IT Budgeting in 2013: Are We Finally Back on Track?

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April 2013
In This Issue:

"The CBR budget issue really stands out, as we benefit not only from a very consistent survey but also from having two authors -- one from academia and one from industry -- who have been with us for the entire journey."

-- Joseph Feller, Editor

Welcome to the eighth annual IT budget issue of Cutter Benchmark Review. In each installment, CBR gathers and analyzes fresh data to understand both the state of IT budgeting in the current year and the emerging trends that can be seen by looking at the changes taking place (or not taking place) between years.

It has been a fairly tumultuous eight years, to put it mildly. Through the annual IT budget issue, CBR has provided a running commentary as we have watched IT decision makers react, year after year, to the dramatic movements of global financial, labor, and other markets. In each issue, our authors have "pulled the signal from the noise" by sharing their insights into the dynamic and ever-changing relationships among four key concepts: IT value, IT budgeting practices, IT governance, and IT management/organizational structures.

As the year is drawing to a close, before I introduce our authors and their contributions, I would like to take this opportunity to acknowledge and thank some of the people that make CBR possible. First, thanks to Managing Editor Cindy Swain, Production/Editorial Manager Linda Dias, Production Editor Tara Meads, Cutter Consortium President and CEO Karen Coburn, and VP Anne Mullaney for their professionalism, diligence, and good humor -- all of which make CBR a uniquely valuable resource for our readers and a genuine pleasure for me to edit.

Second, I'd like to acknowledge the work of CBR's 2013 contributing authors: Dennis Adams and Jim Love, who got us started this year with a look at 2013's IT trends; Dave Sammon, Tadhg Nagle, and Sebastian Hassinger, who shared their insights into the world of Agile data analytics; and most recently, Federico Pigni, Gabe Piccoli, and Manjunath Paramashivaiah, who revisited the emerging space of real-time data, a topic we first explored in 2012. Finally, I'd like to thank Dennis Adams and Bob Benson for delivering yet another insightful look at the world of budgeting in this issue.

As I have said in some of my previous CBR introductions, my favorite issues are always those that look at data across the years, such as the annual budget and trends issues, or the issues where we revisit a previous survey topic. But I think the budget issue in particular really stands out, as we benefit not only from a very consistent survey but also from having two authors -- one from academia and one from industry -- who have been with us for the entire journey.

As a result, this issue's authors probably need no introduction to regular CBR readers, but in case you've just joined us (you're very welcome!), I'll introduce them briefly. Our academic author is Dennis Adams, an Associate Professor in the Department of Decision and Information Sciences in the C.T. Bauer College of Business at the University of Houston (USA). As well as contributing to CBR's annual trends and budgeting issues since the beginning, Dennis's research and analysis of topics ranging from business leadership to the value of IT have been frequently published both through Cutter's practices and through many other well-respected outlets in the IT research community.

Dennis begins his article on an optimistic note, highlighting the signs of stability and growth in this year's data and noting some of the differences between budgeting decisions in large and small firms. With his typical pragmatism, Dennis advises that we look at budgeting decisions as investment decisions, constantly keeping in mind the value, not just the cost. He then turns to the drivers behind IT spending, and points out the growing importance -- and complexity -- of ownership against the backdrop of the cloud and other technology trends. Examining the management practices firms engage in to control IT costs, Dennis calls for a shift in perspective. Savings are only savings if quality is not destroyed; again, it is a question of value as well as expense. He also encourages us to take the long view, noting (in his analysis of multiyear initiatives) "while it is easy to think of budgets from the perspective of a fixed, annual point of view, the wise manager will view his or her budget as a point along a continuum." Finally, he looks at the data in this year's survey pointing to a strong belief that IT is a substantial creator of value for firms. If this is your own belief as well, I think that Dennis's well-expressed case for value-centric IT thinking, his "cautious optimism" for the future, and his thoughtful advice for "wise managers" will all be well received.

Our practitioner author is Bob Benson, a Fellow with Cutter Consortium's Business Technology Strategies practice, a member of Cutter's Government & Public Sector team, and Principal of the Beta Group. Bob brings to his writing over 40 years of academic and corporate experience in helping both companies and government agencies better understand the business value of IT, and the planning and management of IT strategy, finances, and governance. His experience shines through in all of his contributions to the CBR budget series, and this year is no exception.

Although Bob approaches the survey data from a different point of view than Dennis, the focus in his article is the interplay between IT budgeting and IT value as well. While hints of growth caught Dennis's eye, Bob opens by pointing out the relative stability to be seen in this year's data. He begins with an analysis of the data from an organizational perspective, noting the relative cost of IT and non-IT expenditures, as well as the wide variety of components that make up the IT spend. Looking back over time as well as forward, he draws out some of the implications of this spending landscape for decision makers. Bob next looks at the subtle differences between IT's ability to deliver value and IT's ability to confer competitive advantage, and at the variable contributions of IT to customer experiences, products, and services, as well as to the firm's bottom line. After an interesting discussion of budget transparency and adaptability, Bob concludes with a considered look at governance practices and the perception of these practices from various organizational points of view. As always, Bob's article contains a blend of rich observations and practical advice.

Both articles contain fresh data and insights for 2013, as well as rich, historical observations of the trends to be seen in our eight years of survey data. As a result, I trust all our readers will take something away from this issue.

Looking back over the past CBR budget series (see 2012, 2011, 2010, 2009, 2008, 2007, 2006) it strikes me that there are an awful lot of titles and callouts with words like "storm," "roller coaster," and "bumpy ride." But from the relatively steady "calmness" of this year's data and the "cautious optimism" of our survey's more forward-looking data, we might tentatively conclude that things are, at last, back on track. That would be nice -- it's been a long hard climb.

So here's hoping your 2014 stays on track. Enjoy the read.

ABOUT THE EDITOR

Welcome to the eighth annual IT budget issue of Cutter Benchmark Review. In each installment, CBR gathers and analyzes fresh data to understand both the state of IT budgeting in the current year and the emerging trends that can be seen by looking at the changes taking place (or not taking place) between years.