Gartner Survey of 1,300 CIOs Shows IT Budgets to Increase by 2.5 Percent in 2005; Focus on Business Processes and Business Intelligence to Move IT from Commodity to Business Contribution.

EGHAM, England -- Chief Information Officers (CIOs) expect IT budgets to increase by 2.5 percent in 2005, and believe their focus will be on supporting business growth and results, according to a survey by Gartner Executive Programs (EXP), a unit of Gartner Inc. In the past few years, CIOs have had to focus on internal efficiency and cost control, while preparing their organization for an economic upswing. CIOs also voiced concerns about their relationship with the CEO and whether they have the right people to meet current and future business needs.

Gartner EXP surveyed more than 1,300 CIOs representing more than $57 billion in IT spending, covering more than 30 countries. It has presented the findings from the survey in the report 'Delivering IT's Contribution: The 2005 CIO Agenda'. This is the most comprehensive study of CIO behaviors and beliefs available.

"Business expectations are now forcing CIOs to transform the IS organization and 2005 is the year where CIOs must deliver more value and become a contributor rather than a commodity," said Mark McDonald, group vice president for Gartner EXP. "They must do this without large up-front investments and CIOs are turning to business processes and business intelligence to meet this challenge."

Gartner said contributing to business growth starts by providing secure, high quality and cost effective IT services. This is mandatory and a baseline for IT's credibility. It is reflected in the top technology priorities for 2005, where security features at the top of the list (see Table 1).

Table 1 - Top 10 Business and Technologies Priorities in 2005


 Top 10 Business         Overall     Top 10 Technology     Overall
 Priorities              Ranking     Priorities            Ranking
----------------------------------------------------------------------
Business Process                    Security enhancement
Improvement                 1       tools                      1
----------------------------------------------------------------------
Security breaches and               Business Intelligence
disruptions                 2       applications               2
----------------------------------------------------------------------
Enterprisewide operating            Mobile workforce
costs                       3       enablement                 3
----------------------------------------------------------------------
Supporting competitive              Workflow management
advantage                           deployment and
                            4       integration                4
----------------------------------------------------------------------
Data protection and                 Enterprise resource
privacy                             planning (ERP)
                            5       upgrades                   5
----------------------------------------------------------------------
The need for revenue                Storage Management
 growth                     6                                  6
----------------------------------------------------------------------
Using intelligence in               Voice and data
products and services       7       integration over IP        7
----------------------------------------------------------------------
Focus on internal                   Customer relationship
controls                    8       management (CRM)           8
----------------------------------------------------------------------
Shortage of business                Business process
skills                      9       integration tools          9
----------------------------------------------------------------------
Faster innovation and               Server virtualization
cycle times                10                                 10
----------------------------------------------------------------------
Source: Gartner EXP (January 2005)

CIOs believe that business process improvement and strategic use of business intelligence will be most significant in delivering IT's contribution to business growth in 2005 through 2008. Pressure for greater profitability, faster innovation and growth requires enterprises to be more agile. That means doing things better, not just cheaper and faster. These pressures force a move towards business process improvement and integration. The focus on business intelligence reflects the need to identify and find new sources of business growth.

"Business process improvement has been a focus for IS organization for 20 years, however, it is no longer about making individual processes within a business unit or geography faster," said Mr. McDonald. "The latest wave of business process change, business process fusion, provides the opportunity 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."

"Building on these 'fused' processes, business process innovation can link process execution with business intelligence to exploit opportunities for growth, efficiency and customer service," Mr. McDonald added. "Enterprises with strong integrated business processes are already gaining results from a focus on innovation. Extending the CIO and IS role into business process innovation will contribute business value without large up front investments."

CIO Challenges 2005

CIOs reported that they face three critical challenges for 2005.

1. CIO/CEO relationship - two thirds of CIOs see themselves as 'at risk' based on the CEO's view of IT and its performance. To address this, CIOs need to raise and stabilize the quality of IT services and provide measures that clearly demonstrate the contribution of those services and their ability to deliver growth. This needs to be articulated in business terms understood by the CEO.

2. People and skills - Only 39 percent of CIOs believe they have the right people to meet current and future business needs. Additionally, only 20 percent of CIOs who put business process improvement in the top 5 priorities for 2005, believe the IS oganisation has the necessary skills to implement this. This skills gap must be addressed before enterprises can leverage this opportunity. 51 percent of CIOs also reported concerns around an aging workforce as a result of difficulty in attracting new people with the right skills to meet the new requirements.

3. The changing role of IT - The move towards greater involvement with business process and business intelligence will transform IT's role in new ways. This will force changes in IT governance, business relationships and accountabilities, and the overall shape of the IT organization.

The transformation to business contributor requires CIOs to excel in three distinct, but related roles:

--Senior technology executive responsible for leading the IS organisation.

--Technology leader responsible for applying technology to enterprise challenges.

--Member of the executive team, who needs to develop business, technology, leadership and personal skills.

"Being a 'new CIO leader' requires finding the right balance across these roles," Mr. McDonald concluded.

Additional information is available in the Gartner EXP report: Delivering IT's Contribution: The 2005 CIO Agenda. The survey findings include responses from more than 1,300 CIOs covering more than 30 countries around the world representing $57 billion in IT spending. It is the largest of its kind. Industry sectors include manufacturing 21 percent, financial services 19 percent, public sector 18 percent, consumer products and services 9 percent, professional services 7 percent, high tech and communications 5 percent, utilities and chemicals 7 percent, healthcare and pharmaceuticals 4 percent, education 4 percent and other 4 percent.

About Gartner EXP

Gartner Executive Programs (EXP) is a membership-based organization of more than 1,900 CIOs worldwide. Members benefit from the convenience of a single source of knowledge, one-to-one counsel, personalized service, the shared knowledge of the world's largest community of CIOs and the assurance of Gartner objectivity and insight. Additional information about Gartner EXP can be found on the Gartner Web site at www.gartner.com/exp.

About Gartner

Gartner, Inc. is the leading provider of research and analysis on the global information technology industry. Gartner serves more than 10,000 clients, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company focuses on delivering objective, in-depth analysis and actionable advice to enable clients to make more informed business and technology decisions. The Company's businesses consist of Gartner Intelligence, research and events for IT professionals; Gartner Executive Programs, membership programs and peer networking services; and Gartner Consulting, customised engagements with a specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has more than 3,500 associates, and including more than 1,000 research analysts and consultants, in more than 75 locations worldwide. For more information, visit www.gartner.com.