Top 10 business needs driving IT spending today

Ceridian SVP and CIO Carrie Rasmussen got a 7% bump in her IT budget for 2022, with her company’s growth, its ongoing digitalization drive, and security mindfulness driving the boost.

More specifically, Rasmussen is boosting her spend on cybersecurity to help manage risk, a key element for enabling Ceridian’s planned global expansion.

Some of the extra funds are paying for work to consolidate applications and services, a move Rasmussen classifies as an efficiency play “that will free up money to reinvest.”

She also has money earmarked for automation, process improvements, and data projects, which are planned in part at “driving out inefficiencies and helping workers be more productive,” she says. “When you’re growing globally, you have to have those efficiencies to help drive margins.”

Taken all together, those tech initiatives — along with her cloud-first/SaaS-based modernization projects — are helping the cloud HCM software maker scale its digital capabilities to meet increasing employee needs and customer demands, Rasmussen says.

Rasmussen’s budget is representative of CIO spending in 2022, based on findings from the CIO.com 2022 State of the CIO Report and other IT spending surveys, which show CIOs by and large enjoying bumps in annual budgets, with IT spending expected to surpass last year’s figures.

Although those budget increases are in line with years past, the leading business imperatives behind them are different, with enterprise tech leaders seeing a shuffling of business priorities driving their spend, with demands for increased cybersecurity and improved efficiency and productivity topping the list. This comes after years of transformational initiatives being cited as the top reason driving budget increases.

The State of the CIO Report, released earlier this year, found that a desire for increased IT security is the No. 1 business need driving tech spending for the current year, followed by increasing operational efficiency and improving customer experience. Transforming existing business processes, improving employee productivity, and improving profitability rounded out the top six.

Tech leaders and analysts say these business priorities reflect the important balancing act that has been evolving within the CIO office: the need to constantly pursue operational excellence while delivering transformational tech services, with the former supporting the latter.

“IT is one of the best places to invest, but executives want to make sure those dollars are spent on the right things in the right way. They’re being smart about where they spend their tech dollars,” says Dan Priest, managing partner for cloud and digital at professional services firm PwC. He says enterprise leaders on the whole have moved past thinking of IT as a cost center to an enabler that can create leaner operations, enhance existing business lines, and help deliver new ones, with their budget decisions increasingly reflecting that. “That’s why IT spending right now is so strategic. CIOs have big choices to make right now and they have long term implications.”

Top 10 business needs driving IT spend

The State of the CIO report found that 59% of CIOs are planning to spend more in 2022 than they did in 2021. Compare that to last year’s findings, in which only 49% of CIOs entered 2021 saying they planned to get a budget increase for the year.

When asked about the business initiatives that would be “most significant in driving IT investments at your organization,” IT leaders cited the following:

1. Increasing cybersecurity protections: 49%
2. Increasing operational efficiency: 46%
3. Improving customer experience: 42%
4. Transforming existing business processes (i.e., automation, integration): 41%
5. Improving employee productivity: 27%
6. Improving profitability: 24%
7. New product development: 22%
8. Enhancing hybrid work technologies: 21%
9. Increasing topline revenue for the business: 20%
10. Meeting compliance requirements: 19%

Other researchers have found similar trends in IT spending.

Info-Tech Research Group in its CIO Priorities 2022 report found that CIOs considered business process improvements, digital transformation/modernization, security, and supporting revenue growth/recovery as the top business imperatives driving the IT agenda this year.

Delving further, Info-Tech found that, in terms of top priorities for competing in the digital economy, CIOs listed the following priorities:

• Reduce friction in the hybrid operating model
• Improve ransomware readiness
• Support an employee-centric retention strategy
• Design an automation platform
• Prepare to report on new environmental, social and governance (ESG) metrics

Researchers at Gartner reported similar trends in its forecast on IT spending, including a 4% bump in worldwide IT spending this year, buoyed largely by investments in analytics, cloud computing, customer experience, and security.

Cybersecurity needs driving IT spending

Of course, organizations have invested in foundational elements such as cybersecurity every year, but a confluence of issues have necessitated the current boost in security spending.

“Cybersecurity [spend] has always been growing, but it has transformed from perimeter security that we’ve been used to for 40 years to more and more securing cloud and remote work and remote employees,” says John Lovelock, research vice president and distinguished analyst at Garner. “Companies that used to be able to put the virtual brick walls around the building and say they’re secure on the inside now have too many openings — to the cloud, partners, customers, employees — for that strategy to be viable.”

Although that shift has been under way for many years, it nonetheless continues to drive much of the cybersecurity-related IT spending, Lovelock says. “It’s securing what has evolved in the past few years and what has been evolving.” He cites as evidence Gartner’s figures in this space: a 34% annual growth rate in spending for cloud security, which has gone from $585 million in 2019 to an anticipated $3.5 billion in spend by 2025.

Ransomware is also another big reason for increased cybersecurity concerns and the corresponding boost in IT spending, says Brian Jackson, research director in the CIO practice at Info-Tech.

He says his firm’s research shows that more companies than most realize have been hit by ransomware attacks and are in a state of recovery. “And that can cost a lot,” he says. Even those that haven’t been hit by ransomware feel an imperative to steel themselves against that possibility by investing in stronger protections, including, for example, better off-line backups.

“With ransomware, we’re talking about state-sponsored cyberwarfare, and these organizations are caught in the middle of it, and it’s become just the cost of doing business,” Jackson adds.

Efficiency, experience, and productivity requirements

Other big business needs driving IT spending increases — such as boosting efficiency, customer experience, employee productivity, and profitability — also say something about where organizations are in 2022, experts say.

“You have an enhanced discipline about cost management now and being smart about where you spend your tech dollars,” Priest says, adding that “it’s one of the best places to invest, especially in inflationary periods.”

He says organizations are looking to automate, streamline operations, and reduce costs to help deal with an unsettled labor market, worker shortages, inflation, and geopolitical uncertainty. Those tech investments in turn enable them to redeploy their scarce (and increasingly more costly) workers to higher-value tasks. Those tech initiatives also produce savings, which companies can reinvest into operations and initiatives that support top-line growth.

Priest says CIOs are continuing to spend money on migrating from legacy infrastructure to the cloud, a move that helps them shed redundancies, optimize performance, improve processes, and break down data siloes. They’re also spending on data and analytics projects as a way to become more efficient, drive productivity, and support profitability.

In its research on how CIOs will spend their time and money in 2022, PwC found the top five priority areas to be:

• Refining IT to be more agile: 43%
• Migrating from traditional data centers to the cloud: 35%
• Leveraging data and analytics to drive strategic decision-making: 34%
• Evolving IT to be a strategic partner to the business: 30%
• Resetting enterprise architectures for the cloud: 28%

Supporting growth, transformation

Rasmussen says the lists of IT spending priorities compiled by researchers reflect her own budget breakdown, and that they align with the spending plans she has heard from colleague CIOs, too. “This is the common theme among most technology leaders,” she says.

Rasmussen and others acknowledge that this year’s list of business drivers may seem like a break from past years’ priorities, where transformation generally dominated. Indeed, the State of the CIO survey from CIO.com found that business drivers such as introducing new digital revenue streams and monetizing company data — both typically part of transformational programs — were lower on the list of initiatives driving IT spending, coming in at No. 11 and No. 13, respectively.

But experts warn against that assumption, saying that IT spending decisions are indeed aimed at supporting ongoing and new digital initiatives and overall transformation efforts — even if that’s not called out by name.

As Rasmussen notes, spending on efficiency “will free up money to reinvest” while spending on security, user experience, employee productivity, and the like will support new ways of working and engaging with customers. “It’s not about cost control; instead, we talk about investments for value. That’s an investment strategy and it’s a conversation about agility — agility to be competitive in the market,” she adds.

Priest agrees that this shift to the fundamentals can lead to future advances, saying that IT spending on security, efficiency, process improvement, and productivity can put organizations in a strong position no matter what the future holds — whether it’s growth, continued inflation or even a recession.

Moreover, spending on transformational business initiatives is increasingly falling outside the IT budget and within the functional areas, adds Diane Carco, president and CEO of management consulting firm Swingtide.

According to Gartner, the total of business-led IT spending averages up to 36% of the total formal IT budget.

“We’re seeing the transformation spend happening in departments that aren’t IT, so spending trends for CIOs can seem less strategic than they might have even five years ago,” Carco says. “But CIOs are the ones spending to make sure [those transformational initiatives] are safe and secure to operate.”