Appreciating the realities of IT budgets in 2017

Posted by Mike Vizard on Oct 20, 2016 9:59:04 AM

IT_budgets.jpegNow that the fourth quarter is well underway, surveys tracking IT budget projections for 2017 are forecasting that IT spending next year will be anywhere from flat to up 2.9 percent.

In fact, Gartner is predicting that IT services spending will increase 4.8 percent in 2017 to reach a total of $943 billion. Total worldwide IT spending is forecasted to reach $3.5 trillion in 2017.

However, as comforting as those estimates may be to IT service providers, they may very well be beside the point. Regardless of category, new innovations are transforming almost every segment of the IT industry. IT organizations may be spending less as whole because newer technologies are more efficient. But even in a category that is supposed to be as moribund as IT infrastructure, converged and hyperconverged infrastructure (HCI) systems are witnessing double digit growth rates in terms of adoption.

Budget-driven innovation

The primary issue most CIOs are wrestling with today comes down to a need to create an agile IT environment that is much less expensive to both acquire and maintain. More often than not, the board of directors at most companies is forcing that innovation issue by slashing the IT budget. When the IT department is faced with less money to spend, innovation becomes a necessity. IT leaders finally have a mandate to drive change in a way that disrupts the fiefdoms that have historically existed within enterprise IT organizations.

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Those savings are then either dropped to the bottom line or used to fuel additional application development and deployment projects. The challenge for many CIOs is figuring what percentage of those application workloads should be deployed on premise or in the cloud. Different classes of workloads have different types of characteristics. Workloads that require frequent access to persistent data are much more economical running on premise than in the cloud. In contrast, workloads that have variable processing requirements are typically less expensive to deploy on a public cloud.

The good news from an IT service provider's perspective is that the existence of multiple clouds increases demand for IT management expertise. Eventually, the lines between all those clouds will blur to a point that enables true hybrid cloud computing.

Uncovering funding outside the IT budget

In the meantime, IT service providers need to be having IT conversations that start with the goals of the business. Optimizing a particular IT function in a way that makes it faster or better than before isn’t a major priority. IT and business leaders are aiming to fundamentally transform how IT operates inside their organizations. Organizations that don’t have such a plan in place will soon find themselves falling significantly behind rivals that are taking advantage of a modern IT environment to create better digital customer experiences at much lower costs.

To accomplish that goal many organizations are willing to spend more than what’s been allocated in the IT budget. Most IT budgets are a single-digit percentage of revenues. There’s significantly more money in sales and marketing budgets that can be allocated as an operating expense to IT projects that further specific business goals. Once IT service providers align themselves within the context of that mission, the amount of money in the IT budget essentially becomes irrelevant.

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Topics: IT Services Trends

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