Survey Says Most Financial Decision Makers Do Not Understand Impact of IT Budget Cuts
November 15, 2011
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According to an independent survey of financial IT investment decision makers in international enterprises, almost 60% of respondents have no overall understanding how an IT budget cut impacts their business performance or risk exposure.

The study further reveals that barely 4% determine their IT budget in accordance with the company’s actual business strategy or an IT portfolio analysis. As a consequence, more than 90% of the participants admit that they base their IT budget on industry benchmarks - as an arbitrary percentage of revenue - or simply tweak the previous year’s budget.

Another survey earlier this year showed that high quality information on IT landscapes in organizations is infrequent. A study by Nucleus Research showed that IT decision makers on average are constrained to deal with data that is on average 14 months old and only 55% correct.

The intention of the new study was to explore how financial IT decision makers are affected by the lack of reliable information. The results show that IT investment decisions are rarely based on reliable data and that decision processes are slowed down significantly by a lack of information on demand. As a result, only 30% of financial decision makers think their IT portfolios are fully aligned with business strategy and less than 14% think they can adjust them very quickly to changes in business.

Some Key Findings:

The situation – lack of information on demand:

* Less than half of the respondents (46.1 %) say they have a central system for analyzing, forecasting and measuring changes made in their IT portfolio.

* A minority of 32.5% is running standard reports to measure the alignment of their IT portfolio with current business requirements; the majority relies on ad-hoc analysis by either the IT department (32.2%) or a business department (27.5%).

* 85% of respondents do not have automatically-generated insight on the impact of a budget cut on risk exposure and business performance; one in five participants even has to wait longer than a month for the information, slowing down the decision processes dramatically.

* Only 15 % of the decision makers maintain that they have instant access to reliable information about the impact of budget cutbacks on the business performance and risk exposure.

The result – flat-rate budgeting and too little responsiveness:

* Nearly 60% of the financial decision makers do not believe that they have a clear understanding about where and how IT budget cutbacks could impact the business performance and possible risks.

* Barely 4% of the participants state that their budgeting is based on their business strategy and on an IT portfolio analysis. In contrast, over 90 % base their budget on previous year’s spending (28.3%) or an industry benchmark (61.3%) rather than their specific enterprise situation.

* Only 13.5 % can react very quickly to changes; one in five admits to reacting slowly or very slowly.

* Only 29.3% consider their IT portfolios as fully aligned; one in five concede that they are aligned only partly or even hardly.

The 10-question survey, conducted by IDG Business Research Service, canvassed CFOs and financial decision makers in large international corporations with more than 1,000 employees in August and September 2011 by phone. It was commissioned by alfabet AG, a provider of strategic IT planning and Business IT Management solutions.

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