IT Budgets & Spending

Computer Economics fielded their annual survey and the results for IT Budgets & Spending are summarized below.

IT Budgets & Spending – Key Takeaways

The number of respondents reporting that their budgets are inadequate dropped from 60% in 2016 to only 52% last year and 51% this year – this is most likely due to the fact that new technologies, including cloud applications and cloud infrastructure, are allowing CIOs to more quickly and cheaply roll out new IT capabilities.

The biggest change from last year is the increase in IT spending as a percentage of revenue, which rises from 2.3% to 2.7%.

IT spending as a percentage of revenue is expected to flatten or even decline slightly to its historical level of 2.0% to 2.5% as organizations realize further economic benefits from cloud systems.

IT Budgets & Spending – IT Operational Spending Growth Is Steady

IT operational spending growth is increasing at a modest rate this year –  2.8% growth at the median,.  This continues the trend of most of the past five years of increasing spending in operational budgets at a slightly higher rate than inflation.

Capital-Budget-as-a-Percentage-of-IT-SpendingIT Operational Budget Change From Prior Year

  • 2014 2.4%
  • 2015 3.0%
  • 2016 2.0%
  • 2017 3.0%
  • 2018 2.8%

IT Budgets & Spending – IT Operational Spending Growth Is Broad

The net percentage of companies increasing their IT operational spending has remained strong but flat over last year.

64% of organizations are increasing IT spending, but that is offset by budget cutting at 17% of organizations, which results in a net increase of 47%.

Net Percent Increasing IT Operational Spending

  • 2014 47%
  • 2015 52%
  • 2016 39%
  • 2017 47%
  • 2018 47%

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IT Budgets & Spending – Midsize Organizations Leading the Pack

While IT operational spending growth generally is modest, midsize organizations are showing more robust growth than their larger and especially their smaller peers.

At the median, midsize organizations, those with IT operational budgets between $5M and $20M a year, are increasing IT operational budgets by 5.0%, followed by large organizations at 3.3%. Small IT organizations are bringing up the rear at just 1.0%

IT Operational Spending Growth By Company Size

  • Small 1.0%
  • Midsize 5.0%
  • Large 3.3%

IT Budgets & Spending – More CIOs Making Due with What They Have

51% of IT executives feel that the IT budget is somewhat or very inadequate to meet the needs of the business.

Adequacy-of-IT-Operational-BudgetAdequacy of Current IT Operational Budget to Support the Business

  • Very Adequate 8%
  • Somewhat Adequate 43%
  • Adequate 46%
  • More Than Adequate 3%

IT Budgets & Spending –  IT Spending as Percentage of Revenue Jumps

Total IT spending includes both operational and capital spending, as well as IT spending outside the IT budget. It is the broadest measure of IT spending on a cash basis.

As a percentage of revenue, we are seeing a healthy increase this year for the composite sample- the percentage increased from 2.3% last year to 2.7% this year.

IT organizations generally getting a larger piece of the corporate pie seems to be a sign that CEOs and CFOs this year are willing to loosen the purse strings a bit in hopes of reaping bigger gains in productivity and business transformation.

Total IT Spending as Percentage of Revenue

  • 2014 2.5%
  • 2015 2.3%
  • 2016 2.5%
  • 2017 2.3%
  • 2018 2.7%

IT Budgets & Spending – Per-User Spending Rebounds

Consistent with the increase in IT spending as a percentage of revenue, spending per user takes a substantial jump this year.

IT spending per user is up from $6,987 in 2017 to $7,988.

IT Operational Spending per User

  • 2014 $8.4K
  • 2015 $7K
  • 2016 $7.4K
  • 2017 $7K
  • 2018 $8K

IT Budgets & Spending – IT Capital Spending Growth Continues to Decline

In addition to IT operational budgets, most organizations maintain IT capital budgets to fund long- term investments in IT infrastructure, equipment, or major system development and implementation.

While 47% of IT organizations are increasing IT capital budgets, 29% are reducing capital spending.

For the most part, organizations appear to be spending just enough to maintain normal equipment-refresh cycles, not growing their on-premises infrastructure.

Percentage of Organizations Changing IT Capital Spending

  • Increasing 47%
  • Decreasing 29%
  • About the Same 24%

IT Budgets & Spending – Capital Budgets Flat as a Percentage of IT Spending

IT capital spending as percentage of total IT spending is trending down–capital spending as percentage of IT spending remains at a five-year low of 18%, dropping from 23% in 2014.

Virtualization, the cloud, and other technologies are lessening the need for capital expenditure growth even when times are good.

While existing equipment must still be refreshed, the years of large capital expenditures in order to handle growth are likely gone, due to the elasticity and efficiencies of newer technologies.

Capital Budget as a Percentage of IT Spending

  • 2014 24%
  • 2015 23%
  • 2016 21%
  • 2017 21%
  • 2018 18%

IT Budgets & Spending – Security, Privacy, and Cloud Top Spending Priorities

Continuing the trend from recent years, security/privacy is the major spending priority, but this year it is tied with another priority—cloud applications.

Security/privacy is expected to rank at the top again next year.

The transition from on-premises to cloud applications has been proceeding in earnest for some time-only 20% of companies have converted at least half of their business applications to the cloud so there is still plenty of room for cloud apps to grow.

Cloud infrastructure is becoming nearly as important as cloud applications and is gaining ground over last year.

Spending Priorities by IT Initiative

  • Security / Privacy 75%
  • Cloud Applications 75%
  • Cloud Infrastructure 64%
  • BI / Data Warehousing 52%
  • Mobile Devices 39%
  • DR / Business Continuity 37%

Additional Marketing Automation & Predictive Marketing Resources From Four Quadrant

Cloud Computing Report – Users & Providers >>

CMO Spend Research>>

MegaTrends in Analytics >>

IT Spending Research & Surveys >>

Cloud Computing Research >>

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