CIOs Link Spending to Business Recovery

A recent survey of more than 950 CIOs by Gartner Executive Programs (EXP) reveals their outlook on IT spending, business process outsourcing, and other trends. The survey found that although respondents are expecting to increase IT spending by about 1.4 percent in 2004, they don't intend to do so until they see a business recovery. More than 40 percent of respondents believe this increase will occur in the second half of 2004. According to the survey, CIOs' top-three business priorities are security breaches, operating costs, and data protection/privacy. "What we see is that IT is back, but with a difference," says Mark McDonald, group vice president for Gartner EXP, a membership-based organization of more than 1,900 CIOs worldwide that is a unit of Gartner, the research and analyst firm. "There is very focused spending around business growth. In fact, two-thirds of CIOs see CRM and a single view of the customer as important to very important for 2004." Business processes like CRM will be the primary focus of IT initiatives for 43 percent of CIOs for the next three years; 11 percent says cost cutting will be the main focus, according to McDonald. He also says that CRM spending will grow at a rate of 2 to 10 percent: "Spending in this area is mature, because there's not so much first-time spending as in, say, security. There will also be an increase in spending in business intelligence tools as companies seek to close the loop, and in mobile technologies, as well." Business process outsourcing (BPO) is a key initiative for many companies, especially in the call center area, but two-thirds of CIOs do not see BPO as important, either now or through 2007. According to Gartner EXP, in many cases CIOs are not included in BPO decisions, and many suppliers go directly to business unit executives. "Although we didn't specifically ask about call center outsourcing, BPO is not of high importance to COIs, because to some extent the decisions are bypassing them," McDonald says. "The twist is that BPO decisions are difficult, if not impossible, without technology; the CIO needs to be intimately involved." Some COIs, he adds, are now being giving direct responsibility for the success of the call center and customer service. According to survey respondents, there are three trends that will shape their agenda in 2004. First, businesses are both more interconnected and more electronic than ever before. "CRM has been a primary mover and shaker in making this happen," McDonald says. "That's where we're seeing these things converge, and what that's producing is CIOs who are much more focused on business results." Second, IS capabilities are now influencing core business capabilities. Third, building trust and spending time with executive peers drive CIOs' credibility within their organizations. In addition to the CIOs' outlook on trends, the survey also revealed the key drivers behind executives' decision-making. According to these findings, most of CIOs' activities align with their companies' development stage. Thus, Gartner EXP has created three categories that describe what types of environments most CIOs are working in this year. The categories are "maintaining competitiveness," "fighters," and "breakaways." Sixty-nine percent of responding CIOs are in organizations that are "maintaining competitiveness." In these companies CIOs are balancing cost management, effectiveness, efficiency, and operational integrity, according to Gartner EXP. Fifteen percent of the CIOs are in enterprises that are "fighting for survival." As a result, these CIOs are focused primarily on efficiency, and devote more of their budget and attention to controlling costs. Sixteen percent of respondents are in "breakaway" enterprises. These CIOs are seen as business leaders and focus on effectiveness, growth and agility, according to Gartner EXP.