What Determines IT Spending Priorities?

By on Aug 4, 2012 in Implenting ITSM: A Case Study Focusing on Critical Success Factors | 0 comments

What Determines IT Spending Priorities? Source: Hoon S. Cha, David E. Pingry and Matt E. Thatcher

The authors of the article go into great depths in order to explain how businesses determine the amount that they need to spend on IT. This is a difficult thing to prove as IT costs are by no means fixed and are rather intangible to account direct costs to.

Businesses currently spend an average of around 40-45% of their budget on IT. It can be noted that companies can make comparisons on IT spending with their competitors to benchmark spending and budget allocations. This can be difficult as IT’s importance and characteristics vary greatly between businesses.

In order to help businesses a survey was conducted on “1,495 business leaders in Alabama, Arizona, Colorado, and Texas during the 4th Quarter of 2005 to examine the firms’ IT spending priorities across business functions”. The survey focused on things such as industry type, firm size, location, and past IT performance to better judge budget allocation for that particular company. The results showed that the highest IT spending priorities are in administration, production, and distribution. The lowest were research and development and security.

For some companies this may be fine. The general consensus from this is that companies are more focused on the running and profitability of their business than innovation and securing their systems. Security and innovation are becoming increasingly important items to cater for in IT, and hopefully this will become more aware in the future.