If you want to get a read on most situations, it’s sound advice to follow the money. It works for detectives on TV crime dramas, and following the money spent on hiring and technology also helps in drawing a bead on the most impactful IT strategies.
But what you find isn’t always what you’d expect. Investing financially in IT, for instance, doesn’t ensure success. Shadow IT doesn’t neatly rise and fall in relation to the IT budget. Hiring efforts fluctuate by industry, with each sector chasing different roles.
However, you can get a better sense of where to dedicate budget by looking at the IT spending habits of the 1,350 global IT decision-makers that Sungard Availability Services and market researcher Vanson Bourne surveyed for “The Little Book of IT 2017.”
How IT investment relates to integration
Most organizations surveyed for the “The Little Book of IT” are managing both agile environments and legacy IT systems, which pose a resource issue that financial investment alone can’t solve.
While there’s a clear connection between investing in IT and the level of systems integration, for example, spending is often a case of diminishing returns.
For example, organizations that spend between 0 and 5 percent of their revenue on IT report an average level of integration of 19 percent. However, as the percent of IT investment increases, the level of systems integration doesn’t rise at the same rate.
Spending 5 to 10 percent on IT increases systems integration by 4 percent. Spending 10 to 15 percent of revenue on IT increases the systems integration level to 31 percent. And devoting more than 15 percent of revenue buys only a 7 percent increase.
IT spending in the shadows
The ease with which other departments can go beyond IT to add software and services is widely known to have given rise to shadow IT. The natural assumption is that smaller IT budgets make shadow IT more likely as other departments are forced to take tech needs into their own hands. However, “The Little Book of IT” reveals the opposite. Smaller IT budgets lead to less shadow IT.
Only 26 percent of respondents who listed an IT budget of less than 5 percent of revenue said that most business departments were using shadow IT. However, 61 percent of companies devoting 15 percent or more of revenue to IT reported that a majority of other departments were using shadow IT.
Drawing definitive conclusions on why is difficult. Companies that spend more on IT may be whetting the tech appetites of other departments. Or another possible reason is that IT departments are doing a good job delivering on core infrastructure and tech needs, but marketing, sales and other departments are adding analytics or creative services to drive revenue growth.
Innovation and bi-modal IT spending
As we covered in “3 traits innovative IT teams have in common,” companies that are innovating are more likely to have adopted bimodal IT. As its adoption and implementation gains acceptance, organizations (especially those in the U.S.) are investing in hiring to meet that demand – but some industries are more committed than others.
The manufacturing sector, for example, is on the forefront with 82 percent of organizations indicating they are hiring to meet bimodal demand. On the opposite end, only 23 percent of healthcare organizations say they plan to hire to meet bimodal needs.
“The Little Book of IT” points out that this is surprising given the 75 percent of healthcare respondents who indicated they had adopted or plan to adopt a bimodal IT strategy.
Healthcare respondents say they are most likely to hire for digitalization strategies. Energy, oil/gas and utilities say they are mostly to hire for networking and data convergence. Financial services companies are looking for network security pros. Transportation and logistics are looking to hire for digitalization. Like the manufacturing sector, retail and consumer are most likely to hire for bimodal IT.
All roads lead to innovation
The path to digital transformation will be more challenging for organizations facing budget constraints and limited resources. Those companies will need to make more painful decisions than organizations with bigger budgets for technology and hiring.
Globally, according to the survey, Ireland and Sweden are clearly the most affected by the lack of budget to invest in core IT areas, with 81 percent and 71 percent of respondents, respectively, saying they will be impacted by budget cuts.
However, while some IT departments face greater resource challenges than others, the research shows that innovative leaders will need to steer decisions to “meet business and customer demands, drive resilience to physical and virtual threats, and defend against competitive pressure.”