IT Budget Challenge 2011: Keep Your Seatbelts Fastened, It's Going to Be Another Bumpy Ride

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June 2011
In This Issue:

"This is the sixth installment in our annual series on IT budgeting, and we are now beginning to amass enough critical year-over-year data to truly evaluate some longer-term trends."

-- Gabriele Piccoli, Editor

We're in the midst of another tough economic year. That's clear across the board for anyone who doesn't have his or her head in the sand, or in the clouds. Pick your metaphor here, but in either case it's a reality that almost all IT professionals and business managers are battling a continued tough slog through rough fiscal terrain. This issue of Cutter Benchmark Review is thus an especially important one in its relevance to the very real challenges that we all face these days. It is the sixth installment in our annual series on IT budgeting, and we are now beginning to amass enough critical year-over-year data to truly evaluate some longer-term trends. The insight that our expert contributors were able to glean from this data and present to you in this issue will undoubtedly prove both interesting and instructive as you compare these trends with the decisions made within your own organizations.

As with past CBR IT budgeting issues, we're again taking a look at the matters surrounding where organizations are choosing to allocate their IT funds for the year ahead, and why. And, as usual, we've enlisted the expert help of two highly regarded professionals to decipher the results of our survey. In fact, both of them are returning contributors who have offered us insight into this very subject in past CBR issues.

Once again presenting us with the academic perspective is Dennis Adams, Associate Professor in the Decision and Information Sciences Department at the C.T. Bauer College of Business at the University of Houston. Dennis has researched and published extensively on the subject of information system design and management as well as the contributions IT makes to organizations. He has also consulted with a wide range of public and private institutions on these same subjects. Dennis offers a unique and discerning perspective, and I believe you'll learn a great deal from reading his contribution. Cutter Fellow Bob Benson complements the academic viewpoint with our view from the field. Bob, cofounder and principal with the Beta Group, is a well-respected expert, and we're privileged to once again benefit from his knowledge.

Up first, Dennis presents us with a cautiously optimistic viewpoint as he addresses the key aspects of the survey, bringing along his many years of academic and consulting experience to bear on his analysis of the emerging trends. Moving systematically from an examination of IT budgets on the whole to the specific elements within those budgets that are either increasing or decreasing, Dennis progresses through to other important considerations for IT managers, including outsourcing, hiring, and cloud computing. His analysis of the survey regarding "savings sharing," motivation, and the overall impression of how IT delivers value is of particular note. You will find his thorough style and thoughtful perspective invaluable, particularly as you consider his conclusions and guidelines on what to do moving forward.

Bob's piece begins with a brief overview of the past five years of CBR's IT budgeting surveys, highlighting the dominant themes for each year and giving us some historical context. Next, he discusses the various aspects of IT budget practices over the past six years, providing us with a characterization of survey participants before shifting to an examination of IT budget dynamics and what's included in the IT budget of modern firms. Of particular value is his insight into the nature of cost categories, including the importance of knowing the full costs of IT to the organization. Next, Bob moves to a consideration of the ways in which IT managers cope with cost containment efforts in their firms, with specific attention paid to where things stand in terms of both terminated and initiated projects. Considering also the significant management actions that have been taken, Bob gives us some crucial analysis to ponder regarding hardware consolidation, outsourcing, improved internal processes, and cost-reduction strategies. He discusses factors driving both increased and decreased costs and provides an overview of the changes over the last few years. Bob also addresses the results of assessing manager viewpoints on some very basic beliefs that impact the IT budgeting process at its core, before concluding his piece with insightful guidelines to leave you with a better sense of both the current state of affairs as well what to do moving forward.

I hope you find this issue full of information and analysis that you can use as you forge ahead with your own decision-making processes regarding IT budgeting and IT financial management. It's always our goal here at CBR to provide you with strong comparison data to use when assessing best practices within your organizations. I believe we have done that here, and that the insight and guidelines provided by our experts will give you a lot to think about as you consider your own budgeting process.

ABOUT THE EDITOR

We're in the midst of another tough economic year. That's clear across the board for anyone who doesn't have his or her head in the sand, or in the clouds. Pick your metaphor here, but in either case it's a reality that almost all IT professionals and business managers are battling a continued tough slog through rough fiscal terrain. This issue of Cutter Benchmark Review is thus an especially important one in its relevance to the very real challenges that we all face these days.