IT spending plays an outsized role in operating budgets — and it's going up. IT spending was projected to grow 0.6% to $3.74 trillion in 2019, according to Gartner.
As technology has become pervasive across business units who controls IT spend — and where spend comes from in corporate budgets — is changing.
For 67% of IT leaders, at least half of their spend is controlled by individual business units, according to a survey conducted by Snow Software and IDC Connect.
That's not necessarily a bad thing, Sanjay Castelino, chief product officer at Snow Software, told CIO Dive. This move puts spending power in the hands of end users (i.e. employees) who buy exactly what they want to be productive.
But putting purchasing decisions in the hands of business units takes away oversight, leading to possible overspending when those individual units buy more than necessary (or duplicate what another department has). It also raises concerns about compliance and safety issues.
"Ten years ago, people used to talk about 'shadow IT' and they used to talk about this stuff with very negative connotations," said Castelino. Now that shadow IT has come into the light, it's allowing workers to be more agile, but introduces overarching concerns and consequences along the way.
Business buy what they need
While business units are controlling more of IT spend, 78% of respondents think decentralized technology spending is good for business, according to Snow Software and IDC Connect
The report also found 45% of IT leaders think this shift will allow organizations to become more agile and innovative.
When a business unit makes purchase decisions, employees are buying what works for them, said Castelino. Employees can do it quickly, too.
"They can get what they need by going to a website and plunking down a credit card," Castelino said. And it's all delivered to that business unit by the cloud.
Catelino sees this as a natural evolution of technology spending; it's a shift from technology requiring specialized knowledge to becoming an integral part of business operations across departments.
"Businesses can't grow without leveraging technology because it drives efficiency and it drives experience for their customers," Castelino said.
Decentralized structure means more spending, less oversight
Decentralized spending doesn't mean letting employees buy whatever they want.
IT leaders are worried about how this shift in spending increases risks to data security and compliance, according to Snow/IDC. The survey found 62% of IT decision makers are concerned about increased integration challenges with legacy hardware and software, and 32% worry business units are overspending on cloud without centralized spending oversight.
"Because of distributed decision making, three people could want a project management tool and you buy three instead of one," Castelino said.
Overspend is a big deal too, costing $8.8 billion from idle resources and $5.3 billion from oversized resources in 2019, according to ParkMyCloud.
"This estimation of wasted cloud spend is probably low," wrote Jay Chapel, CEO of ParkMyCloud. "This calculation doesn't even account for waste accumulated through orphaned resources, suboptimal pricing options, misuse of reserved instances, and more."
Concerns about overspending, compliance and safety aren't normally issues for companies where IT functions as a service to other business units, because IT in those enterprises typically have a view of what is happening across the company, Todd Tucker, vice president of Standards, Research and Education at the Technology Business Management Council, said in a CIO Dive webinar on navigating IT costs.
IT departments can make decisions across the board without spending redundancies and "link the funds that IT receives to the volume and quality of services that are being provided," he said.
However, that arrangement doesn't happen overnight. What "CIOs and their teams have built over years takes time to mature," Tucker said.
This change in who spends, and on what, will impact the CIO's role in the future.
Snow/IDC predicts in two years, 80% of IT leaders will be judged on IT's effectiveness in driving business growth and not IT operation measures.
"IT professionals are finding it easier to command boardroom attention because now, all of the sudden, technology is part of how businesses are run," Castelino said.