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  • CFO.com | US

Tech Spending to Jump Next Year

In a new study, 38% of IT leaders polled said their budgets will grow in 2011.

The number of information-technology executives who are expecting budget increases for 2011 is reminiscent of prerecession days, a new survey from the Society of Information Management suggests.

Thirty-eight percent of respondents said their budgets will be up next year, a leap from the 27% in last year’s survey who anticipated having more money to spend in 2010. (That year-ago forecast proved to be pessimistic, as 34% of respondents to the new survey said their actual 2010 budgets rose over the previous year’s.)

Meanwhile, 35% said their budgets would stay the same. The overall 73% of 172 IT leaders polled who expected their 2011 budgets to at least stay the same is on a par with levels last seen before the economic downturn, says Stevens Institute of Technology professor Jerry Luftman, who has been conducting the annual survey for a decade.

IT budgets were expected to reach an average of 3.87% of revenue for this year, up from 3.83% in 2009, according to the survey.

Companies are loosening their technology purse strings at a time when IT leaders are increasingly being given more input on not only their own budgets but also those of other departments and units. “In all past recessions, without much strategic consideration, companies first went after IT, as a big spender, for cuts,” says Luftman. “This time, and continuing this year, they have asked IT to help identify opportunities for the rest of the business to cut.”

How budget funds will be allocated among equipment, various staffing categories, and consulting services is expected to be essentially unchanged next year, with one exception: the share for internal domestic staff is anticipated to be 38%, down from 43% in 2010. Meanwhile, expenses for offshore outsourcing will grow for the fourth consecutive year, to 7% of budget, up from 5% this year.

Companies may be seeking lower labor costs overseas, but Luftman says a bigger factor is the anticipation of a continued decline in qualified IT professionals in the United States. The number of U.S. students graduating with information-services or computer-science degrees has been falling since 2000, he notes.

Another survey finding: 31% of the respondents report to CFOs, roughly the same as many other studies have shown. “That’s the wrong place,” contends Luftman. “If a company is looking to leverage IT for revenue generation, then IT should report to a revenue-generating executive.”

Other research Luftman has performed shows that the alignment between IT executives and their bosses on business objectives and perceptions is more mature when the boss is the CEO or president rather than the CFO, he says.

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