Companies’ average IT budgets increased sharply to $107 million in 2017 — representing a 23% increase over the average IT budget in 2016 ($86.6 million), according the Society for Information Management (SIM) IT Trends Study, which was released today. Over 760 organizations and 469 Chief Information Officers (CIOs) participated in this year’s study.
The annual study, which has been conducted since 1980, found that IT spending as a percentage of revenue rose from 5.04% in 2016 to 6.08% in 2017. This 20% increase is the largest annual increase in IT spending observed since 2012 when economic pressures from the Great Recession began to subside.
While an overall upward trend in IT spending suggests organizations are valuing the contributions of IT in supporting and driving business strategy and transformation, the study reveals considerable differences in spending across industries. Industries spending the most (as a percentage of revenue) on IT include: IT Hardware/Software (15.9%), Not-for-Profit (11.6%), and Financial Services/Insurance/Banking (9.7%). This contrasts the industries spending the least on IT: Retail/Wholesale (1.4%), Construction/Architecture (1.6%), and Energy (1.9%).
In total, 74% of organizations reported an increase in their year-over-year IT budget while only 20% reported a decrease. “While small annual increases and industry differences are not uncommon,” said Professor Leon Kappelman, the study’s chief scientist, “an increase of this magnitude nearly a decade into an economic recovery, and while IT operating costs are falling, points to a significant increase in IT investments aimed at increasing capability, strategic value, and digital transformation.”
The study also found that hiring for IT has continued its steady upward trend with 61.3% of organizations experiencing an increase in recruiting and hiring of IT personnel in 2017 (up from 56.1% in 2016 and 49.3% in 2015). This trend is expected to continue as 70% of organizations are predicting further increases in their IT workforce in 2018.
Interesting trends associated with CIO tenure and background were also reported. The average tenure of a CIO increased to 6.67 years in 2017 (average of 5.44 years over the preceding four years). A surprising 23.8% of CIOs have a non-IT background, up 164.4% from 9.0% in 2013. The study also found that only 21.0% were hired from inside their current organization, which represents a 20% decrease from last year and nearly a 29% decrease from 2015. “Although IT leadership was once the exclusive domain of technical experts, business savvy is clearly becoming more important,” said Professor Kappelman who chairs the Information Technology and Decision Sciences Department at the University of North Texas’ College of Business.
“Increasingly companies are finding they must go into the market to find the IT leadership they need.”
Cybersecurity and data breaches continue to dominate headlines and these issues are front-and-center for the industry and the larger business community. While IT leaders report that cybersecurity is the top IT issue for their organizations and is most personally worrisome to them, the study found a decrease in cybersecurity spending as a percentage of IT budgets this year (5.3% of the IT budget in 2017 compared to 6.2% in 2016).
“However, given the 20.6% increase in IT budgets this year, this still means cybersecurity spending as a percent of total revenue increased in 2017, and we expect this trend will continue,” Professor Kappelman noted.