Ken Davis, Brian Scanlon and Anna Rath of McKinsey & Company have new research on IT spending in the 2004 special edition issue of The McKinsey Quarterly (page 58 in the print magazine or online). The article is short but very information-packed, as is most of McKinsey's research. I'm pulling out some highlights worth mentioning, but I would recommend reading the full article.
They found that due to a combination of factors, IT spending is on the rise (I have certainly noticed this myself). The primary drivers are:
- Capital expenditures from 2000 and before are rolling off the books, meaning lower depreciation expenditures in the budgets, leaving more money available for new capital projects.
- Pent-up demand to replace older infrastructure, due to deferred investment over the past few years. This ranges from garden-variety PC purchasing to security upgrades.
Something else interesting about this, and mirroring a trend I am seeing firsthand as well as in the trade press, is the rise of custom software spending. While 58% of CIOs plan to spend more on software in '04, only 35% are planning implementation of major packages or industry-specific packages, while 65% are planning to develop new applications themselves.
The IT Governance results from the article were interesting as well. A nice infographic depicts the different decision-making roles among IT, finance, purchasing and business units in different types of oversight models for different types of expenditures. The most common model is one in which IT and finance jointly decide on medium and large new initiatives, IT and purchasing jointly decide on small and medium commodity infrastructure and CIOs can make autonomous decisions otherwise (including anything related to integration and complex infrastructure).
If you have comments about this topic, suggestions for future topics, or questions related to the governance of the IT function or the business-centric use of technology, feel free to e-mail me at eyetoIT@gmail.com.
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