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IT Quickly Losing Control Of Enterprise Tech Spending, Study Says

The IT department is losing control of enterprise technology spending to the functional business division, an IDC study said.

The funding for enterprise technology projects is increasingly falling out of the hands of IT and shifting toward the functional end of business, according to a recent study.

An IDC study released Thursday found that 61 percent of enterprise technology projects are funded by functional business and credits the shift to the trend toward technology saturation and consumerization, an increased urgency in the need for technology to compete in business and the advent of cloud computing.

"Technology has long been central to improving business processes, enabling greater speed, efficiency, and reliability," said Meredith Whalen, IDC senior vice president, in a presentation about the study. "As businesses embrace the 3rd Platform, built on cloud services, big data analytics, mobile computing, and social networking technologies, they are taking the critical first steps toward business process transformation and, in some cases, business model transformation. With such high stakes, the business is increasingly taking a front seat in technology initiatives."

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Among business executives surveyed, 85 percent said IT is becoming more valuable to the functional side of business, but the IDC study said that it is important for IT organizations to jump on board with that and make sure not to miss the boat.

The leading area of growth in the functional end of business IT spending was in the marketing department, which showed a CAGR of 9 percent over five years.

Kevin Miller, CMO at SalesFUSION, said that his marketing automation software company has seen a jump in IT spending by companies' marketing sectors to keep pace with social selling and Internet marketing. Sales people often feel overwhelmed and that they have lost control of the cycle, he said, which can be regained through technology.

However, that doesn't mean IT is completely out of the conversation, Miller said. In the last 12 to 18 months, he has seen an increase in having to approve new software systems with the IT department or CRM administrator of a company before the sale can be completed.

"Sooner or later, they will be making the decision," Miller said.

NEXT: The Shadow IT Problem And How IT Can Make Sure To Stay In The Conversation


As the trend toward functional business purchases grows, the study warned that a potential problem area for IT going forward would be the corresponding growth in shadow IT. The study found that 17 percent of technology spending came from shadow IT, opening up possibilities for security problems, blind spots and redundant spending. The main areas where the shadow IT occurs were in legal, marketing, product management and the manufacturing supply chain.

"Make sure you understand what is truly holding your IT organization back. Don't get distracted by secondary drivers of why the business avoids working with IT, especially if those secondary drivers are easier to address than the primary cause," IDC said. "Our study shows business executives think IT organizations need to spend more time learning the business processes and building relationships with the key business stakeholders -- two root causes not so quickly addressed. Developing an action plan to address these two issues is likely the starting point for reducing shadow IT in your organization and becoming a more valuable partner to the business."

There are two recommended approaches to solving the growing problem, according to the study. First, IT can collaborate with the finance department to "hunt down" the shadow IT and implement corporate policies to prevent further growth. The second recommended approach is to discover the root cause of the issue and why employees preferred to implement IT without consultation.

The bottom line is that IT needs to make sure it is critical to business, business executives told the researchers of the study. Fifty-seven percent of business executives said that IT needs to make itself more important to business functions by learning more of the processes outside of the technical aspects. In fact, 51 percent of business executives said they wished IT would bring them new ideas on how to improve the functionality of their business.

"To succeed in this world of technology-imbued business processes, IT organizations need to work closely with the business to identify where technology can provide the business with a competitive advantage," said IDC's Whalen in the study.

PUBLISHED Oct. 4, 2013

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