Gartner, in its latest report, Worldwide IT Spending Forecast, predicted that worldwide IT spending would grow by 6.2% in 2018 and by 2.8% in 2019. That firmly puts the projected global IT budget at a whopping $3.85 trillion for 2019. Will that be enough? Analysts believe ‘probably not’!
Budgeting has been a herculean struggle for IT departments across the corporate world. As digital infrastructure takes center stage and continues to create competitive advantages for businesses, there is a definitive increase in the budgetary allocations for IT departments in organizations. However, the present-day IT departments are grappling with creating and supporting critical digital infrastructure while also making smart investments into developing the technologies of the future. These investments are intended to ensure the long-term sustainability of the organization.
The twin mandate of creating a supporting infrastructure for today and developing the technologies of the future often stretch the underfunded IT budgets thin. For instance, a 2018 survey of IT professionals by Insight reported that 66% of the IT pros in large enterprises feel that spending on IT security needs to be increased. The same report also shared that 29% of the IT pros feel that outside of the IT department, finance is exerting the most influence on technology decisions.
There is mounting pressure on IT departments to get more done with limited resources. Despite the budget increases, this pressure will only increase in 2019, as organizations require their IT departments to play a critical role in giving them a competitive edge over the competition.
How can IT heads deliver on these growing demands? The solution might require some bold steps on the part of the IT departments as well as the enterprises.
Use Technology to Solve Geopolitical Challenges
Two geopolitical tensions that pose the biggest threat to global economic growth are increasing trade tariffs and barriers, and the impending Brexit.
The UN, in its report entitled, World Economic Situation and Prospects as of mid-2018, speculated that if the trade tensions were to worsen, then the global economic growth in 2019 will drop from a good 3.2% to 1.8%.
The continuing political turmoil in the UK parliament and its rapidly evolving political landscape has left the future of the UK, EU, and their trading partners, which is practically almost all the countries, in limbo. UK businesses, who used to depend on nearshore businesses from the EU may no longer have access to them starting 2019. In addition, the US is adding additional tariffs on trading partners around the globe, with a variety of responses that are expected to show impacts in the next year.
Both of these challenges come at a momentous time in history when workflow automation is disrupting the business landscape. IT departments can embrace automation to eliminate low-skilled tasks within their department. At the same time, they can justify investments in such efficiency-enhancing projects by easily demonstrating the potential cost savings to be achieved in the other departments as well.
What percentage of the funds should be allocated to the IT department?
The answer to that question varies from one industry to another, from one business model to another, and is also based on the size of the business. However, comparisons with similar size businesses in the same industry should give a good benchmark to bank upon. In fact, such figures can help the CIOs pitch the IT budgets to the CFOs and CEOs more effectively. For instance, IT budgets in industries that handle sensitive information like banking and finance are significantly bigger than, say, landscaping. Competitor comparisons can help IT heads communicate to the other decision-makers that an underfunded IT can leave the organization in a technologically inferior position in comparison to the competitor.
At the same time, competitor analysis will also help the IT heads prioritize their expenses and investments. This doesn’t mean that the IT heads should follow in the footsteps of the competition. They can use the information to take decisions in line with their organization’s strategic goals. For instance, if businesses in their industry generally allocate a small percentage of funds to IT, it can mean that they are yet to take advantage of the full potential of the digital. By making substantial investments into IT, a visionary enterprise can gain deep inroads into the market simply by creating a robust digital infrastructure. In other words, knowing what the competitors are doing can help the IT heads make better budget decisions.
Continue Gathering Information Even After Budgeting
Budget preparation is a continuous exercise. IT heads should continue to seek new information from all quarters even after creating the budget. Some ongoing projects may turn out to require more funding or less funding over time. An emerging threat in the market can make it imperative on the part of the IT department to develop or deploy critical digital infrastructure or services to combat it with a sense of urgency. There’s no telling what new information can prove useful. Therefore, the IT heads must proactively check with all the teams, employees, and even the vendors at least once a month. Then they can decide whether they need to reallocate their resources.
With the global trade tensions rising, it is natural for the business leaders to look at optimistic investments as adventurism, and instead focus more on reducing the costs to stay competitive. After all, cost management and consolidation continue to be an effective strategy to manage economic and political uncertainty. However, such challenges often turn out to be the very factors that stoke revolutionary ideas and spawn disruptive technologies. That is, if the businesses are bold enough to stretch themselves and grab the opportunities offered by the uncertainties. And, it is the responsibility of the IT leaders to sell that vision to the CXOs.
The year 2019 will witness a reshaping of the business landscape in many industries. It will definitely be an interesting year to watch.