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IT Budgets Increase; CIOs Shop For Tools to Help Grow Businesses

CIOs have changed their spending focus from products that help control costs to those that can help grow their businesses. Think security enhancement tools and business intelligence software for starters, says a Gartner report.

Chief information officers plan to spend a bit more than last year on technology, but their focus has shifted from products that will help control costs to those that can help companies grow their business, a market research firm said Friday.

A survey of more than 1,300 CIOs in 30 countries found that the execs expect information-technology budgets to increase by 2.5 percent this year, with security enhancement tools and business intelligence software rating first and second, respectively, on the CIO's list of top 10 technology priorities, Gartner Inc. said. The spending increase, while small, is the highest in three years.

"Businesses are concentrating on growth in 2005, rather than recovery," Gartner analyst Mark McDonald said. "But they are not significantly increasing their expenditures for 2005, which means CIOs have to create more value for the business (from IT) than businesses can buy in the marketplace."

If CIOs fail to build an IT organization that contributes to profits, than more of the operation could be outsourced to third parties.

"Savvy CIOs recognize that they have to specialize to create more value faster than service providers and other alternatives," McDonald said.

Being able to provide adequate security is the first step in deploying technology, some of it Internet based, to help boost business growth, Gartner said. Business intelligence software, on the other hand, is seen as an IT organization's contribution to helping their employer find ways to make business processes better and more efficient.

"Business intelligence is changing from the quantity of data to the quality of data in terms of getting the right information to the right people at the point of need," McDonald said.

In the past, companies have focused IT departments on improving the speed and reducing the cost of individual business processes within a unit or geography, McDonald said. That, however, has changed and CIOs are now looking to "re-engineer processes end-to-end from the customer perspective and integrate previously autonomous business processes, information and application software across business units and geographies."

CIOs see themselves as "at risk" based on chief executives' views of IT and its performance, Gartner said. As a result, the tech execs are looking to raise and stabilize the quality of IT services, which, in general, need to be presented in business terms understood by CEOs.

Six out of 10 CIOs surveyed believed they needed to upgrade their own business skills, as well as those of their staff, to meet their employer's current and future needs. "Improving business skills is one of the top CIO initiatives," McDonald said.

Among the executives who put business-process improvement in the top five priorities for 2005, only 20 percent believe the IT organization had the necessary skills to implement such projects.

"The saucy angle is what one CIO told me," McDonald said. "'We're having to invest to replace the experience and skills that we had to let go over three years of cost cutting.'

"Businesses told them to be cheap, so they went out and were cheap. Now businesses are telling them to be better and faster."

More than half of the CIOs surveyed reported concerns over an aging workforce and the difficulty of attracting new people with the right skills to meet the new requirements.

According to the survey, the top business priorities, in order, from one to 10 were business-process improvement, security breaches and disruptions, enterprise-wide operating costs, supporting competitive advantage, data protection and privacy, the need for revenue growth, using intelligence in products and services, focus on internal controls, shortage of business skills and faster innovation and cycle times.

The top 10 technology priorities were security enhancement tools, business intelligence applications, mobile workforce enablement, workflow management deployment and integration, enterprise resource planning upgrades, storage management, voice and data integration over Internet protocol, customer-relationship management, business-process integration tools and server virtualization.

Editor's Note: This article first appeared at InformationWeek, a sibling publication of Insurance & Technology.

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