorities, running

day-to-day operations is costly, and despite all this, there are usually demands to trim the budget even further.

It all seems like a process that should be completed as quickly as possible in order to move on to the “real

work.” However, that would be a mistake.

Follow the moneyWillie Sutton, the famous bank robber, was supposedly asked by a reporter why he robbed banks, to which he

responded, “That’s where the money was.” (Apparently the quote was fabricated by the reporter, but Sutton

later used it, including in an autobiography title.) Similar thinking is appropriate for the budgeting process: the

IT and larger organization will ultimately place funding in the areas it sees as priorities. If there’s lots of flowery

talk about the importance of security, digital, customer experience, or some other hot area, but no budget

available to back up the talk, then the organization either places minimal importance on that area, or has a

minimal understanding of the benefits provided by that technology.

This presents the perfect opportunity for IT leaders to spur discussion around these mismatches between

what’s been said and what is being funded. Generally, a gap is a result of one, or a combination of four things:

The topic might be important enough to warrant discussion, but ultimately falls well short of being important

enough to garner funding, despite stakeholders having a good understanding of the costs and benefits.

The organization is not mature enough to fund initiatives around that area. For example, there might be lots of

talk about a “digital customer experience,” but the organization is unable to meet basic customer expectations

and therefore not ready to embark on more advanced initiatives.

Stakeholders might publicly support an initiative, but don’t fully understand the benefits in the context of other

items in the budget. Keeping basic IT functions like email and networking up and running might be seen as

more important than longer-term initiatives to migrate to the cloud, for example.

Stakeholders lack confidence in the organization’s ability to successfully execute an initiative, perceiving that

they might end up throwing away money on a failure versus an initiative with a higher probability of success.

Understanding the budget is understanding the organizationAssuming your budgetary numbers are reasonable, when some of your proposed initiatives are not funded at

the levels you’ve requested, it’s critical to understand why, based on the drivers listed above. This can require



some detective work. For example, in a collegial organization stakeholders might be hesitant to express

their lack of confidence in success, and point to a generic line of reasoning like ‘market conditions’ or “other

priorities.” Once you’ve identified the high level mismatch, you can start having productive discussions to

change key stakeholders’ positions.

If there’s a lack of confidence in the organization’s ability to execute successfully, perhaps partnering with

a vendor will mitigate that concern. If there’s a gap between what’s been stated and funding, a frequent

occurrence around budgetary items like security and employee tools, discussions can uncover the true

organizational priorities and either highlight the mismatch or aid your future planning.

A dramatic mismatch between your proposed budget and what the organization is willing to fund could

indicate a troubling gap between IT’s priorities and the rest of the company, providing an early indicator of the

need for some significant discussions and mitigations. For example, if you perceive IT as being a key player

in pushing the business’s strategy forward, but your budget is trimmed merely to run and maintain activities,

there’s an obvious and disconcerting difference between your perception of IT and that of the broader

organization.

While the budget process will likely never be an activity most of us relish, it’s perhaps the best tool for

separating what the organization says and what it actually does, and provides an unparalleled view into what

the organization values, how it perceives technology, and how we as IT leaders have performed in educating

our peers about our capabilities and abilities. Leaders who look at the budget process solely as a painful

administrative exercise are missing one of the most powerful tools at their disposal for moving the organization

forward.



Does the CIO still call the shots when it comes to IT spending?By Nick Heath

In today’s internet-centric world, IT is fundamental to the success of business.

But while information technology has come to play a central role inside firms, that doesn’t mean the CIO is

equally indispensable.

Rather than necessarily elevating the importance of the CIO, the rising relevance of IT has resulted in some

technology spending decisions being taken by a broader range of people within organisations.

Today the CIO is expected to play more of a collaborative role on many IT spending decisions, helping guide

projects where technology is key to improving customer service, getting products to market quicker and

launching new services.

“Under that much broader and inclusive IT perspective, it is difficult to talk about an exclusive IT budget, and it

makes more sense to talk about IT-related expenditures in each and every business initiatives and respective

budgets,” says the Gartner report How CIOs influence decisions when every budget is an IT budget.

Despite these changes, across most firms there is still a broad pattern for how most technology projects are

funded, said Spencer Izard, chief analyst for Enterprise ICT at Ovum.

Contentious siblings“What I typically see from an IT organization, from a budgeting perspective, hasn’t actually changed since I

started my career 20 years ago. Which is where predominantly the project spend is derived out of a line-of-

business function and then moves over into IT,” he said.

“The most common model is where new technology investment is funded out of line of business and, at a

point where it’s about to go live and be switched over to operational cost and long-term running, it switches

over to an IT budget.”

Izard described the relationship between business and the IT department when it came to priorities and

spending as being less like ‘us’ versus ‘them’ and more like ‘contentious siblings’.

“Both love each other, both know they need each other to be around, but that doesn’t mean they always

agree.”

Fundamentally, the role of the CIO when deciding on IT spending is both to advise business leaders on viable

technologies for realising a project’s goals, but to also explain how any new investments would fit with a firm’s

existing infrastructure.

https://www.gartner.com/doc/2845423/cios-influence-decisions-budget-it

https://www.ovum.com/authors/spencer-izard/



“In a modern organization, most IT functions should be there to be

that trusted adviser,” said Izard.

“To say ‘Actually, you know what, you might have found a piece of

good technology we don’t have within an organization, that does

100 percent of what you need, but we’ve already invested in XYZ

technologies in our organization for other groups and departments

and that will do 80 percent of what you need.”

Expert oversightMarc Cecere, principal analyst at Forrester serving CIOs, said that

while an IT leader may only be one of many execs deciding which

new technologies to invest in, their expert oversight remains crucial.

“For things such as apps or devices...the CIO is often one of several leaders making the decision,” he said.

“Recently, because of the push to have greater consistency of systems, processes and technologies across

the organization, the CIO is required to facilitate these decisions.

“In this case, they may or may not be decision makers, but they pull together the information and decision-

making vehicle—a steering committee, for example—to have others make the decision.”

The introduction of Chief Digital Officers (CDO) may have initially marginalized the CIO, said Izard, with the

CIO “bypassed a little bit”, but companies today generally understand the need for someone with a greater

understanding of technology to work alongside the CDO.

“The CIO’s function is that delta between where we are right now as an organization and where we could

potentially be. Whereas a lot of the chief digital officer’s role is ask the question ‘Where do we need to be with

digital?’,” he added.

“Digital has been, I would say, for all of its hype and its buzzwords, the best marriage therapy for IT and

business for many years,” said Izard, citing how the emphasis on digital transformation had forged a closer

working relationship between the business and IT.

Four roles for the CIOIn a today’s world, where every company is a software company, CIOs can adopt one of four roles, according

to Gartner’s How CIOs influence decisions when every budget is an IT budget report, depending on the type of

organization.

The first is controlled independence, an approach suited to mature companies—diversified conglomerates,

according to Gartner—with multiple units that effectively function as separate businesses with individual IT

“Digital has been,

I would say, for all

of its hype and its

buzzwords, the best

marriage therapy for

IT and business for

many years.”

—Spencer Izard

https://www.forrester.com/Marc-Cecere

https://www.ovum.com/authors/spencer-izard/



budgets and systems. In this scenario, individual business units will have control over IT budgets and the role

of the CIO is to act like a broker, highlighting to business leaders in each unit which internal and corporately

sanctioned external services fit the bill for the current project. Just as important will be flagging up which of the

technologies under consideration would be a poor fit the company, perhaps because they’re incompatible with

existing systems.

Given their cross-department perspective, CIOs can also attempt to steer units towards choosing technologies

that complement those used in neighbouring units.

The structured consensus approach again applies to large, mature companies, but this time where business

units depend on each other to deliver a product or service and where the company may be responsible for

every stage between turning a raw a material into a finished product—manufacturing and assembly compa-

nies, for example.

IT budgets are typically allocated centrally, perhaps by a business-IT committee made up of managers from

across the business, to suit current business objectives.

These are the types of organizations in which CIOs will play the greatest role in determining IT spending, says

Gartner, and will help support initiatives that further the organization’s goals. The extent of their decision-

making powers could extend to deciding which services should be present in the IT services portfolio. In this

way, the CIO will exert a strong influence over the enterprise’s use of IT.

The dynamic collaboration approach is suited to companies operating in fast-changing industries where there’s

a need for business units to collaborate and rapidly iterate on ideas and get products to market—consumer

electronics companies, for example. In these companies, budgets are often assigned to individual initiatives

and projects, often in an ad-hoc manner.

These firms operate in a business environment where the fast pace of change needs rapid response. As such,

firms will often form what Gartner refers to as a “SWAT team”, composed of managers from across the busi-

ness to spearhead initiatives to achieve business goals.

Here the IT leader’s role will be more collaborative, consisting of advising the team on what technologies are

available and how any new tech will fit with existing enterprise applications, and what additional spending

might be necessary to integrate with backend systems.

The opportunistic action approach is again suited to companies operating in a fast-changing environment, but

this time where business units operate more independently, with each unit focusing on a different business

scenarios and allocating funds from their own budgets. For example, fashion and high-tech retail.

IT spending in this area often falls under specific initiatives, this time led by an individual business unit and

headed by an individual senior manager, according to Gartner. The budget for these initiatives will usually be

funded by that individual unit. While the CIO will have a role in advising on the best available technologies for



a rapid project turnaround and how they fit with the organization’s

core tech, the driving force behind spending decisions will be initia-

tive’s leader, whose primary focus will be realizing specific business

outcomes.

Selling the role of CIOCIOs also need to remind their organizations of why they and the

IT department matters, said Izard, to avoid the risk of CIO being

charged with nothing more than keeping the services running—

something he described as a “misuse of the role”.

“I think a lot of CIOs have fallen into being comfortable with the

role as it’s currently understood, but they need to do a better job of

demonstrating their value in a business outcome context, rather than talking about the value of technology.”

It is a sentiment echoed in the Forrester report, Design The Tech Organization for the BT Agenda.

“In the age of the customer, firms must accelerate the BT [Business Transformation] agenda—the

technologies, systems, and processes to win, serve, and retain customers,” says the report.

“Many CIOs have been balancing customer-facing requirements with operating the company. But too few

CIOs have met the BT agenda’s need for fast-cycle times, continuous change, and a focus on the customer

experience. Those CIOs that optimize for the BT agenda will find themselves as business partners, leading

their firms’ success,” the report adds.

If CIOs want to ensure they have a meaningful input into technology-led, business transformation discussions,

there are several steps they can follow, says Forrester’s Cecere.

“There are a lot of obvious things, such as speak the language of business, stay physically close to decision

makers, aligning your recommendations and spending with the business direction,” he said.

“All that is pretty well known. Less obvious are things like establishing relationship managers who act as

proxies for the CIO to the business and act as proxies for the business to IT.”

Cecere says these proxies can help anticipate business needs, guide business leaders and keep IT

investments in sync with the firm’s goals. Another useful approach can be to set up groups within IT as internal

consultants to the business.

Another key skill for CIOs, according to Ovum’s Izard, is to master the art of promotion.

“It’s all about that marketing and positioning, and I’ve known a few CIOs in the past year or so who have

actually got independent advice from a marketing/PR expert on how to better position their message inside

their own organization to maintain business relevancy,” he said.

“They’ve now got into a position where their line-of-business peers realize that IT functions are there to

support the business journey.”

Those CIOs that

optimize for the

BT [business

transformation]

agenda will find

themselves as

business partners,

leading their firms’

success.”

—Forrester

https://www.forrester.com/report/Design+The+Tech+Organization+For+The+BT+Agenda/-/E-RES114001



Additional resourcesResearch: Where are CXOs placing their bets for 2017?According to a recent online poll conducted by Tech Pro Research, improving security and increasing the

availability and performance of network infrastructure are among top budgeting priorities for IT leaders in the

next year. Additional information about budgets for fiscal and calendar year 2017 are in the infographic below.

To learn more, download the full report: IT Budget Research: Where CXOs are placing their bets for 2017.

(Tech Pro Research membership required.)

http://www.techproresearch.com/downloads/it-budget-research-where-cxos-are-placing-their-bets-for-2017/

Documents

SPECIAL REPORT Tech budgets 2017: A CXO’s guide...four CIOs covering different geographic areas. In June, the company began the global rollout of its Infrastruc-ture-as-a-Service