IT budgets are not keeping up with inflation

IT budgets are not keeping up with inflation

CIOs expect 2023 IT budgets to increase 5.1%, which is 1.4% lower than the projected 6.5% global inflation rate, according to Gartner.

Two leaders looking over budgets and financial charts.
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While IT budgets are set to increase for most CIOs next year, after inflation, the real-dollar value of those budgets will be less than this year.

A Gartner survey of over 2,000 CIOs found that nominal IT budgets are set to increase by 5.1% globally and 4.8% in North America.

“Funding for digital isn’t really ‘falling’ in a nominal sense, it’s just that its rate of increase isn’t keeping up with inflation,” said Gartner analyst Andy Rowsell-Jones. He cited CFO pessimism about future trading conditions and a lack of tech resources as reasons that are leading many organizations to reign in spending.

SEE: Gartner: IT force multipliers for sustainable growth, cyber resiliency and responsible investment (TechRepublic)

CIOs plan to increase investments in these tech initiatives

The survey also found that increased economic pressures, scarce IT talent and supply challenges are increasing urgency to realize time to value from digital investments. IT leaders need to accelerate time to value and drive top- and bottom-line enterprise growth from digital investments.

“With increasing economic uncertainty, and the benefits of harsh experience, senior business leadership is developing a more realistic view of what digital is and is not,” said Rowsell-Jones. “There is a general shift from ‘transformation’ to efficiency increase as the rationale for digital investments. In other words, digital investment is shifting from a strategic investment or a cost of goods sold to an SG&A [selling, general, and administrative] expense.”

At the behest of their businesses over the last two years, most CIOs have been investing in ways to improve operational excellence (53%) and customer or citizen experience (45%). Only 27% of CIOs cited growing revenue as a primary objective, and 22% answered improving cost efficiency.

Surveyed CIOs said they plan to continue this budgeting  pattern while increasing investment in cyber and information security (66%), business intelligence/data analytics (55%) and cloud platforms (50%). Only 32% of CIOs cited AI as an area of increased investment. Fewer than a quarter (24%) of the CIOs plan to invest in hyper-automation.

“CIOs must prioritize digital initiatives with market-facing, growth impact,” said Janelle Hill, a distinguished vice president and analyst at Gartner, in a press release. “For some CIOs, this means stepping out of their comfort zone of internal back-office automation to instead focus on customer or constituent-facing initiatives.”

How CIOs can create shared goals

Due to competing expectations from different stakeholders, the vast majority of organizations (95%) struggle to develop a shared understanding of the outcomes digital transformation can deliver. Too many IT shops are still the primary drivers of innovation, Gartner said. Most CIOs (77%) said IT is the main provider of innovation and collaboration tools, compared with 18% who said non-IT personnel are providing these tools.

To create shared goals, CIOs should work with business leaders to learn what they need, what “improvement” looks like, and how to measure it.

Loaning IT staff to create fusion teams that combine business experts, business technologists and technologists is one way to achieve digital business outcomes that everyone is after, Gartner said.

About the survey

Gartner surveyed 2,203 CIO respondents from 81 countries and all major industries, representing approximately $15 trillion in revenue/public-sector budgets and $322 billion in IT spending.

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