IT budgets flat due to post-recession ‘recovery’ spending

It has long been argued that the UK needs to do more to nurture a culture of innovation in the technology sector if it is to compete with US firms. However, the UK’s Silicon ambitions may have a while to wait, as latest budget forecasts from CEB reveal CIOs plan to allocate roughly 30 per cent of total IT spending next year on business opportunities, with innovation accounting for just 8 per cent.

The global study from member-based advisory firm shows CIOs expect a modest growth in total IT expenditure to increase by only 1.8 per cent, roughly 50 per cent less than they did in 2012. Operational expenditure will rise to 70 per cent of budgets in 2013 , while capital expenditure growth will stay flat.

The IT Budget Benchmark Report is based on CIO forecasts in more than 200 companies across the globe, representing over £32 billion in IT spending.

CIOs plan to increase spending on mobile applications in 2013, ensuring all applications are ready for the mobile environment from the outset, fitting into a broader trend in mobile spending across the globe.

We are also seeing a growing migration to the cloud, as 54 per cent of organisations plan to increase spending in this area. Almost half of this cloud spending will be spent on Software-as-a-Service (SaaS).

Andrew Horne, managing director for CEB, said: “Currently over two thirds of IT budgets in 2013 are already allocated to maintenance and regulatory compliance – essentially ‘keeping the lights on’ – before a single new project can be started. This inevitably means that the ability of companies to be innovative and set themselves apart from their competitors will be challenging.”

“This increase in operation spend is in part a knock-on effect from high levels of spending prior to the spending of 2010 and 2011, meaning that CIOs are seeing any budget increases absorbed by the need to keep existing capabilities going.”

However, despite the modest growth CIOs may end up expanding their spending beyond what they initially predict.

Horne continued: “Although currently CIOs are very cautious in their planning, they may well expand their budget if economic performance is better than expected. CIOs are becoming increasingly agile about their investments, with more people looking at rolling budget scenarios to embed a degree of flexibility.”

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