Forrester: IT 'on threshold' of new spending boom

IT managers must 'evolve or perish' in a new climate that will see spending increase - and will transform IT into 'business technology'. Forrester senior vice-president David Metcalfe explains


The enterprise has come a long way since the days when mainframe computers were relegated to the back office to spit out data sheets. Today, technology touches every aspect of the enterprise, from transaction automation to mobile devices and analytic insights.

For this reason, Forrester chief executive George Colony has suggested that IT has become so central to the business, it should be renamed business technology (BT).

Despite the fact that IT is increasingly critical to keep the business running, the IT organisation still has to prove its value. The upshot is that chief information officers strive to operate IT as a business, using business metrics to market IT more effectively. To complicate matters, the industry is at a tipping point, as businesses plan to spend on IT innovations.

David Metcalfe, senior vice president, research, at Forrester, explains the industry is on the threshold of a new period of new innovation and growth, as organisations ramp up investment into new initiatives. “If we look at the growth in IT spending as a percentage of company revenue in relation to gross domestic product growth every year, we can see there have been major cycles of innovation and growth. The network computing boom spanned from 1992 until 2000, then after the year 2000 problem, there was a period of refinement from 2000 through until now.”

“Looking back only four years ago, people weren’t investing in IT in 2003. Instead, businesses were only investing in project they needed to do. There is data that suggests innovation and growth is really happening.” says Metcalfe.

On average, companies will spend 30% of their IT budget on new initiatives this year, according to Forrester research in North America, Europe and Asia. In 2004, the average was 21%, says Metcalfe, who believes IT budgets will continue to blossom.

For the CIO, this increased spend is a mixed blessing. Metcalfe warns that the enterprise will move to "business technology", with or without the technology department. “CIOs need to really think again about the governance of technology and how they want to manage migration of IT into 'BT' governance. Given that the shift is happening, it raises the contrasting image of the CIO that takes a leadership role to fit the new context, versus the CIO being told what is going to happen to governance by the business people.”

In a report titled Business Technology Defined, Forrester states: “IT organisations that adhere to the adversarial ‘we are IT and you are the business’ are already seeing businesses convert frustration into action when they hire a new business-sharp CIO, outsource as much as feasible, move the project management office (PMO) into the business, or simply start-up technology initiatives within the business.”

Metcalfe cites two examples of increased responsibility that will have an impact on the CIO's role: increased pressure to be agile and the greening of IT.

The internet has become so pervasive in the past few years that it has extended beyond the desktop to other devices, such as laptops and mobile phones, he explains . "There’s connection on planes. Wi-Fi and WiMAX broadband has made a massive difference to consumer uptake in the past few years. This connectivity and internet pervasiveness is creating a powerful trend for a 24-hour business. The business impact is the need to be agile and flexible."

The second issue is IT efficiency, which Metcalfe believes will be the biggest priority for IT spending. Managing environmental impact will become part of the CIO’s remit, as the pressure to reduce energy costs and show that companies are aware of green issues increases.

'IT to business technology' is the theme of this year's Forrester IT Forum, taking place in Edinburgh this week.

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