The good news for CIOs — they still control about 60 percent of the average IT budget in a corporation.
The bad news — they think they control 80 percent, according to a survey of member-based advisory firm CEB, which surveyed 165 organizations representing more than £29 billion in IT spending in Europe and the US.
“There’s a surprising amount being spent beyond IT and CIOs only see half of it,” said, Andrew Horne, managing director at CEB in London.
He doesn’t think that is necessarily a problem, and, he added, many CIOs are becoming comfortable with it, even if their teams aren’t, yet.
“Traditionally, this has been seen as a bad thing, as the names suggest — shadow or rogue IT — and it has been seen as risky because it doesn’t have the same security that traditional IT does. It also is potentially wasteful because it can duplicate things being done by IT. And it often has inexperienced people dealing with vendors who get more out of them. Our view is that you have to distinguish between health and unhealthy shadow IT.”
Independent IT projects can be driven by creative people in a company, he said.
“Individual employees up to the head of sales are spending money on technology because they see interesting or exciting opportunities to improve the business,” Horne explained. “They want to experiment with technology. To the extent that is going on, we think it is healthy. But it is unhealthy if it is just duplicating what the company is already doing, or if the smaller teams are buying hardware that the company could get a better deal on through central purchasing.”
Increasingly, he added, the spend is legitimate and often draws on cloud resources so it is not duplicating company resources. Departments like marketing want to move fast. They want to try things and see what works, but they don’t want to run a big IT shop, so if it works they turn it over to IT.
With the amount of technology choice that business leaders have, the speed of change and the ease of using cloud applications, it makes sense for departments to develop their own solutions.
Chief financial officers might be critical of some of these experiments if it weren’t for the fact that finance itself is often using systems outside of IT’s control, Horne said.
“The CFO has traditionally looked at this as wasteful and tricky, but we see finance departments doing some of this, as as well as HR,” Horne said. HR departments in the survey spend 6 to 9 percent of their budget on technology, often on cloud-based HR systems.
“The CEO in many cases would be hearing from these other executives and business unit leaders saying that technology is so important to my business and to make my teams productive I can’t solely rely on IT. I need to be involved in this because I have my own view on what is important to the business.”
The result is some tension between the CIO who thinks technology needs to be controlled and the business side saying they want more of a role in the decisions, and pushing back at IT control efforts.
Best practices are evolving, Horne added.
“We see a growing number of CIOs recognize that shadow IT is not always a bad thing. Often the bigger problem is their teams haven’t gotten that message.”
He talked to a CIO for a consumer products company who was educating his team to ask them to stop getting in the way.
By Tom Groenfeldt, EPM Contributor, from: http://www.forbes.com/sites/tomgroenfeldt/2013/12/02/40-percent-of-it-spending-is-outside-cio-control/2/
I write about finance and technology, which can range from supercomputers to iPhones and iPads, which have made inroads into enterprise computing in the last year. It’s a fast-moving world with just a bit of hype, so figuring out what’s real is a challenge, and spotting emerging trends is a feat that often comes from listening and deciphering themes amidst the chatter. For a change of pace I turn to photography — I like shooting on the streets of New York, and when I am home in Wisconsin, I turn to our dogs for inspiration, as you can see on Facebook. Tom writes for Banking Technologies in London, and for Forbes, at blogs.forbes.com/tomgroenfeldt. See Tom’s articles on EPM Channel here.