IT budgets shift away from capital expenses thanks to the cloud

IT organizations are spending money on things other than hardware acquisition

IT budgets shift away from capital expenses thanks to the cloud

IT organizations are enjoying a slow but steady increase in budgets, but their capital expenses and hiring trends are essentially flat, reflecting the effect of the shift to cloud computing. 

That’s the takeaway from Computer Economics’ annual IT Spending and Staffing Benchmarks study for 2017/2018. The study finds that the greatest effect has been a decrease in the total amount of spending that goes toward the capital budget.

"Unless you are an IT equipment manufacturer, this is good news," said David Wagner, vice president of research at Computer Economics in a statement. "The cloud transition is far from over, and we're already seeing more efficient IT departments, particularly on a cost-per-user basis, which is at a new low. Business applications and network infrastructure are the top areas of new IT spending, while the data center, for the first time, is at the bottom. We take this as a sign the cloud transformation is continuing in earnest."

IT capital spending drops to 18 percent 

IT capital spending has gone from 24 percent of total IT spending in 2013 to 18 percent in 2017, a significant drop in just four years. Computer Economics found that capital spending has held steady while operational budgets have grown, leading to capital budgets making up a smaller portion of the pie.

The move to cloud infrastructure and software as a service means no more significant capital investments required to purchase computer hardware or software licenses. So, IT departments are shifting their money elsewhere, some of it to paying for cloud and SaaS, since they still have to pay the bill for those services. 

There is good news for IT departments. The number of respondents reporting that their budgets are inadequate dropped from 60 percent to only 52 percent. Computer Economics said this is most likely due to the new technologies giving CIOs the ability to roll out new IT capabilities more quickly and cheaply. 

The study also found there is slow-to-no growth in IT staffing levels. Less than half of IT organizations plan to add IT staff this year, according to the study. 

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Increases in IT headcount are becoming more modest in good times, so hopefully that will mean less severe cutbacks when bad times come. The shift to the cloud and greater levels of automation are reducing the demand for lower level IT positions, but demand for higher level skills, such as business analysis, data analytics, project management, IT security and vendor management are increasing. 

The survey shows that IT executives are investing more of their budgets in business applications, networking, security and end-user devices this year, while data center spending is not much of a priority at all, as IT departments shift some of their workload off-premises along with getting more use out of their data center with virtualization and automation. 

The Computer Economics IT Spending and Staffing Benchmarks 2017/2018 study is based on a detailed survey of more than 200 IT executives in the U.S. and Canada on their IT spending and staffing plans for the next two years. The executive summary is available for free.


Copyright © 2017 IDG Communications, Inc.

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