CFOs and CIOs have very different priorities when it comes to IT spending, and that dichotomy is not likely to change any time soon, even as IT budgets are starting to once again increase.
After being slashed to almost nil during the height of the crisis for many corporations across sector and size, IT budgets are beginning to rise.
But CFOs are keeping a keen eye on where that money is going and still expect a relatively swift return on investment (ROI) in order to consider anything beyond maintenance and upgrades.
They want to clearly see that ROI—whether it be through qualitative measures, like better compliance or improved risk management, or through quantitative measures like reductions in days sales outstanding (DSO) or decreased cost-per-check.
As Craig Himmelberger at SAP said in a recent interview I did for Global Finance magazine: “People don’t want to rip and replace systems that are still functioning well, so a lot of the investments we see now are incremental.”
This IT budget allocation is likely to continue for the near future, at any rate, regardless of what CIOs may want. However, there does have to be a balance. At some point when liquidity risk fears begin to subside, CFOs will once again be more open to their CIOs’ suggestions for IT spending.
And what CIOs want to see is more spend on innovation, as Ellen Pearlman noted in her blog on CIOZone.com last month.
She quoted CXO Art Sedighi as saying: “In the current time and environment, the biggest challenge is [to] convince upper management to open up their wallets again after almost 3 years. The IT staff has been pulling things together with nothing short of band-aids since 2008, and things are about [to] fall apart. All management sees is the fact that spending was down, and they survived.”
Pearlman points out that while most execs believe that IT innovation is important, companies have consistently slashed spend on innovation over the past decade. In an AT Kearney study, executives cited IT innovation spend of 30 percent in 1999, compared with just 14 percent by 2009.
In the study, 45 percent of IT budget went to improving operations and 41 percent went to business enablement/process improvement. Most respondents felt that 24 percent of the IT budget should be directed towards innovation.
The current budget split certainly meshes with the continued corporate focus on driving down costs across the working capital chain. Indeed, it may be quite some time before CIOs get their dream IT allocation.