2012 corporate it spending outlook db it investor call

21
2012 Corporate IT Spending Outlook Alexander Stille European Research Director, CIO Executive Board In conjunction with 5 th January 2012 INFORMATION TECHNOLOGY PRACTICE CIO EXECUTIVE BOARD TM

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Brief overview of corporate spend data presented to investors in IT software and services organizations, with Deutsche Bank.

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Page 1: 2012 corporate it spending outlook   db it investor call

2012 Corporate IT Spending Outlook Alexander Stille European Research Director, CIO Executive Board In conjunction with 5th January 2012

INFORMATION TECHNOLOGY PRACTICE

CIO EXECUTIVE BOARD TM

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CIO Executive Board, Information Technology Practice

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A FRAMEWORK FOR MEMBER CONVERSATIONS

The mission of the Corporate Executive Board is to create revolutionary economic advantage for leaders of the world’s great enterprises by enabling them to act with unparalleled intelligence and confidence. We lift their performance at key decision points and career moments by delivering insight drawn from the most powerful global executive and professional network. When we bring leaders together, it is crucial that our discussions neither restrict competition nor improperly share inside information. All other conversations are welcomed and encouraged. We look forward to the continued and robust sharing of insights by member executives and professionals at Corporate Executive Board events.

COPIES AND COPYRIGHT

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The pages herein are the property of The Corporate Executive Board Company. Beyond the membership, no copyrighted materials of The Corporate Executive Board Company may be reproduced without prior approval.

LEGAL CAVEAT

The CIO Executive Board has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and the CIO Executive Board cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the CIO Executive Board is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither The Corporate Executive Board Company nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by the CIO Executive Board or its sources, or b) reliance upon any recommendation made by the CIO Executive Board.

© 2011 The Corporate Executive Board Company. All Rights Reserved.

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CIO Executive Board, Information Technology Practice

CIO Executive Board Support For IT Leaders and Their Teams

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4 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Research Methodology

IT Spending Levels

2012 Corporate IT Spending Outlook

Spending Trends Staffing and Sourcing Trends

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2011-2012 Budget Benchmark Benchmarking Survey Process

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Data Set

• 178 Companies participated in the benchmarking exercise

• Of between $1 billion and $370 billion in revenue

• Controlling total IT budgets in excess of $55 billion

• Surveys completed / validated by Group CIO and IT CFO

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6 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Partial List of Organizations Participating in the Benchmark

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Participant Profile Respondents by Region Percentage of Responding Organizations

© 2011 The Corporate Executive Board Company. All Rights Reserved.

N = 178

Respondents by Business Strategy Percentage of Responding Organizations

Respondents by Information Intensity Percentage of Responding Organizations

Respondents by IT Adoption and Risk Profile Percentage of Responding Organizations

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8 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Research Methodology

IT Spending Levels

2012 Corporate IT Spending Outlook

Spending Trends Staffing and Sourcing Trends

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CIO Executive Board, Information Technology Practice

9 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Key Insights

1. Modest Increases in IT Operating Expenditure Forecast for 2012. Two-thirds of CIOs expect to see increased IT operating expenditure in 2012, with a median rise of 2.9%. This is down from 10% realized growth in 2011 Opex, as companies reset spending after 2008 / 2009 freezes.

2. IT Capital Expenditure Flattens After a Year of Significant Investment. Following large increases in capital expenditure from 2010 to 2011, CIOs are expecting to maintain capex spending at near current levels as they have addressed the backlog of projects left from the recession.

3. Information Management projects Outweigh Process Automation. IT project budgets will be flat in 2012, but the budget mix is switching to smaller information management projects rather than process automation projects,

4. Despite Continued Volatility, IT Staffing Allocation Remains Constant. Despite continued economic pressure and increased sourcing interest, the allocation of staff across IT is predicted to remain surprisingly stable.

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CIO Executive Board, Information Technology Practice 10 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Capex Flattens After a Year of Increased Investment

Following a large increase in capital expenditure from 2010 to 2011, CIOs are expecting to maintain capex spending at near current levels, with an expected growth rate of 0.6% for 2012.

• 2011 IT capital investments increased as organizations addressed the backlog of projects left over from the recession.

• Organizations in the U.S. expect larger increases in capex spending for 2012, whilst European organizations are anticipating a sizable reduction in spending driven by continuing economic uncertainty.

• More than one-third of respondents expect large increases in capital expenditure for 2012, where recovery in spend did not happen during 2012.

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CIO Executive Board, Information Technology Practice 11 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Modest Opex Growth After a Year of Increased Spending

The 2.9% median expected in IT operating expenditure for 2012 is a fraction of the 10% realized growth in 2011.

• The 2012 rise in operating expenditure is driven in part by the cost of supporting the new functionality created during the 2011 IT capital expenditure spike.

• European organizations plan to hold operating budgets flat in 2012 following large increases in operating expenditure in 2011, driven primarily by centralization activities.

• Organizations expecting a higher than median increase in IT operating expenditure for 2012 are those whose products/services have a high information content, as well as innovation-focused organizations.

Median Change in IT Operating Expenditure From the Previous Year

Percentage of Organizations Changing IT Operating Expenditure from the Previous Year

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CIO Executive Board, Information Technology Practice 12 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Changes in IT Operating Spend by Industry

2012 IT operating expenditure is expected to grow at 2.9% at the median, though this masks underlying deviation across industries.

Median Change in IT Operating Expenditure From the Previous Year by Industry

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CIO Executive Board, Information Technology Practice

13 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Research Methodology

Spending Trends

IT Spending Levels

Staffing and Sourcing Trends

2012 Corporate IT Spending Outlook

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CIO Executive Board, Information Technology Practice 14 © 2011 The Corporate Executive Board Company. All Rights Reserved.

The Focus on Information Over Process

IT organizations spend more in customer interface, business intelligence, and collaboration projects than they do on process automation.

Breakdown of the IT Project Budget by Enablement Types

2011 - 2012

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Investments in mobile application development are expected to expand in 2012 to over 4% of total IT expenditure, on average.

• Organizations are expecting the increase in 2012 spend on mobile applications to be driven by:

1. Converting currently existing applications to mobile versions

2. Preparing for mobile application development through foundational efforts such as investment in new hardware, training, SOA services, mobile development frameworks etc.

15 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Percentage of Total IT Expenditure Allocated to Mobile Application Development 2010 - 2012

Increased Investments in Mobile Application Development

KEY FINDINGS | IT EXPENDITURE | CAPEX & PROJECT BUDGET | OPEX | OUTSOURCING & OFFSHORING | STAFFING & ORG STRUCTURE | APPENDIX

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CIO Executive Board, Information Technology Practice 16 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Percentage of IT Operating Expenditure Allocated to Cloud Sourcing 2010 - 2012

Spending on ‘the Cloud’ is Increasing On average, roughly 6% of IT

operating expenditure is allocated to cloud sourcing.

• Infrastructure-as-a-Service (IaaS) includes fundamental computing resources like processing, storage, and networks, where the consumer does not manage the underlying cloud infrastructure but has control over the deployed applications and the operating systems, e.g. Amazon EC2.

• Platform-as-a-Service (PaaS) includes consumer-created or acquired applications using programming languages and tools furnished by a provider, where the consumer does not manage the underlying cloud infrastructure but has control over the deployed applications, e.g. Microsoft Azure.

• Software-as-a-Service (SaaS) includes applications accessible through a web browser where the consumer does not manage the underlying cloud infrastructure or even individual application capabilities, e.g. Salesforce.com.

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17 © 2011 The Corporate Executive Board Company. All Rights Reserved.

Research Methodology Spending Trends IT Spending

Levels Staffing and

Sourcing Trends

2012 Corporate IT Spending Outlook

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Expected Prevalence of IT Service Models 2010 - 2013

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In 2011, 41% of IT organizations report that they currently have end-to-end IT services.

• End-to-end IT services are defined as services that are delivered across IT’s functional towers (e.g., applications, infrastructure). These services unite applications and infrastructure across IT silos.

• As service models change, CIOs expect this to drive increases in ability to outsource more individual service components, and to need to increase spending on tooling and measurement for service delivery.

IT Service Models Continue to Develop…

Note: Bars may not sum exactly to 100% due to rounding.

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CIO Executive Board, Information Technology Practice

19 © 2011 The Corporate Executive Board Company. All Rights Reserved.

CIOs expect significant increases in outsourcing over the next 3-5 years, but are not expecting to increase sourcing deals in the short-term.

…But is not Increasing Short-Term Sourcing Decisions

Percentage of Organizations Outsourcing Infrastructure at Various Spend Thresholds

Mean Percentage of Infrastructure Spending Outsourced

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CIO Executive Board, Information Technology Practice

www.cio.executiveboard.com

INFORMATION TECHNOLOGY PRACTICE

CIO EXECUTIVE BOARD – CONTACT DETAILS

CIO Executive Board www.cio.executiveboard.com Washington, D.C. Telephone: +1-571-303-3000 Fax: +1-571-303-3100 Chicago Telephone: +1-312-730-9000 Fax: +1-312-730-9100 San Francisco Telephone: +1-415-239-5825 Fax: +1-415-239-5826 London Telephone: +44-(0)20-7632-6000 Fax: +44-(0)20-7632-6001 New Delhi Telephone: +91-124-479-6000 Fax: +91-124-479-6001 Sydney Telephone: +61-2-8216-0831 Fax: +61-2-8216-0701

European Research Director: Alexander Stille [email protected] European Sales Director: Tim Kelso [email protected]

© 2011 The Corporate Executive Board Company. All Rights Reserved.

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