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Outsource magazine: thought-leadership and outsourcing strategy | June 27, 2017

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IT budgets are increasing – but not as we know them…

IT budgets are increasing – but not as we know them…
Outsource Magazine

Respondents to our latest CIO and IT Leadership survey are reporting a 40% increase in their IT budget, over the past year. However there is something really interesting in the underlying data which suggests that the pressure to commoditise is like never before: IT budgets that have given back savings year on year are still under pressure for a more cost-effective solution. So why do we see this discrepancy? The answer lies in one of the fundamental parts of the survey: two-speed IT.

Although we see the headline figures of big spending increases, this correlates with the emergence of tangible business-enabling technologies. Digital (and all that is attached to it) is seen as a major revenue-generator, an enabler to different business models fit for today’s online and “always connected” businesses. So we’re not actually seeing a big increase in the traditional IT sense; we are seeing a shift in the way IT is viewed, with an associated budget to reflect the new importance many businesses are putting on leading technology.

Coeus April 2016 graphic 1

New remit, new problems

We have been pushing to save money and commoditise for many years: outsourcing, offshoring and leveraged technology teams have all been ways to drive costs down. But aren’t we being asked to do that in our new role? We are being asked for business-led technology decisions and innovative business solutions, so what does it mean for our current ways of working and the tools we have had in our back pocket up until now?

Coeus April 2016 graphic 2

The biggest issue facing any business that needs to have technology at its heart, to manage the business transformation the markets demand, is the skills gap. Successive years of outsourcing and offshoring do two things to a company’s work force: it deskills based on knowledge of the actual business; and it also creates a “progression gap”. If you have outsourced all of your junior or commodity roles where people cut their teeth how do you bring technical ability and knowledge up through an organisation to the business technology layer, with architects and technologists who really know your business?

Coeus April 2016 graphic 3

Chasing the same resources

Our survey tells us that most organisations needing to deliver on the business promise that has been stoked by buzzwords such as digital and big data are looking to external organisations or to new recruits. As we all know, there is a limited supply of the new crop of business technologists, so who will win out? This isn’t just an issue for a retailer, for example, looking to build a new team: they are competing against the system integrators, managed service providers, net native startups and even consultancies for the same limited number of people.

So we have to ask ourselves: are our years of commoditisation, outsourcing and offshoring now biting us? Are we now going to pay the price through increased salaries, matching an increased skill level and reduced working pool? Or does the two-speed/adaptive IT paradigm ensure there is, as there always has been, a need for commodity and a need for business-inspired IT.

One thing is for sure: technology is a business model-changer, and is making its way from the periphery of the boardroom to the very centre. We see CIOs now heavily involved with business strategy. We also see a need for the commoditisation we have worked tirelessly to deliver over the past 20 years, becoming an ever-increasing focus for cost and efficiency savings. For those lucky budget holders whose budgets are increasing, there is a greater expectation than ever for a return on the cash.


About the Author

Matthew Headford 150Matthew Headford is a Managing Consultant and Head of Technology and Architecture at Coeus Consulting.  Matt’s specific responsibility at Coeus is to support organisations to understand their strategic ‘technology’ direction, in order to create opportunities from which they can leverage benefit.

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