IT budgets are not keeping up with inflation

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

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While IT budgets will increase for most CIOs next year, after inflation, the actual dollar value of those budgets will be less than this year.

A Gartner survey of more than 2,000 CIOs found that nominal IT budgets will increase 5.1% globally and 4.8% in North America.

“Digital funding isn’t really ‘falling’ in a nominal sense, it’s just that its rate of increase isn’t keeping up with inflation,” said Andy Rowsell-Jones, an analyst at Gartner. He cited the CFO’s pessimism about future business conditions and a lack of technology resources as reasons that are leading many organizations to rein in spending.

SEE: Gartner: IT Force Multipliers for Sustainable Growth, Cyber ​​Resilience and Responsible Investment (TechRepublic)

CIOs plan to increase investments in these technology initiatives

The survey also found that increasing economic pressures, IT talent shortages and supply challenges are becoming more urgent to realize the time value of digital investments. IT leaders must accelerate time to value and drive business growth in revenue and bottom line from digital investments.

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

At the urging of their businesses over the past two years, the majority of CIOs have been investing in ways to improve operational excellence (53%) and the customer or citizen experience (45%). Only 27% of CIOs mentioned increasing revenue as their primary goal, and 22% said improving profitability.

CIOs surveyed said they plan to continue this budgeting pattern while increasing investment in cybersecurity and information security (66%), business intelligence/data analytics (55%), and cloud platforms (50%). Only 32% of CIOs mentioned AI as an area of ​​greatest investment. Less than a quarter (24%) of CIOs plan to invest in hyperautomation.

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

How CIOs can create shared goals

Due to the conflicting expectations of different stakeholders, the vast majority of organizations (95%) struggle to develop a shared understanding of the results that digital transformation can deliver. Too many IT shops remain the main drivers of innovation, Gartner said. Most CIOs (77%) said IT is the top provider of innovation and collaboration tools, compared to 18% who said non-IT staff provide these tools.

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

Lending IT staff to create fusion teams that combine business experts, business technologists and technologists is one way to achieve the digital business outcomes everyone is looking for, Gartner said.

About the survey

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

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