IT Confidence Up But IT Budget Outlook Cautious

Economic uncertainty has resulted in a mixed outlook among IT decision-makers according to the latest CDW IT Monitor. While confidence is on an uptick and spending is showing small gains, budget recovery has been slow.

Budget expectations among IT decision-makers held steady through most of the latter half of 2010 until December of 2010 when there was a six percentage point drop. The recent CDW IT Monitor shows that budget recovery has been slow in some sectors but improving in others. However, the Six Month Growth Outlook, an index calculated from a number of survey questions related to spending, staffing expectations as well as hardware and software procurements, increased one point year over year, to 68.

While budget outlooks are more cautious, CIOs still expect to make key IT investments in the second half of the year. The outlook for software spending has shifted to the greatest expectations on record for new software installations for a significant part of organizations. Two out of five IT decision-makers expect to do so, up six percentage points year over year and four points above the previous record set in the fourth quarter of 2010. In addition, three out of four IT decision-makers expect to purchase new hardware in the next six months. This is seven percentage points above this time last year. Spending on mobility is effectively equal to that of desktops, with IT decision-makers expecting to purchase 66 percent and 67 percent of mobile devices versus desktops respectively in June.

Virtualization (59 percent), security (58 percent) and cloud computing (56 percent) lead June solutions spending considerations among IT decision-makers with cloud computing making the biggest jump, up nine points from April. As cloud computing, virtualization and mobile computing become more prevalent, 48 percent of IT decision-makers see security as a greater priority than it has been in the previous two years with internal threats as the greatest concern.

While 43 percent of IT decision-makers expect an increase in the overall IT budget in the second half of 2011, this level of budget optimism is five percentage points below June of 2010. In particular, the budget forecast among large business and the federal government is weaker than this time last year, down 10 and 17 percentage points respectively.

The bright spots are medium-size businesses and state governments, which show a more favorable budget outlook. Of medium-size business decision-makers, 59 percent expect increases, up four percentage points year over year. Among state governments, 32 percent expect increases. While two percentage points down from June 2010, the state government reading is eight percentage points above April figures.

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CFO Optimism Wanes as Economic Concerns Return and Internal Challenges Rise

As their companies shift from recovery to growth, chief financial officers (CFOs) are becoming increasingly concerned about the external and internal factors that threaten their progress. According to the results of the Deloitte CFO Signals survey for the second quarter of 2011, CFOs are more apprehensive about the soundness of capital investments and the possibility of internal missteps as they work to further their organizations’ growth agendas. This coincides with their returning concerns over the economic recovery.

Tracking the perspectives of CFOs from some of the largest and most influential companies in North America, the study found that “own-company optimism” fell markedly this quarter as 40 percent of respondents say they have a more positive outlook, down from 62 percent last quarter. Moreover, the percent of respondents who say they are less optimistic doubled from 16 percent -- the lowest level in the previous 12 months -- to 32 percent.

Behind the sagging sentiments are concerns over the execution of corporate growth agendas. Whereas past pessimism was driven largely by deteriorating assessments of the macro-business environment, roughly half of the renewed doubt this quarter is driven by internal concerns. In addition, CFOs are having second thoughts about their capital investments. In fact, almost half (49 percent) of the CFOs surveyed are more worried about the quality of their capital investments than they were three years ago and 40 percent are more concerned about the level of those investments.

Still, CFOs appear to be only raising a cautionary flag at this point. They continue to expect year-over-year revenue growth (7.1 percent this quarter versus 8.2 percent last quarter) and positive earnings growth (14 percent versus 12.6 percent last quarter) as well as increased capital spending (10.7 percent this quarter compared to 11.8 percent last quarter). Approximately 64 percent of CFOs also expect domestic hiring increases although the hiring will not be substantial--year-over-year domestic hiring growth projections for the second quarter of 2011 remained low at 2 percent and slightly higher than last quarter’s 1.8 percent.

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CEOs say innovation is most important factor for growth, leadership, strategic integration, accountability required

Innovation -- in the form of developing new products and services -- has become as important to growth for CEOs as raising their share of existing markets. A survey by PwC of 1200 CEOs from around the world found that innovation, along with increasing their existing business, now outstrips all other means of potential expansion, including moving into new markets, mergers and acquisitions, and joint ventures and other alliances.

PwC's 14th annual Global CEO survey found that that innovation is high on the executive agenda in virtually every industry. In all, 78% of CEOs surveyed believe innovation will generate ‘significant’ new revenue and cost reduction opportunities over the next three years. But it is highest for those where technology is changing customer expectations. In both the pharmaceutical and entertainment and media sectors, for example, more than 40% of CEOs believe their greatest opportunities for growth come from spawning new products and services.

Additionally, the survey found that CEOs are re-thinking their approach to innovation and increasingly seeking to collaborate with outside partners and in markets other than where they are based. For example, a majority of entertainment and media CEOs said they expect to co-develop new products and services.

The innovation process generally has four phases:

Discovery: Identifying and sourcing ideas and problems that are the basis for future innovation. Sources may include employees as well as customers, suppliers, partners and other external organizations.

Incubation: Refining, developing and testing good ideas to see if they are technically feasible and make business sense.

Acceleration: Establishing pilot programs to test commercial feasibility.

Scale: Integrating the innovation into the company; commercialization and mass marketing.

The study also identifies seven misconceptions about the innovation process:

Innovation can be delegated. Not so. The drive to innovate begins at the top. If the CEO doesn't protect and reward the process, it will fail.

Middle Management is the ally of innovation. Managers are not natural champions of innovation. They to reject new ideas in favor of efficiency.

Innovative people work for the money. Establishing a culture that embeds innovation in the organization will attract and retain creative talent.

Innovation is a lucky accident. Successful innovation most often results from a disciplined process that sorts through many ideas.

The more open the innovation process, the less disciplined. Advances in collaborative tools, like social networking, are accelerating open innovation.

Businesses know how much innovation they need. Leaders must calculate their potential for inorganic growth to determine their need to innovate.

Innovation can't be measured. Leadership needs to identify its ROII--Return on Innovation Investment.

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What Makes CIOs Toss and Turn at Night? IT Security Among Top Tech Concerns

The tech world never sleeps and, apparently, CIOs don't get much rest either. According to The CIO Insomnia Project, a recently released research initiative from Robert Half Technology, nearly one-quarter (24 percent) of CIOs cited data security as the primary worry keeping them up at night, followed by hardware and/or operating systems upgrades, with 13 percent of the response.

The research project examines the most pressing technology concerns and is based on telephone interviews with more than 1,400 U.S. CIOs. The CIO Insomnia Project also features expert advice and video interviews with IT leaders from around the country. Other findings include:

-- 65 percent of CIOs estimate the average company experiences three or more IT security breaches per year.

-- As the economy improves, 37 percent of CIOs plan to implement hardware or software upgrades.

-- 63 percent of CIOs said understaffing at least somewhat affects their companies' ability to implement innovative technologies.

-- 34 percent of CIOs are at least somewhat concerned about losing top IT performers to other job opportunities in the next year.

-- One in 10 CIOs said managing heavy workloads is the top concern keeping them up at night. 

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Worldwide IT Spending Is on Pace to Grow 7.1 Percent in 2011

Worldwide IT spending is on pace to grow 7.1 percent in 2011, according to the latest quarterly spending outlook by Gartner, Inc. Analysts have revised overall IT forecast spending growth in U.S. dollar terms, up from their first quarter update, when they projected 5.6 percent growth for 2011.

Global IT services is forecast to reach $846 billion in 2011, a 6.6 percent increase from 2010. The computing and hardware segment is poised for the strongest growth with spending forecast to grow 11.7 percent in 2011.

The migration to public cloud services is currently one of the hottest topics in IT, and Gartner's latest forecast found that spending in this area is projected to grow four times faster than spending on overall IT. Worldwide public cloud services spending is forecast to total $89 billion in 2011, up from $74 billion in 2010. The market is forecast to reach $177 billion by 2015.

However, to put this growth in context, Gartner analysts said public cloud services spending was only about 2 percent of global IT spending in 2010, and by 2015 the level of spending on public cloud services will be less than 5 percent of the total spent on IT overall.

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Worldwide Enterprise Software Revenue to Grow 9.5 Percent in 2011

Worldwide enterprise software revenue is on pace to surpass $267 billion in 2011, a 9.5 percent increase from 2010 revenue of $244 billion, according to Gartner, Inc. The enterprise software market is projected for continued growth in 2012, with revenue forecast to reach $288 billion.

Enterprise infrastructure software spending is on pace to a $153.3 billion total in 2011, a 9 percent increase from 2010 revenue of $140.6 billion. The market is led by the operating systems (OS) segment in which revenue is projected to reach $32.6 billion in 2011, followed by database management systems (DBMSs) revenue at $25.5 billion.

Worldwide enterprise application software spending is forecast to total $114.4 billion in 2011, a 10.2 percent increase from 2010 spending of $103.8 billion. Enterprise resource planning (ERP) is the largest segment within the enterprise application software market. ERP revenue is expected to reach $23.3 billion, followed by office suites with $15.7 billion.

Emerging countries such as Poland, India, China and Brazil, which were less affected by the latest economic downturn than the U.S. and Europe, are expected to continue to invest heavily in enterprise software initiatives in the next few years as they build the IT infrastructures necessary to do business on a global basis.

Enterprise software spending in North America is forecast to reach $121.2 billion in 2011, up from 2010 revenue of $112.9 billion. The market will experience consistent growth through 2015, when spending in North America will surpass $158.1 billion.

Gartner believes that oil prices and the outcome of the federal budget deliberations are the largest threats to economic stability in North America. However, current indicators are positive with consumer and business spending on both equipment and software holding up. With the extension of federal tax cuts —including the tax relief on capital equipment depreciation —due to expire at the end of the year, additional stimulus revenue could further boost enterprise spending on technology and other capital goods.

Enterprise software spending in Western Europe is forecast to reach $78.3 billion in 2011, up from 2010 revenue of $70.3 billion. The market will experience growth on a par with North America through 2015.

Asia/Pacific (excluding Japan) will have the second fastest growth, after Latin America, in enterprise software revenue of all the regions in 2011. Spending is forecast to reach $26.4 billion in 2011, up from 2010 revenue of $23.6 billion. The market will experience strong growth through 2015, when spending in Asia/Pacific will surpass $40 billion.

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Survey Shows Expectations of IT's Strategic Contribution Will Double for 2012

In the midst of a belief that tough times lie ahead, more boards of directors are saying that they expect a high to extremely high strategic contribution of IT in 2012, according to the Gartner Forbes 2011 U.S. Board of Directors Survey. The expectations of "high" to "extremely high" strategic contributions of IT climbed from 32 percent of survey respondents for 2010 to 66 percent for 2012.

From October to December, 2010, Gartner and Forbes surveyed 96 company directors. The Gartner Forbes 2011 U.S. Board of Directors Survey was designed to gain insight from a group that has low visibility to IT and business leaders, yet is ultimately held accountable for the performance of the corporation. The survey examined the key business issues and priorities of a sample of directors from companies with revenues over $1 billion, their view of what is ahead for their businesses, and their expectations for IT's strategic contribution to the business.

While 73 percent of board directors surveyed believe that the economic situation is tough and will remain so for the foreseeable future, 51 percent said they are still focused on growing revenue. The tension between these two views means that CIOs will need to plan for the systems that will be required for growth but build in flexibility should circumstances change amid high levels of uncertainty.

One of the goals of the survey was to test how board directors view the different business issues in front of them. The hypothesis was that board-level issues, such as corporate governance, would rank highly, along with the issue of corporate social responsibility, such as workforce diversity, instituting green policies and philanthropic activity. However, in listing the top 28 priorities, there was a clear delineation where business priorities fell into three distinct groups:

-- The Top 12: The Business Performance Block -- This top-ranked list was dominated by issues that have a direct connection to revenue and profit.

-- The Middle 8: The Board Policy Block -- This list was dominated by issues that concern the board directly, such as instituting or strengthening corporate governance.

-- The Bottom 8: The Social Responsibility Block -- This list contained "green" policies, corporate social responsibility and philanthropic activity, and political lobbying.

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