The Cloud

More Department Leaders Make Their Own IT Decisions

Technology has become so vital to all areas of a business that those in charge of departments and functions are spending big.
Taylor ProvostMay 7, 2013

Senior management executives are increasingly budgeting for information-technology purchases particular to their own functional areas or departments, beyond what’s included in corporate and IT-department budgets.

In a survey by research firm Forrester, conducted from August to November 2012, 92 percent of 824 respondents said they had decided to spend on technology services, products or staff, not because of any frustration with IT or IT leaders, but because their attitudes about technology’s importance to their business have changed.

“We originally thought people would be spending their own budgets because they weren’t happy with IT, but that isn’t the case,” John McCarthy, vice president and principal analyst at Forrester, tells CFO. “[Business leaders] want to spend more money on technology than IT already does. But more than that, they view technology as too important to be left to IT alone. Their expectations as a result of IT consumerization are driving them to take a more active role.”

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The survey, limited to companies with more than $1 million in annual revenue, broke out decision-makers into five categories: senior management and those responsible for research and development, manufacturing and supply chain, back office, and sales and marketing. Senior managers, a group that included CFOs, were the biggest IT spenders, followed by R&D then sales and marketing. Among industry sectors, the greatest IT spending by non-IT functions or departments was found in financial services.

Respondents classified as “high spenders” – that is, the 250 decision-makers who said they devote at least 21 percent of their departments’ expenditures to IT – tended to prioritize product and service innovation over cost cutting. One-third (33 percent) reported that their knowledge of technology has increased, making them more comfortable engaging with IT in projects of their own devising.

Also, 20 percent of high spenders said their own use of consumer technology has changed their expectations of how technology should be used in business. Specifically, they reported recognizing a need for easy-to-use smartphone applications and more agile and flexible IT systems in order to improve customer satisfaction.

Additionally, high spenders, the survey found, were more actively involved in technology selection and vendor management. They were more likely to select, negotiate and manage technology suppliers, either on their own or in partnership with IT. “Regardless of who’s doing the spending, technology is increasingly important to the core of the business, and it’s going to take a larger share of the company spend,” says McCarthy.

The business leaders spending the most on technology have begun exploring software-as-a-service tools beyond those that aid in customer relationship management (CRM), which which are often the first cloud applications that companies use, McCarthy says. These businesses are now trying out SaaS-based accounting, fraud management and financial services. Some business departments are also hiring their own dedicated IT staff and acquiring PC and smartphone hardware without involving IT.

But business leaders are primarily spending their budgets on systems of engagement and other technologies designed to help them better serve and understand their customers, according to the survey.

“Whether you’re talking about R&D or new engagement applications put out by marketing, tech literacy across the business has to go up because it’s going to be much more core to the company’s success in the marketplace,” McCarthy concludes. “Senior management is realizing that software is how people experience a company. Whether we’re talking mobile banking apps in financial services or infotainment systems in cars, more and more companies don’t exist without software.”