Testing Times Ahead for CIOs: Gartner

by CXOtoday Staff    Oct 20, 2009

Though IT spending will rebound in 2010 with 3.3% growth after worst year ever in 2009, the market will not recover to 2008 revenue levels before 2012

In its latest outlook for the IT industry, Gartner has cautioned IT leaders against being overly optimistic.

"While the IT industry will return to growth in 2010, the market will not recover to 2008 revenue levels before 2012," said Peter Sondergaard, SVP at Gartner and global head of research. "2010 is about balancing the focus on cost, risk and growth. For more than 50 percent of CIOs the IT budget will be 0 percent or less in growth terms. It will only slowly improve in 2011."

According to Gartner, emerging regions will resume strong growth. "By 2012, the accelerated IT spending and culturally different approach to IT in these economies will directly influence product features, service structures, and the overall IT industry. Silicon Valley will not be in the driver’s seat anymore," Sondergaard said.

From a budget perspective, there are three important items that IT leaders must consider in 2010, says Gartner:

* A shift from capital expenditure to operational expenditure in the IT budget - Concepts such as cloud services will accelerate this shift. IT costs become scaleable and elastic. CIOs need to model the economic impact of IT on the overall financial performance of an organization. For public companies, they must show how IT improves earnings per share (EPS).

* Impact of the increased age of IT hardware - With delayed purchases of servers, PCs and printers likely to continue into 2010, organizations must start to assess the impact of increased equipment failure rates, and if current financial write-off periods are still appropriate. Approximately 1 million servers have had their replacement delayed by a year. That is 3% of the global installed base. In 2010, it will be at least 2 million.

"If replacement cycles do not change, almost 10% of the server installed base will be beyond scheduled replacement be 2011," said Sondergaard. "That will impact enterprise risk. CFOs need to understand this dynamic, and it’s the responsibility of the CIO to convey this in a way the CFO understands."

* IT must learn to build compelling business cases - 2010 marks the year in which IT needs to demonstrate true line of sight to business objectives for every investment decision. IT leaders can no longer look at IT as a percentage of revenue. CIOs must benchmark IT according to business impact.