35% of IT funding comes outside IT budget: Gartner

• APAC IT leaders use public cloud services and outsource more than global counterparts
• Gartner expects chief digital officer (CDO) role to become more common over next 5yrs

CHIEF information officers (CIOs) in the Asia Pacific region reported increases in conventional IT budgets for 2014 of 0.9%, but estimated that only 65% of IT is funded from within the conventional IT budget, according to an annual global survey of CIOs by Gartner Inc's Executive Programmes.
                                             
IT leaders from Asia Pacific – or what Gartner categorises as Asia Pacific & Japan (APJ) – reported increases in budgets for 2014 that exceeded the global average of 0.2%, the analyst firm said in a statement.
 
“APJ businesses expect IT to support growth and are increasing IT budgets accordingly,” said Gartner vice president Andy Rowsell-Jones (pic).
 
“Although not a large increase, this growth in IT budget at least allows APJ IT leaders to prepare the ground to capture the digital opportunities appearing in 2014,” he added.
 
More notable, given the growth of the conventional IT budget, is the proportion of IT spending funded from outside of IT, Gartner said.
 
In contrast to the global average, where 73% of IT funding is estimated to be funneled through the conventional IT budget, only 65% is estimated in APJ, leaving 35% of IT spend to be funded by marketing and other buying centres of IT services, such as sales, operations and R&D (research and development).
 
“This high level of unconventional funding from outside IT, while aiding growth, may contribute to integration issues in the short term and governance in the long term,” said Rowsell-Jones.
 
Filling the digital leadership vacuum
 
According to the Gartner report, most businesses have established IT leadership, strategy and governance, but have a vacuum in digital leadership.
 
Only 11% of APJ businesses have appointed a chief digital officer (CDO). Although this is higher than the global average of 6%, Gartner believes that to exploit digital opportunities and ensure that the core of IT services is ready, there must be clear digital leadership and all business executives must become digitally savvy.
 
“Whether your enterprise has a CDO or not, we recommend that CIOs contribute to and, if necessary, lead the discussion about the implications of the ‘digital dragon’ on the enterprise,” said Rowsell-Jones.
 
“We expect the CDO role to become more common over the next five years. We expect its scope to grow, too,” he added.
 
Across the globe, 42% of CDOs are currently focused on digital marketing, but this number is falling as more CDOs become true advisors on digital business strategy to the CEO and board of directors, and so they move into the arena of business strategy.
 
Technology focus
 
The top technology spending priorities of APJ CIOs for 2014 reveal two complementary goals: exploiting new technologies and trends, and renovating the core of IT.

The cloud was nominated as the top area for new technology spending by CIOs in APJ. Nearly one-third of APJ businesses are enthusiastic adopters of the public cloud, indicating significant investments in the drive for greater agility.
 
This places them ahead of their global peers: 31% of APJ CIOs say they have invested significantly in cloud compared with 25% globally.
 
Organisations in this region are greater users of public cloud services, especially platform as a service (PaaS) and infrastructure as a service (IaaS), but lower users of software as a service (SaaS) than the global average.
 
Only 56% of APJ respondents are using SaaS, whereas this figure is much higher globally (72%). This implies that the majority of cloud services are being consumed by the IT function rather than business units directly.
 
“It’s unsurprising that investment in mobile app development and device management ranks second, given the rapid growth in adoption of mobile-data-enabled smartphones and tablets, the increased popularity of BYOD (bring your own device), and the explosion in the number of devices capable of participating in the Internet of Things,” said Rowsell-Jones.
 
“This is followed by business analytics in third place, as enterprises in this region seek to better understand and manage the drivers of business performance,” he added.
 
The second area of significant investment for APJ IT leaders is renovating the core of IT – in other words, ensuring that the infrastructure, as well as the main IT applications and services, such as data centre, ERP (enterprise resource planning) and networks, are fit for purpose to ensure that the core is digital-ready.
 
Strategic sourcing
 
IT leaders across APJ have long embraced strategic sourcing, mixing inhouse with sourcing from offshore captive units, contractors and fully fledged outsourcers.
 
The survey data bears this out, Gartner said, showing APJ to be slightly above of the global average when it comes to mixed or outsourced arrangements.
 
Only 19% of CIOs in APJ reported having wholly or mainly insourced IT arrangements, compared with 27% globally. A mixed model was used by 66% of APJ respondents (63% globally) and 14% were wholly or mainly outsourced, compared with a global average of 10%.
 
This is only the beginning, however. IT leaders across APJ intend to embrace strategic sourcing even more wholeheartedly, with 77% expecting to change their sourcing arrangements in the next three years.
 
Building bimodal capability
 
To address the age-old tension between needing to provide slow and steady IT (for critical systems), while responding ‘at the speed of digital’ (for innovative, differentiating opportunities), digital-savvy IT leaders are managing their IT organisations in two modes: Traditional and nonlinear.
 
APJ is slightly in front with the adoption of this model, with 48% of respondents saying they operate some form of bimodal IT, in contrast with the global average of 45%.
 
“If you are not already bimodal, consider experimenting with separating conventional and ‘nonlinear’ IT work streams, with conventional looking after more traditional waterfall development projects, and nonlinear looking after more short-term, agile and lean startup opportunities,” said Rowsell-Jones.
 
More information is available in the report 2014 CIO Agenda: An Asia/Pacific and Japan Perspective, available on Gartner’s website here. Of the 2,339 respondents to the 2014 Gartner CIO Agenda Survey, 398 came from APJ.
 
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