CEB CIO Leadership Council

A New Pattern
in IT Spending

Key Findings from the

ITBudget Benchmark

This past year ushered in an era of new IT

spending patterns, potentially signaling bigger
changes for 2016.

Every year, we work with 150200 of our member organizations
to benchmark how IT organizations spent their budget and how
they plan to spend over the next year. The benchmarking looks
at what types of investments are being made, how staffing levels
are changing, and what types of service delivery models are
most common.
This years benchmarking, in particular, grabbed our attention
with several interesting trends.
than expectations (3.3% growth at the median was predicted).
This low top-line number for 2015 budget growth, however,
obscures a sharp division in the spending behaviors of IT
functions.
About one-quarter of benchmarked IT functions are much more
likely to act as advisors to technology projects rather than as
owners of them. These companies saw their IT budgets decline
by a median of 2.3%, pulling down overall top-line growth
numbers.

Modest Growth Expectations for 2016 and
Diverging Growth Patterns in IT Budgets
Corporate IT functions expect total budgets to grow by 2.2%
(Figure 1). Capex is expected to grow by 3.3%, and opex is
expected to grow by 2.0%. This growth represents an improve-
ment over actual budget growth from 2015, but it is the most
modest prediction weve seen since 2012.
Despite conservative forecasts for overall budget growth,
expectations for 2016 staff growth are the highest since the
2009 recession at 1.9%. Security budgets are expected to grow
from 5.8% of the IT budget (at the median) to 6.2%, continuing
a steady upward trend.
Between 2014 and 2015, overall IT spending increased by a
modest amount (0.4% growth at the median) that was slower
The remaining three-quarters of benchmarked organizations
had spending growth much more in line with historical pat-
terns. These organizations, which retained direct ownership
over the majority of their companies technology projects, saw
IT budgets grow at a median rate of 5.1%.
A Fork in the Road for Corporate IT:
Adaptive Versus Traditional IT Organizations
About one-quarter of the surveyed companies had dramatically
different spending patterns than the rest of the benchmark.
Were calling them Adaptive IT organizations in contrast to
traditional IT functions (Figure 2). These organizations differ
from their peers in that they are more likely to do the following:

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Figure 1: Median Expected and Actual Change in Total IT Expenditure
20102016(E)

10.0% Expected Actual Traditional IT Organizations Adaptive IT Organizations

6.3%
5.1% 5.1% 5.1%

3.0% 3.3%
2.8%
2.2% 1.8% 2.2%

0.4%

(2.3%)
20102011 20112012 20122013 20132014 20142015 20152016(E)
n = 128. n = 176. n = 181. n = 172. n = 166. n = 154.
Source: CEB 20102015 IT Budget Benchmarks.

Play an advisory role. In Adaptive IT organizations,
Corporate IT is more likely to play an advisory role in tech-
nology projects rather than owning them directly. These
organizations act as advisors for more than 50% of their enter-
prises technology projects.
Own a decreasing share of enterprise technology spending.
Because Adaptive IT organizations are less likely to directly
own technology projects, more funding for technology is
channeled through business leaders organizations instead of
corporate IT budgets. As a result, Adaptive IT organizations
had both lower opex growth and lower capex growth than
their peers. Overall, they appeared to enable the growth of
their companies technology budget at the expense of growth
in the corporate IT budget.
Spend more on analytics and employee-facing projects.
Adaptive IT organizations are more likely to invest in analyt-
ics, usability, personalization, and collaboration projects. They
spend about one-third more of their IT project budget on
these types of investments than other IT organizations. They
tend to spend less money on infrastructure or process automa-
tion projects.
Have more flexible budgets. Adaptive IT organizations use
more flexible approaches to budgeting, allowing them to typi-
cally reallocate twice as much of the IT budget in response to
changing business needs than their peers do. Adaptive IT
organizations reallocated a median of 10% of their budgets in
2015, while most other organizations reallocated only 5%.
In addition to differences in spending patterns, Adaptive IT
organizations are also more likely to:
Focus staff on new skills and ideas. Adaptive IT organi-
zations are more likely to invest in training for emerging
technology skills, and they are at least one-third more likely to
give their teams personal performance objectives focused on
innovation and challenging the status quo.
Have more widespread business engagement skills.
Adaptive IT organizations typically have twice as many staff
who are rated good or excellent at business engagement
compared to other IT organizations.
Interestingly, Adaptive IT organizations do not seem to be
structured differently from Traditional IT organizations; they
do not appear to have adopted this adaptive posture by moving
to any sort of bimodal organization. They are, however, slightly
more likely to have adopted an end-to-end IT service delivery
model.
Combined with CEBs recent research on business-led IT, the
differences between Adaptive IT organizations and other
IT teams lead us to believe that traditional IT budget bench-
marking will provide an increasingly incomplete picture of
technology activity in the enterprise.
In some situations, a rising corporate IT budget may signal an
unhealthy pattern of spending, showing that Corporate IT has
not adapted how it operates to best serve business leaders.
Figure 2: Percentage of Portfolio Where IT Acts as
Consultant or Advisor on Technology Projects
Percentage of Organizations, 2015
27% 73%
More Than Up to 50%
50%

n = 154.
Source: CEB IT Budget Benchmark.

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 Figure 3: Median Actual Growth in CapEx and OpEx
20102015

30% CapEx Growth OpEx Growth

23.3%

15% 10.0% 9.7%

5.0% 7.2% 6.0%
4.1% 4.0% 1.8% 3.2%
0%
20102011 20112012 20122013 20132014 20142015

Source: CEB 20102014 IT Budget Benchmarks.

Does Slowing Capex Growth Signal

Bigger Changes? Key Takeaways from Our 20152016 IT Budget
Benchmark
Since 2010, capex growth consistently outpaced opex growth.
Since the 2009 recession, 2015 was the first year when capex Expectations for 2016 IT budget growth at
growth was slower than opex growth, potentially representing 2.2% are higher than actual budget growth in
a tipping point in IT spending patterns (Figure 3). 2015, but they are lower than IT organizations
predictions from the past few years.
Three related trends contributed to this switch:
Spending patterns among IT functions
1. Shift of Project Spending into Business Budgets diverged: IT organizations that still own
delivery of most technology projects grew
Most organizations, and Adaptive IT organizations in particular,
their budgets last year at 5.1%, and IT
saw business leaders continue to spend directly on technology
organizations that more frequently act as
outside the IT budget. This project funding was often classified advisors saw their budgets shrink by 2.3%.
as capex, leading to lower capex growth in IT budgets as more
of that activity takes place in the rest of the business. Shrinking IT budgets no longer necessarily
represent a negative sign of enterprise
2. 
Declining Spend on Core Infrastructure and Process technology spending, while growing IT
Automation budgets may not represent a healthy growth
in enterprise technology investment. IT budget
Companies continue to invest less year-over-year on capi-
growth needs to be looked at through the lens
tal-intensive core infrastructure projects (e.g., data center
of ITs posture toward technology projects in
expansions) and process automation projects (e.g., ERP) the rest of the business.
declining from 65% of project spending in 2013 to 60% in 2015.
In place of capital intensive infrastructure and process- Adaptive IT organizationsthose that most
focused IT projects, investments in analytics, usability, and frequently act as advisors rather than owners
collaboration have grown from 31% to 34% of the IT project of technology projectsare much more likely
budget. A significant driver of this shift is the spending patterns to have flexible budgets, spend on more
of Adaptive IT organizations. analytic- and user-focused projects, have high
levels of business engagement, and support
3. Continued Movement to the Cloud staff involvement in learning and innovation.

Almost every organization in the benchmark is investing to IT capex growth is slowing as more business-
some extent in cloud computing (e.g., SaaS, PaaS, IaaS), which led IT, more cloud investments, and less
is typically treated as opex. Although SaaS has been used infrastructure spending all lessen the need for
almost universally for the past several years, 2015 marked the larger IT capital budgets.
tipping point for IaaS; 63% of companies reported using IaaS in
2015 compared to 46% in 2014.

Take Action1

Compare your IT budget to that of your peers. | IT Budget Benchmark (CEB CIO)
See key findings from this years IT Budget Benchmark. | IT Budget Benchmark Key Findings Replay (CEB CIO)
View select IT budget metrics by peer group. | IT Budget Benchmark Analysis Tool (CEB CIO)
Create and effective budgeting process. | CEB Ignition Guide to Creating the Annual Budget for IT (CEB CIO)
1 Access to these resources is available only to members of each program. Please contact your CEB account manager or e-mail IT.Support@cebglobal.com if you would like
to learn more about this content.

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