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European key IT and Management Issues &
Trends for 2013 Results of an International Study
Jerry Luftman Ph.D., Global Institute for IT Managementdr.lec. Barry Derksen MMC CISA CGEIT, Business & IT Trends Institute
The four areas focused on in the report are:
1. Top IT Management Concerns
2. Top Application and Technology Investments
3. IT Budget Allocation
4. IT Organizational Considerations
Table of Contents _
Top ten IT Management
Concerns ..................................... 4
Top Five Applications and
Technology Investments ......... 10
IT Budget Allocation ......................... 14
IT Organization Considerations ..... 16
CIO Trends .......................................... 18
IT Outsourcing ................................... 22
Concluding Remarks ........................ 23
2
Public sector / Non profit
Business Professional Services
Financial services / Real estate / Insurance
Hardware / Software / Networking
Wholesale / Retail / Trading
Auto / Industrial / Manufacturing
Pharmaceutical / Biotechnology / Life sciences
Construction
Chemicals / Energy / Utilities
Food / Beverages / Consumer packaged goods
Other
Media / Entertainment / Travel and Leisure
Aerospace / defense
Telecommunication
Transportation / Warehousing
Education
Healthcare
14,8% 298=12,8% 256=
11,5% 230=10,5% 210=
3,9% 80=9,2% 184=
5,6% 112=5,6% 115=
7,2% 144=2,6% 52=2,6% 52=
4,3% 86=0,7% 14=0,3% 6=
3,0% 60=2,0% 40=2,0% 40=
144= 7,2%
348= 17,4%
300= 14,9%
102= 5,1%
72= 3,6%
200= 9,7%
92= 4,6%
42= 2,1%
52= 2,6%
102= 5,1%
0 0%
124= 6,2%
20= 1,0%
30= 1,5%
20= 1,0%
144= 7,2%
144= 7,2%
Percentage of Respondents by Industry
EU USA
Since 1980, the Society for Information
Management (SIM), in a joint effort
with different academic leaders, has
conducted an annual survey of the key
issues facing IT executives in the United
States. In 2010 the results of the Society
for Information Management and the
Dutch survey results on Business & IT
Trends (since 1994) were combined
providing a global benchmark (other
groups were engaged to collect data
from Asia, and Latin America). In ad-
dition to providing a snapshot of the
important IT technical and managerial
issues of the day and a benchmark of
the different geographies, this annual
report facilitates the identification of
significant trends by comparing survey
data based on a similar sample from
previous years. The 2012 survey, con-
ducted in the summer of 2012, focused
on three important areas:
- Management concerns
- Application and technology invest-
ments (IT Trends)
- Organizational issues (IT budgets, IT
staff salaries, CIO roles, IT organiza-
tion structure)
Participants were asked to rate the im-
portance of 39 managerial concerns, 51
application and technology opportuni-
ties, and 18 organizational issues.
The recognition of the global reach of
IT, especially in light of the impact of
both the European and global eco-
nomic crisis, has amplified the necessity
to obtain responses from organizations
around the globe to understand similar-
ities and difference across geographies.
Hence, this year the same survey was
conducted in five major geographies,
namely, U.S., Europe, Asia, Australia
and Latin America. The detailed results
from the U.S. appeared in MISQE in
December 2012; while the complete
global analysis will be in JIT by the 2nd
Quarter of 2013.
This paper focuses on the major in-
sights gained from this survey in Europe
2012-2013, and compares the results
to the results from the U.S. It is based
on IT executives that are members
of CIONET Europe and Business & IT
Trends Institute. This paper is based
on the responses from IT executives
representing 306 Western European or-
ganizations contributing to the Strategic
Information Management survey (See
figure and table below for participant
demographics). The important man-
agement concerns are shown in Table
2. Figure 1 provides a breakdown of
respondents based on their geography
and Table 1 provides a breakdown of
the respondents by industry. We hope
that you recognize the significance of
this research and participate in next
year’s survey.
3
Introduction
Percentage of Respondents by Geography
14+6+4+11+1+1+43+2+10+7+1+tBelgium
14%
France
6%
Germany
4%Italy
11%
Ireland
0,3%Luxembourg
0,3%Netherlands
45%
Norway
2%
Spain
10%
UK
7%
Poland
0,3%
4
The top 10 management concerns tend
to evolve slowly albeit the severe reces-
sion begun in 2007 continues to impact
some of the management priorities of
2012 and those projected for 2013. Two
European and U.S. concerns that have
traditionally remained on the top ten
list are: IT and business alignment, and
business productivity and cost reduction
(Luftman and Ben-Zvi, 2010b). This year
the two most important European man-
agement concerns are: business pro-ductivity and cost reduction as well as
IT and business alignment. Interestingly
IT cost reduction is increasing in im-
portance within Europe and the U.S.
This is a result of the current European
based economic discussions with
regards to the European nation, and
the current strong negative economi-
cal impact of countries such as Greece,
Spain, and Italy. When compared with
other management concerns (business
productivity & cost reduction, business
process management/reengineering,
and revenue generating IT innovations
(11th in Europe and 4th in U.S.)). Europe
tends to be more cost oriented in com-
parison with the U.S. IT cost reduction is
ranked 4th in Europe, as opposed to the
U.S. (ranked 5th) and revenue generating
IT innovations is ranked 4th in US and
ranked 11th in Europe. The discussion
below elaborates on this finding.
1. Top ten IT Management Concerns
Business productivity and cost reduction
IT and business alignment
Business agility & speed to market
IT cost reduction
IT reliability and efficiency
Business process management/reengineering
IT strategic planning
Change management
Security and privacy
Enterprise architecture/infrastructure capability
EU
20
12
EU
20
11
EU
20
10
US
20
12
US
20
11
US
20
10
Top IT management concerns
1
1
1
6
4
5
7
9
8
10
1 1
1
2
10
6
3
5
12
8
7
1
2 2
3
5
10
7
6
12
9
8
3
3
2
8
3
3
6
12
9
13
3
4
4
3
8
6
2
7
5
15
10
4
5
6
7
8
9
10
5
From a country perspective the
European management concerns var-
ies. This is partly because of the limited
responses for some countries (Norway
and Germany). Interestingly IT and busi-
ness alignment is of lesser importance
in the U.K. (ranked 6th) which is more
focused on societal implications of IT
(ranked 4th) to market as well as change
management (ranked 5th). France ranked
IT cost reduction as priority 1, which
ranked second for both the Netherlands
and Norway. Although this is related to
the economic crisis, the northern coun-
tries seem to use cost reduction as a
higher priority than countries which are
affected stronger by the economic crisis
(Spain, Italy). In Norway the number 1 IT
management concern is Outsourcing/
Vendor management which implies that
Norway wants to leverage IT possibili-
ties in order to reduce costs and focus-
ing on core business. Both Italy and
Germany have IT and business align-
ment ranked 1st supporting the view that
a mature level of IT and business align-
ment is important to realize revenue
generating IT innovations. Examples
of these are TomTom and Nokia where
both are facing difficulties due to the
fast rising completion from Apple and
Google.
Top IT management concerns (Countries)
Business productivity and cost reduction
IT and business alignment
Business agility & speed to market
IT cost reduction
IT reliability and efficiency
Eu
rop
e
Be
lgiu
m
Fran
ce
Ital
y
Ge
rman
y
Ne
the
rlan
ds
No
rway
Spai
n
UK
1 1 2 3 2 1 4 1 1
2 3 3 1 1 4 5 2 6
3 2 6 2 6 9 6 3 2
4 5 1 4 11 2 2 4 3
5 6 4 6 8 3 3 7 10
6 1. Business productivity and cost reduction
Business productivity and cost reduc-
tion also appears as a top concern in all
geographies (ranked 1st within Europe).
It has recently gained momentum with
a number 1 position universally in 2010,
It ranked 4th in the top management
concerns globally last year and is cur-
rently ranked 1st within the U.S.
The IT cost reduction, and the impor-
tance of improving business productiv-
ity is in line with the findings of Luftman
and Ben-Zvi that the current trend
seems to be unique in this recession
(Luftman and Ben-Zvi, 2010b); instead
of simply cutting IT budgets, IT leaders
seem to be responding to this recession
by focusing on IT as an enabler/driver
of business productivity for the rest
of the business. Even though data for
individual countries are not reported in
this paper, it is interesting to note that
this trend is present in all geographies.
Within Europe business productivity
and cost reduction are ranked first but
IT cost reduction is also among the top
5 management concerns. Having both
IT cost reduction and business produc-
tivity & cost reduction within the top
5 management concern might create
conflicts in managing both concerns if
not managed effectively.
2. IT and business alignment
Alignment of IT and business continues
to be elusive, and in all of the geogra-
phies it ranks in the top ten manage-
ment concerns; ranking 2nd in both the
U.S. and Europe. The importance of IT
and business alignment is often seen
in return on investment. IT business
alignment maturity can be measured
(Luftman, 2003) and higher maturity
in this measurement model results in
better return on IT investment (Luftman
2012, Derksen, 2013, Poels, 2006).
Demonstrating a significant positive
correlation between alignment and
company performance both European
and U.S. organizations are proceed-
ing to work at higher alignment levels.
Despite this effort, IT and business
alignment remains a top 10 IT manage-
ment concern for 30 years. Looking at
the ranking of IT and business align-
ment management concern there is no
excuse for not reaching to higher levels
of alignment and supporting the per-
ception that IT and business alignment
is a constant process.
IT leaders in most demographics see
IT as an integral driver/enabler of ef-
ficiency/effectiveness in other parts of
the business and therefore focus on
initiatives that enhance the maturity
of alignment between IT and busi-
ness. While IT business alignment has
been recognized for over 30 years as a
persistent problem, it is clear that it is
pervasive and persistent.
3. Business agility and speed to market
Business agility and speed to market
is ranked 3rd in Europe and is 3rd in the
U.S (IT business alignment is also No.2
ranked in U.S.). Business agility and
speed to market is essential for busi-
ness survival in an uncertain and volatile
economy, and the improved ranking
of business agility and speed to market
is testimony to that. Known examples
of business agility and speed to market
are of course Apple (iPad) and Google
(Chrome). Regional business agility and
speed to market is fundamental. Both
the European and U.S. results demon-
strate this well because the past couple
of years business agility and speed
to market have moved up from the
mid-teens to the number 1 European
management concern. It is noted that
business agility and speed to market
along with business productivity and
cost reduction are the foundation for
long term competitive advantage, and
therefore it is anticipated that these
concerns will continue their top five
ranking. This result suggests that the
downturn in the Europe economy has
driven organizations to focus on re-
sponsive IT approaches that can deliver
immediate value. Speed to market has
become essential for business survival
in today’s economy.
74. IT cost reductionIn the top 5 IT management concerns
IT cost reduction ranked 4th from the
European perspective and was 5th in
2011. IT cost reduction remains a top
IT management concern within Europe
focusing on reducing the costs of IT
whereas this management concern is
now also increasingly important as IT
management concern ranking within
the U.S (5th this year and 10th last year).
The current European based eco-
nomic discussion with regards to the
European nation is expected to be the
cause, which is also correct for the U.S.
During economic downturns, business
executives usually expect all organiza-
tional functions, including IT, to greatly
reduce their expenses and budgets. In
previous recessions IT was typically the
first organization to have their budgets
reduced; in this economic period, IT cost
reduction has only recently risen as a
high priority, likely because of the length
of time and economic uncertainty. When
the economy gets better, those pressures
usually ease.
IT cost reduction refers to the costs of
realizing, implementing and managing
IT. One of the most used comparison
methods is the usage of Total Cost of
Ownership methods starting with meas-
uring the percentage of revenues spend
on IT shown in Table 3 (blanks indicate
that there is not enough valid responses).
We will elaborate on the top five.
5. IT reliability and efficiency
The growing complexities of IT sys-
tems, along with the need to consider
costs, have brought IT reliability, avail-
ability and efficiency to the forefront. IT
reliability and efficiency is ranked 5th in
Europe and 10th in the U.S. This man-
agement concern has been a top five
management concern in Europe since
2009. In the U.S. IT reliability and effi-
ciency was 3rd in 2010 but traded places
with the European ranking last year and
is now 10th in the U.S.
IT reliability and efficiency refers to the
accuracy, timeliness, and reliability of
data and information services delivered
by IT (Luftman and Ben-Zvi, 2010b). The
relatively higher ranking of IT reliability
and efficiency in Europe is based on
two distinct explanations. To have a
reliable and efficient IT, stored data and
information need to be pristine, and
European IT leaders are often con-
cerned about the quality and accuracy
of data/information in their organiza-
tions. Secondly European organizations
are preparing for the fast IT changes
due to the rise of tablets and strate-
gies such as Bring Your Own Device
(BYOD). Based on the current platforms
and implemented integrated applica-
tions the IT reliability and efficiency
is often not ready to support a stable
environment for developments based
on BYOD and others. A second reason
for the displayed ranking and also based
on the technology developments is the
increasing usage of IT reliability and ef-
ficiency statements such as SAS70 and
ISEA3402 (cloud security alliance, 2009).
6. Business process management and reengineering
Business process management (BPM)
and business process reengineer-
ing (BPR) are ranked in the list of top
ten concerns in all of the geographies
(ranked 6th in Europe and 7th in the
U.S.). Since the ‘90s large corporations
leveraged the BPR tools that analyze,
design, and automate workflows and
processes within an organization, and
as a result, BPM and BPR have appeared
every year in the list of top concerns in
Europe. In global perspective BPM/BPR
slowly moved to the 18th place in 2008
and returned to the top 5 management
concerns in 2009.
BPR by definition is ‘process-centric’.
More recently BPM has emerged as a
more holistic approach focusing on
integrating all aspects of the organiza-
tion. It has become an important tool to
take advantage of BPR initiatives. BPM
is utilized to streamline end-to-end
management of the whole enterprise
(enterprise-centric). During the eco-
nomic downturn as organizations focus
on leveraging IT to reduce expenses by
enhancing business processes and as
the recovery from the recession gets
underway, corporations large and small
need to compete in a globally-linked
market place, it is expected that busi-
ness process management and reengi-
neering will remain a top management
concern globally. The high ranking of
ERP as an important application and
technology (discussed later in this
paper) provides further support for this
important consideration.
8 Both the European based information technology (13.86%) and finance/
banking/insurance industry (14.27%) have a higher IT budget as percent of
revenue in comparison with the U.S. (13.33 and 10.63%), which was also
true for last year. The majority of the responses came from EU based or-
ganizations which did invest heavily in integration across country borders.
It is likely that the IT budget as percent of revenue by industry classifica-
tion will be “corrected” in the next few years to become closer to the U.S.
percentages. This statement is already partly visible when looking at the
2011 figures (14.75% for information technology and 14.25% for Finance/
Banking).
14+13+6+5+5+4+3+3+2+1+1+vFinance/Banking
14,27%
Computer/Network Consulting
13,86%
Education
6,38%External Services Provider (DP)
5,5%
Business Services 5,1%Government 4,31%
Pharmaceutical/Healthcare
3,19%
Aerospace
3,5%
R&D/VAR/VAD
1,75%
Manufacturing
1,63%
Transportation
2,94%
Europe 2012
IT budget as percent of revenue by industry classification
9
10+13+5+8+10+2+4+2+2+2+10+vFinance/Banking
10,63%
Computer/Network Consulting
13,33%
Education
5,25%
Business Services
8,29%
Government 9,90%Pharmaceutical/Healthcare 2,33%
Aerospace
4%
Manufacturing
2,38%
Wholesale/Retail
2,25%
Real Estate/Legal Services
10,63%
Transportation
2%
US 2012
IT budget as percent of revenue by industry classification
10
The top five applications and technologies does not differ much between Europe
and U.S. The big differences are the higher European ranking for Apps and
Networking. The top five applications and technologies for 2012 are discussed (and
illustrated in the Tables) below with comparisons across the surveyed geographies.
Looking from a country perspective the ranking of customer relationship manage-
ment (CRM) in the U.K. is remarkable (27th). An explanation can be found in a more
internal organizational focus instead of looking beyond the organizational boarders.
For Norway the ranking of apps development (13th) is interesting. Norway is histori-
cally a country which is highly digitally cooperative with other countries
2. Top Five Applications and Technology Investments
Business Intelligence (incl. Big Data)
Cloud Computing
Apps Development*
Enterprise resource planning (ERP) systems
Customer Relationship Management (CRM)
Network Communications
Business Process Management (BPM) systems
Bring Your Own Device (BYOD)*
Continuity planning / disaster recovery
Customer Corporate portals / External Community Platforms*
EU
20
12
EU
20
11
EU
20
10
US
20
12
US
20
11
US
20
10
Top Application and Technology Development (Europe and U.S.)
* New to 2012
1 1 1
8
2
3
5
10 17
1 1
2 2
3
5
14
1
2 2
11
13
11 12
3
5
9
7
13
16
3
3
5
1616
4
4 2
6
5
5
6 9
7
8
9
10
11
Top Application and Technology Development per country
Business intelligence
Cloud Computing
Apps Development*
Enterprise resource planning (ERP) systems
Customer Relationship Management (CRM)
Eu
rop
e
Be
lgiu
m
Fran
ce
Ital
y
Ge
rman
y
Ne
the
rlan
ds
No
rway
Spai
n
UK
* New to 2012
1 1 7 1 4 1 1 1 2
2 3 1 4 10 3 2 3 1
3 2 4 10 1 5 13 5 5
4 9 2 5 2 3 6 4 13
5 4 3 2 3 9 16 7 27
12 1. Business IntelligenceBusiness intelligence (BI) remained the
top application/technology (a clear
standout), having been in the top 3
since 2003. BI includes big data and
data mining to identify valuable busi-
ness trends. Global research conducted
by Oxford Economics identified busi-
ness intelligence as the 2nd top tech-
nology for the next five years.1 That
research also revealed how companies
value the ability to analyze information
to rapidly inform decision-makers. An
IBM MIT Sloan Management report re-
vealed that companies that harness the
power of big data and analytics outper-
form those that do not by 220%.2
An IDC study on the financial impact of
business intelligence identified a 5-year
Return on Investment of 112%.3
European companies ranked business
intelligence as their top application
and technology development, like the
U.S. where it has also been ranked 1st in
2009 and 2010, and 2nd in 2006, 2007,
and 2008 (Luftman and Ben-Zvi, 2010b,
Luftman and Ben-Zvi, 2010a). Since
business intelligence leverages data
mining to identify valuable insight, this
high ranking across these geographies
suggests that IT leaders believe their
organizations are data rich and insight
poor (Luftman and Ben-Zvi, 2010b).
Another reason for the business intel-
ligence number 1 ranking is the increas-
ing role of best practices such as COBIT
(Control OBjectives IT). Having business
intelligence supporting reports with
regards to the best practices supports
management control objectives as well
as discovering and correcting errors in
the business.
2. Cloud ComputingCloud computing was new to the list of
key technologies in 2009, when it was
ranked No. 17. In 2010 it jumped to No.
5 and in 2012 it ranked 2nd in Europe. At
first glance this jump in ranking might
suggest that cloud computing is now
better understood and the solutions
have become more mature. Additionally,
the Gartner 2011 CIO Survey reveals that
almost half of all CIOs surveyed expect
to operate their applications and infra-
structures via cloud technologies within
the next five years.4 Bain & Company
predicts that over the next three years
nearly 65% of the growth in cloud
spending will come from companies
that make little or no use of the cloud
today. And industries like retail, transpor-
tation, industrials and financial services
will demand more private and hybrid
cloud offerings.5
However, the 2012 SIM survey also asked
participants what percentage of their IT
budgets was allocated to internal and
external cloud services. On average for
all respondents, 5% of IT budgets were
allocated to internal cloud (with 12% of
the companies allocating 10% or more
of their budgets to the cloud, and 37%
allocating less than 1%) and on average
4% are allocated to external cloud (with
16% of the companies allocating 10% or
more, and 41% allocating less than 1%).
While cloud computing is likely to re-
main one of the top technologies in the
near future, companies are proceeding
its deployment cautiously. Last year we
saw organizations trying to understand
Cloud and how it can be deployed. This
year organizations have initiated pilots
and experiments to gain experience. It is
anticipated that next year Cloud invest-
ments will continue to rise. The long
term implications of Cloud computing
remain unclear; it is analogous to the
understanding of the long term impact
of PCs in the late 1980s.
3. Apps developmentAt 3rd place in the ranking of IT applica-
tion and technology is Apps develop-
ment. This is a trend which is new to
this year’s survey. In the past year it is
relatively easy to say that Apple has
made a huge impact in the European
market with its introduction of the
iPhone and iPad and introducing the
Apps market and later on followed
by Google (Android) and (much) later
by Microsoft/Nokia. Results from this
revolution is that European organiza-
tions started to introduce a ‘Bring-Your-
Own-Device’ policy and placing major
applications behind an Apple-iOS and/
or Google-Android App (Derksen, 2011).
With this development other trends
such as security started a new phase
as well.
Interestingly is that Apple is most
popular (ChangeWave research, 2011)
impacting the mobile & wireless ap-
plications because of the platform used
(iOS). This change to the platforms of
Apple (iOS) and Google (Android) is ex-
pected to impact business architecture
as well as the applications and technol-
ogy used within organizations. Another
aspect is the implication towards the
previously discussed application and
technology investments for which
interfaces to mobile & wireless applica-
tions will be key to support the employ-
ees as well keeping a competitive level
of doing business.
134. Enterprise resource planning (ERP) systems
Enterprise Resource Planning (ERP)
systems is ranked 4rd in Europe and 3rd in
U.S. The thought of having an integrated
system has existed for a long time and
remains high on the IT application &
technology list. Despite the high level of
implementation within Europe, ERP is
still one of the top ranked applications &
technology trends. This is based largely
because of upgrades and realizing
less demonstrable value from the ERP
implementations within organizations
whereas having more instances of ERP
within a company is significantly more
expensive than having one instance.
The ERP trend in light of the anticipated
growth of cloud computing systems
(currently ranked 2nd in Europe and 2nd
in U.S.) will be interesting to observe.
Cloud computing solutions are typically
less client based and are currently more
‘best of breed’ focused.
5. Customer Relationship Management (CRM)
Customer relationship management
(CRM) was 6th in Europe in 2010, 3rd in
2011 but 5th in 2012. The increased rank-
ing in 2011 might be a response from or-
ganizations on the economic downturn
investing more in customer relations/
intimacy (Treacy, 1992) but seems to be
quickly realized. Related to this response
are the IT management concerns busi-
ness agility & speed to market as well as
business productivity & cost reduction.
The CRM application investment is often
related to ERP both as module of ERP or
interfaced with ERP. Another related top
5 ranked IT application & technology is
business process management systems
managing the workflow between the
systems such as CRM, ERP and busi-
ness intelligence. According to Gartner
Inc., the worldwide social CRM market
(which is subsumed in social network-
ing) is forecast to reach over $1 billion
in revenue by year-end 2012, up from
approximately $625 million in 20106;
this market is projected to total $820
million in 2011. It should be noted that
SaaS applications ranked No. 2, and the
current leading application is Salesforce.
com. The return on investment of CRM is
approximately 3 years7 with the average
increased revenues at 16.3%8.
1 Oxford Economics, 2011, “The new digital economy: How it will trans-form business”. http://www.citibank.com/transactionservices/home/docs/the_new_digital_economy.pdf
2 2011 IBM MIT BI report is: http://sloanreview.mit.edu/feature/achiev-ing-competitive-advantage-through-analytics/
3 Morris, H., 2003, “The Financial Impact of Business Analytics: Build vs. Buy” , DM Review, (13)1, pp.40-414 McDonald, M., Aron, D., op. cit., 2011.
5 Heric, M., Kermisch, R., and Bertrand, S. 2011, “The five faces of the cloud”. Bain & Company.
6 Gartner Press Release, “Gartner Says the Market for Social CRM Is on Pace to Surpass $1 Billion in Revenue by Year-End 2012”, August 30, 2011, http://www.gartner.com/it/page.jsp?id=1777938
7 Derksen, B., (2011), ‘ Trends in Business & IT 2012-2013’, November 2011, p.p. 143.
8 CSO Insights’ 2010 Sales Performance Optimization Study and http://www.destinationcrm.com/Articles/Columns-Departments/Reality-Check/Has-CRM-Lost-Its-Revenue-Mojo-66859.aspx
14
3. IT Budget Allocation
1. Overall Budget Allocation Considerations
The next wave of the recession might
be underway, albeit at different rates in
different geographies. European CIOs
reported increased IT budgets in 2012
compared to 2011 with 28% of the
companies in Europe and 48% in the
U.S. indicating increases. Over 30% of
Europe and 21.8% of U.S. respondents
indicated that their IT budgets would
decrease in 2013. 39% of the European
companies will keep the same IT budg-
et in 2013 as used in 2012 whereas this
is just 32% for the U.S. organizations.
The IT budget forecasts are better for
U.S. companies in comparison with the
European organizations for the second
year in a row.
2. Percentage of 2012/2013 budget allocated to internal and external Cloud computing
One of the current application and
technology trends is cloud computing.
We evaluated the budget allocated to
internal and external cloud computing.
On average 3.71% of the IT budget was
allocated to internal cloud comput-
ing (using cloud technology within the
organization) and 2.74% to external
cloud computing. 21.6% of the compa-
nies researched allocated over 10% of
the IT budget to internal cloud. Usage
of external cloud computing is relatively
low with 41% (57% previous year) of
the European companies spending less
than 1% of their IT budget on external
cloud usage. 20% of the European
companies have allocated IT budget to
external cloud with of 20% of higher.
34.4% of the organizations invest
between 1 and 5% of the IT budget on
external cloud. While just about every-
one is discussing Cloud, organizations
are just beginning to invest in small/pi-
lot initiatives. This is anticipated to grow
over time.
3. IT Budget as a Percent of Revenues
While the often-benchmarked average
IT budget as a percentage of revenue
for the U.S. was 3.87 in 2010 (relatively
the same as in the previous SIM sur-
veys), it was 3.31 in Europe. In 2011
the European IT budget as percent of
revenues increased to 6.36 whereas
U.S. decreased to 3.55. This year’s
survey showed a decreased figure of
6.11% for Europe and increased figure
for U.S. with 4.94%. An examination by
industry reveals that some sectors, such
as Information Technology business
services, banking/finance, and educa-
tion/publishing, have IT budgets of
more than 5% of their revenue. On the
other hand, sectors with IT budgets
which are less than 5 % of their rev-
enue are manufacturing, Government,
Transportation and Pharmaceutical/
healthcare. Finance/Banking/Insurance
and Information Technology industries
invest over 10% of revenue on IT. The
industry breakdown is comparatively
consistent across geographies impli-
cating that the IT support is mostly
industry based instead of geographic or
organization specific. This also implies
that usage of benchmark for IT budget
as percent of revenues is globally valid
but industry specific (table 3).
This section discusses the survey findings related to the overall allocation of IT budgets with a further discussion on staffing and compensation matters.
15
4. IT Staffing and Compensation Considerations
It is clear that staffing (internal and ex-
ternal) remains the largest component
of IT budgets (57% in Europe and 56%
in the U.S.).
The domestic sourcing budgets for in-
ternal staff are 21% in Europe compared
with 33% in the U.S. Offshore internal
staff accounts for around 6% of the IT
budget in the U.S., and 13% in Europe.
Europe has a relatively high percent of
their staff outsourced domestically (11%)
when compared with the U.S. (8%). The
European outsourced staff domestic is
projected to stay at 11% in 2013 and the
European outsourced staff offshore to
increase to 6% (currently 4%).
When it comes to the allocated per-
centage of the IT budget for training/
education growth is anticipated for
2013. The percentage of budget al-
located for training/education declined
in 2011 from 2.8 in 2010 to 2.65 in 2011
and 2.34% in 2012, but is now expected
to be 2.57 in 2013. Despite this grow
the European continent spends less on
training and education than U.S. spend-
ing 3.48 in 2010, 3.23 in 2011, 2.87 in
2012 and expected to be 2.99 in 2013.
Regarding IT staff salaries, 38% of the
European IT employees earned more
in 2012 in comparison with 2011, 12%
earned less. The increase in IT staff
salaries is less than the U.S. where 60%
earned more in 2012 in comparison to
2011. But still 2011 was a better year
with regards to actual IT staff salaries
in comparison with 2010, where 62%
of the European IT staff salaries were
either fixed or less. 2013 is projected to
be a better year in which 34% of the IT
staff can expect to have an increase in
salary and 51% can expect no change.
Lastly, with regards to the rate of IT staff
turnover there is surprisingly good staff
retention rates across the globe during
the economic downturn. In Europe staff
turnover in 2012 was 4.66%; in 2011 it
was 5.56% in comparison with 5.82%
in 2010. In the U.S. staff turnover was
5.5% in both 2011 and 2010; this year’s
turnover rate was 5.23. This staff reten-
tion rate is likely due to the recession
making it difficult for staff to find more
lucrative positions elsewhere, as well
as the difficulty boomers are having in
retiring.
16
4. IT Organization Considerations
1. IT Organization Structure
The organization structure of IT can
have a major impact on the perfor-
mance of the company. IT organization
structure is the degree to which it is
centralized, decentralized, or federated.
65.6% (see figurer below) of European
and 61% of the U.S. respondents
indicated centralized in 2012. IT organi-
zation structure, where all IT reports
to a single IT executive (the CIO).
Centralized IT organization structure
can better attain more IT standardiza-
tion across the organization; for exam-
ple, a centralized email system ensures
the same email features across the
enterprise (same look and feel, same
capabilities, centralized archive and
back up policies, etc.). Often costs are a
major reason to centralize IT aiming for
scale of economics.
This section discusses the survey findings related to IT organizational structure and CIOs.
260=248=264=
12=0=36=
100=156=92=
16=8=0=
12=0=8=
Centralized
Decentralized
Federated / Hybrid
Matrixed
Networked
65%
64%
66%
3%
0%
9%
25%
34%
23%
4%
2%
0
3%
0%
0%
IT organization structure Europe
2010
2011
2012
17
On the other end of the spectrum,
there are decentralized organizational
structures where each business unit
has its own IT organization without
much coordination across business
units (for example, each unit having
their own email system, or their own
standards for database administra-
tion). There is not much economy
of scale in the decentralized struc-
ture, but each business unit has the
full flexibility to focus on the unit’s
particular IT needs (applications and
infrastructure). This can be of most
value in large organizations where
IT needs across some business units
vary greatly. Some universities, for
example, can benefit from decen-
tralized IT structure, as each school
or department might have vastly
different IT requirements. 9% of the
investigated European companies
indicated a decentralized IT structure.
3% of U.S. respondents indicated a
decentralized IT structure. , a big
drop from 9.5% in 2009 (Luftman and
Ben-Zvi, 2010a). This drop could be
the result of a radical response to the
recession, in which many of the U.S.
CIOs have opted for economies of
scale over flexibility of business units
in order to rein in their IT expendi-
tures. European companies seem to
favor decentralized IT organizations
in order to gain flexibility.
A federated (or hybrid) structure
can realize the benefits from both
centralized and decentralized struc-
tures. Corporate-wide standards are
enforced in an effort to maximize
the benefits of economies of scale,
while providing flexibility to business
units to maximize unique application
opportunities at the business unit
level. 23% of the European compa-
nies and 33% of the U.S. companies
were reported as federated in 2012.
Organizations with a federated
structure tend to have a higher align-
ment maturity assessment than those
that are centralized or decentralized
(Luftman et al., 2010). With both the
economic crisis as well as the oppor-
tunity to gain a higher level of align-
ment it should not come as a surprise
to see these numbers increase over in
the last few years.
The IT organizational structures cur-
rently used per country are displayed
as well. Interesting is that NL, UK,
Germany and Spain have a high level
of centralization. In Norway a feder-
ated IT organization is dominant,
which, possibly, makes IT and busi-
ness alignment a lower ranked IT
management concern (ranked 5th);
U.K. ranked IT and business align-
ment 6th. All other countries placed
IT and business alignment in the top
5 management concerns. Looking at
the increasing centralized and decen-
tralized organizational structures it
is to be expected that alignment will
be a top 5 management concern for
a number of years. The choices for
different organizational structures are
possibly a result of cost cutting.
730+20+180+30+40=620+90+260+30=600+340+30+30=710+230+70=690+60+180+70=550+370+80=680+220+100=360+640=
Networked
Matrixed
Federated / Hybrid
Decentralized
Centralized
Netherlands
Belgium
Italy
Spain
U.K.
France
Germany
Norway
IT organization structure Europe (country perspective)
18
5. CIO Trends
1. CIO Reporting Structure and Role of CIO
As the majority of time of CIOs is spent
in dealing with non-technical issues,
the roles of CIOs vary between the
geographies surveyed.
Figure: CIO reporting structure Europe
(left = 2010, middle and right is 2012)
The figure above presents where CIOs
(or senior IT executives) report. Previous
research has shown that, on average,
organizations in which CIOs report to
CEOs have higher alignment maturity
than those reporting to non-CEO ex-
ecutives (Luftman and Ben-Zvi, 2010b,
Luftman et al., 2010). CIOs reporting
to the CEO is the highest in Asia (68%-
2010). Europe is currently decreasing
the direct reporting to CEOs (51% in
comparison with 57% in 2011) which
implies the CEO focuses on other pri-
orities for the organization and trusting
the COO and board of directors for the
IT part. Historically IT was seen as a cost
center and more often the CIO report-
ed to the CFO. This reporting structure
decreased as well which indicates that
IT organizations are less and less seen
as a cost center.
360=456=408=
216=216=168=
88=64=80=
40=40=40=
96=64=104=
CEO
CFO
COO
BUE
Board of Directors
45%
57%
51%
27%
27%
21%
11%
8%
10%
5%
5%
5%
12%
8%
13%
Europe
CIO reporting structure
2010
2011
2012
19
2. CIO TenureThe average CIO tenure is on the rise in
Europe as well as abroad. This trend has
been clearly illustrated in previous SIM
surveys with the average CIO tenure of
4.6 years in 2009, 4.3 years in 2008, 4.1
years in 2007, and 3.6 years in 2006.
In 2012, the respondents reported in
Europe that CIOs held their positions
on average 5.99 years in comparison
with 4.3 years in 2010 and 5.04 in 2011.
Even though it is believed that high
CIO turnover (short tenure) makes it
difficult for CIOs to address any long-
term changes to the business or IT
organization (Luftman and Ben-Zvi,
2010b), other research shows execu-
tive performance peaks between four
and five years of tenure, after which
the performance is likely to dip before
another performance increase for ex-
ecutives with tenure of more than eight
years (O’Shannassy, 2011). The same
research shows the optimum executive
tenure to be either between four to six
years, or tenures longer than eight years
(O’Shannassy, 2011). It is noted that this
recent study was for CEOs and board
of directors, with an average tenure of
8 years, and not specifically for CIOs. A
similar study focusing on IT executives
would be an interesting and welcome
addition to the body of literature in this
area.
The survey also asked respondents to
indicate where CIOs were hired from.
The figure above shows a significant
change in hiring the CIO from within
the companies IT organization to hiring
from an external IT organization. This
change might be a consequence of the
economic downturn as well. For 2011
this was likely because an externally
hired CIO is more willingly to imple-
ment more dramatic changes during
the economic downturn. In 2012 an-
other change can be seen using more
people within the organization.
380=310=350=
540=610=470=
40=40=100=
40=30=90=
within your company’s IT organization
outside your company from an external IT organization
within your company but outside of IT
outside your company from an organization outside of IT
38%
31%
35%
54%
61%
47%
4%
4%
10%
4%
3%
9%
Europe
CIO hired from ...
2010
2011
2012
20 3. CIO Time on Activities
Predictably CIOs spend most of their
time dealing with non-technical is-
sues; 78% in 2012 in comparison to
83% in 2011. Interestingly, CIO time
spent on software development issues
is around 3%-6% across all the geog-
raphies. Relationship management is
most time consuming for the European
CIO’s and is 30% of the CIO time of
which 17% towards business and 13%
towards IT staff. But despite 30% a
drastic reduction of the CIO’s time can
be seen compared to 2011 where 37%
of the time was spend in relationship
management. This might be a direct
result with the reduced IT budgets and
the well known assignment: less with
more. Within the European area Human
Resource Management & Strategy the
needed CIO time is consistent in 2012
in comparison to 2011 and 2010.
U.S. CIOs spend 18% of their time
on operations and architecture; the
European CIOs spend even less time,
only 17% in 2012. The time spend is
significantly lower in both Europe and
U.S. in comparison with other regions.
The time spend on operations and
architecture might be a good indica-
tor of the maturity of this area where it
is expected that U.S. and Europe have
a high level of maturity as a result of
implementing ITIL / ISO 20,000.
Also interesting is the increase of CIO
time spent in both IT governance and
vendor relationship management. This
might indicate a first shift to other IT
governance structures using cloud
computing.
21
210= 7%
150= 6%
210= 7%
300= 10%
300= 10%
300= 10%
300= 10%
360= 12%
330= 11%
480= 16%
150= 5%
270= 9%
360= 12%
240= 8%
300= 10%
450= 15%
660= 22%
510= 17%
240= 8%
450= 15%
390= 13%
240= 8%
300= 10%
270= 9%
120= 4%
90= 3%
150= 5%
300= 10%
300= 10%
300= 10%
Architecture
Human resource
IT Governance
Non-IT
Operations
Relationship Management with Business
Relationship Management with IT Staff
Relationship Management with Vendors
Software Development
Strategy
6%
7%
9%
7%
12%
20%
12%
7%
5%
15%
CIO time spend Europe
2010
2011
2012
US 2011
22
6. IT Outsourcing
IT outsourcing has been defined as
“handing over the management of some
or all of an organization’s IT assets,
resources and related services to a third
party” (Willcocks et al., 1995). Over the
last two decades, IT outsourcing has not
only been an attractive option for many
corporations, but also subject of signifi-
cant academic research (Derksen, 2013).
IT leaders globally have long been look-
ing to outsourcing as a means to reduce
costs as well as to fill skills gaps. The re-
cent recession has fueled this even fur-
ther; the overall increase in outsourcing
in all of the areas is a testimony to that,
when considering total outsourcing,
which includes offshoring, near-shoring,
and consulting of non-internal staff.
The No-onshore outsourcing in Europe
is expected to decrease to 40%. For all
investigated activities except helpdesk
(e.g., running existing systems applica-
tions, building new systems applica-
tions and running infrastructure) the
IT offshore outsourcing allocation is
expected to be lower in 2013 than in
2012. This indicates that building and
running systems applications as well as
running infrastructure are activities that
a growing number of organizations are
looking to source domestically.
2012 European outsourcing is largely
nearshore with 64% of the outsourcing
budget allocated within Europe. India
is the most popular offshore country
receiving 27% of the European offshore
outsourcing budget. The other offshore
countries are far less (China, Brazil and
Mexico 1%). The differences with the
U.S. are mainly determined looking at
the European Nearshore activities. U.S.
offshore outsourcing budget allocated
by geography for Europe is only 12% in
comparison with the 64% realized by
European organizations.
40+18+19+15+6+2+A35+24+20+12+5+4+PNo offshore outsourcing
41%US 35%
Maintaining existing
systems applications
18%US 24%
Building new
applications/services
19%US 20%
Running infrastructure /
Data Center
15%US 12%
Helpdesk
6%US 5%
Management consulting
2%US 4%
IT offshore outsourcing allocation 2012 (actual)
23The rather slow recovery from the relatively persistent recession poses new chal-
lenges to IT executives around the globe. The relatively consistent top manage-
rial concerns cannot simply be addressed through identical responses in different
geographies; each area has its own set of characteristics, and appropriate response
to management concerns. In other words, unique characteristics of the local mar-
kets influence management responses of enterprises operating in a globally-linked
environment. While the expected recovery from the recession presents new chal-
lenges and opportunities for IT executives in 2013 and 2014, IT executives are set
to leverage both global and local IT opportunities (such as increased spending and
hiring, business intelligence, virtualization, and outsourcing) to overcome not only
global challenges but also local IT and business challenges.
By comparing and contrasting Europe and the U.S., this research has identified the
many similarities and dissimilarities that confront managers. Clearly there are re-
gional influences that are powerful enough to reduce the influence of global trends
such as nearshore versus offshore and the investments in applications & technolo-
gies with regards to IT reliability and efficiency.
In closing, it is important to point out that IT managers are working in a highly inter-
connected world, and therefore certain patterns in different geographic locations
are evident. However, this research found while there are many similarities there are
also important local trends that managers must be sensitive to.
ReferencesDerksen, B. (2011). Trends in Business & IT 2012/2013: Richten, inrichten & ver-
richten met Business & IT., 17nd edition, Business & IT Trends Institute, South-
Holland, Leiden.
Derksen, B (2013). Impact of IT Outsourcing on Business & IT Alignment, Business &
IT Trends Institute, South Holland, Leiden.
Luftman, J. and Ben-Zvi, T. 2011. “Strategic Alignment Maturity and Company
Performance: A Structural Equation Model Validation,” Unpublished working paper,
Stevens Institute of Technology.
Luftman, J.N. ( 2003): Competing in the information age: align in the sand, 2nd edi-
tion, Oxford University Press.
Luftman, J.N., Ben-Zvi, T., (2011): Key Issues for IT executives 2011: Cautious op-
timism in uncertain economic times. MIS Quarterly Executive Vol. 10. No. 4 / Dec
2011.
Poels, R. ( 2006): Beïnvloeden en meten van Business & IT alignment, PhD disserta-
tion. University Amsterdam (VU), North-Holland, Amsterdam.
Treacy, M., Wiersema, F. (1992): Customer Intimicay and Other Value Disciplines,
Harvard Business Review, reprint 93107.
Concluding remarks
Maintaining existing
systems applications
18%US 24%
Authors
About CIONET
We are CIONET, the biggest commu-
nity of IT executives in Europe. Bringing
together over 3500 CIOs, CTO’s and IT directors from wide
ranging sectors, cultures, academic backgrounds and genera-
tions, CIONET’s membership represents an impressive body
of expertise in IT management. CIONET’s mission is to feed
and develop that expertise by providing top-level IT executives
with the resources they need to realise their full potential.
CIONET develops, manages and moderates an integrated array
of tools and services from the online CIONET platform – the
world’s first social network for CIOs – to a range of offline
networking events, conferences, workshops and executive
education programmes all tailored to top-level manage-
ment. CIONET also provides exclusive access to the latest
research through regular online and offline publications and
a number of value adding partnerships with key players from
the academic and corporate worlds.
Faced with the rapidly changing role of today’s IT execu-
tive, CIONET not only helps its members keep up with the
pace of change but empowers them to take an active role
in shaping the future of their field, always challenging them
with “What’s next.”
What’s next.
The importance of the impact of IT on organizations around the world,
especially in light of the global economic crisis, has amplified the need to
provide a better understanding of the specific geographic similarities and
differences of important IT managerial and technical trends. The econom-
ic conundrum is especially harsh in Europe, and like in the U.S. it is having
a profound impact on decisions pertaining to IT. Going beyond identifying
these economic implications is the need to understand the considerations
for leveraging the impact of transformational new technologies, especially
as the world becomes more globally-linked. By comparing Europe to the
United States (U.S.), this paper presents the important information man-
agement and technology trends (e.g., management concerns, emerging
technologies, budgets/spending, organizational considerations) necessary
to prepare IT leaders for the challenges that await them.
While the research initiative collected data from four geographic regions
(United States, Europe, Asia, and Latin America), this paper focuses on the
analysis comparing Europe and the U.S. The same questionnaire (albeit
translated for the respective respondents), based on the lead authors well-
respected and long-running Society for Information Management (SIM) IT
Trends survey, was applied across geographies.
This paper presents the major findings based on survey responses from 501
organizations (195 U.S. and 306 European (mainly West Europe)) in mid to
end 2012. Including the other continents 758 organizations were involved.
The top five IT management concerns within Europe
- Business productivity and cost reduction
- Business & IT alignment
- Business agility and speed to market
- IT cost reduction
- IT reliability and efficiency
The five most influential technologies for Europe
- Business Intelligence
- Cloud Computing
- Apps developments
- Enterprise Resource Planning
- Customer Relation Management
Prof.dr. Barry Derksen
MMC CISA CGEIT
- Head of Architecture, BI &
Processes department (Stedin)
- professor at NOVI University of
Applied Sciences
- Research director (Business & IT
Trends Institute)
Jerry Luftman Ph.D.
- SIM VP Chapter Relations &
Academic Affairs & NJ Chapter
President Emeritus
- Professor & Executive Director
- Global Institute for IT
Management