Key European IT Management Trends for 2015

Transcription

1 Key European IT Management Trends for 2015 Results of an international study: Issues, Investments, Concerns, and Practices of Organizations and their IT Executives dr.lec. Barry Derksen MMC CISA CGEIT, Stedin, Business & IT Trends Institute, VU, NOVI Jerry Luftman Ph.D., Global Institute for IT Management What s next.

2 Table of Contents _ 2 Executive Summary... 3 Top IT Management Concerns... 4 Largest investments and most important technologies IT Practices (Organization, Budgets, Staffing) CIO reporting relationships, time allocation, background, tenure and performance measurement Future of IT Summary and Conclusions... 41

3 Executive Summary This is the fourth annual European research on IT trends for CIONET. It is based on the authors research underway since This report presents the major findings from the 35th Anniversary IT Trends Survey based on responses from 2,552 organizations worldwide; 801 organizations within Europe representing 24 European countries. It is clear that organizations in Europe and around the globe are continuing to invest in IT to improve operations, reduce costs, and enable/drive strategies. SMAC (Social, Mobile, Analytics, and Cloud) technologies are clearly transforming the industry. IT budgets, hiring, and salaries are modestly increasing, and IT executives are cautiously optimistic that this trend will continue into next year. While the global results are available in multiple other publications, the scope of this report is Europe in comparison to the rest of the world. The important topics elaborated in this report include: -- IT spending patterns, including sourcing, and the use of cloud and shared services. -- IT workforce trends, including retirement forecasts and specifics about the performance analytics used for in-house and outsourced IT, as well as to evaluate IT executives. -- To whom CIOs report, what they do with their time, with whom they spend it, what they do with them, and what they think about the role of IT in strategy and innovation. -- Skills requirements for the success of new IT hires, mid-level IT professionals, and CIOs. -- The personal views of senior IT leaders about their most important and worrisome IT management issues and technologies. Overall, IT is becoming more strategic and business focused. It appears that organizations are becoming more digitized with their focus shifting away from tactical and organizational IT issues like efficiency, service delivery, and cost reduction to more strategic and organizational priorities like business agility, innovation, the velocity change in the organization, IT time to market, and the value of IT to the business. Some suggest that IT is the business. Time will tell if this is a widespread trend, but it is here now among global and European organizations, and it is confirmed by a corresponding shift in how CIOs are spending their time. 3 5 MOST IMPORTANT IT 5 MANAGEMENT CONCERNS MOST INFLUENTIAL TECHNOLOGIES Global Europe Global Europe 1. Business & IT Alignment 1. Analytics / Business Intelligence 3. Velocity of change in IT 4. Business Cost Reduction / Controls 5. Business Productivity 2. Business Agility 2. Application / Software development 3. Business Cost Reduction / Controls 4. Business Productivity 5. Infrastructure Capability 3. Data Centre Infrastructure 4. Cloud Computing 5. Enterprise Resource Planning 2. Big Data 3. Customer Relationship Management 4. Cloud Computing 5. Bring Your Own Device

4 Top IT Management Concerns 4 The participants were asked to select, from a list of 43, up to three IT management issues that they considered most important to their organization and up to three issues that were most important or worrisome to them personally or that keep you up at night. This is similar to the approach used since the research began in 1980; albeit the second, personal question was added for the first time last year. Capturing both the organizational and personal perspectives of the respondents provides additional insights. Some items on the selection list were modified or deleted (based on very low selection rates the previous year), and additional ones added for this year s study. The organization s top 10 most important IT management concerns, from the perspective of the senior-most IT leader in each of the 2,552 organizations, are shown in Figure 1, together with the comparative rankings from the authors last ten years of IT trends studies. The global top management concerns (see Table 1) tend to evolve slowly except for concerns such as IT cost reduction (ranked 23rd overall in 2014) and business cost reduction (ranked 4th in 2014) which appear to be directly related to the state of each region s short-term economy. Despite the prevailing global economic conunundrum, management concerns such as ITbusiness alignment appear consistently (see Table 1) both globally and locally in the top management concerns. Table 1. Key management concerns IT and Business Alignment Business Agility IT Time to Market 3 Business Cost Reduction / Controls Business Productivity Security / Privacy Business Continuity / Disaster Recovery Time to Market / Velocity of Change IT Value Proposition in the Business 9 Innovation 10 Infrastructure Capability 11 1 Revenue Generating IT Projects Business Process Management Globalization of IT Change Management New: IT Time to Market, IT Value Propoistion in the Business & Innovation Note: IT Cost Reduction is out of TOP 15 (first time!), is now 23.

5 Interestingly, Business Productivity (ranked 5th in 2014) and Revenue Generating Initiatives (ranked 12th in 2014) have started to appear in similar rankings across all geographies. Indeed the pattern is emerging where an increasing number of management concerns rank similarly across all geographies. We expect as enterprises are more assimilated in the global market, their IT management concerns will become even more consistent across geographies. Within Europe the top five IT management concerns for 2015 (24 countries, 801 organizations) are: 1. Business & IT Alignment 2. Business Agility 3. Business Cost Reduction / Controls 4. Business Productivity 5. Infrastructure Capability European country specific information follows below. Five most important IT management issues and concerns 24 European countries were represented in this year s research. 13 countries have been well represented (above 10 responding organizations, over 1% representation). These countries were (in order of representation): Netherlands (39.5%), Spain (14.6%), Finland (8.1%), Germany (6.6%), Portugal (4.7%), Austria (4.2%), Belgium (4.2%), Italy (3.3%), Luxembourg (3.3%), United Kingdom (3.0%), France (2.2%), Poland (1.3%), and Switzerland (1.2%). The authors anticipate that the continued increase in the European data will provide a more balanced perspective for the results. The top ten most important IT management issues for these countries are displayed below. There is relative consensus within Europe about the top three management concerns with regards to Business & IT alignment, Business Agility, and Business Cost Reduction. The diversity between European countries in the ranking of the remaining top ten increases rapidly. The range of perspectives across Europe is indicative of the different emphasis that these enterprises place on the important issuers of the day. 5 Table 2. Top ten management concerns Europe Europe Austria Belgium Finland France Germany Italy Luxembourg Netherlands Poland Portugal Spain Switzerland U.K. Alignment of IT and / with the business Business Agility Business Cost Reduction / Controls Business Productivity Infrastructure Capability IT Change Management Globalization of IT Velocity of Change in Business Business Continuity Legal Compliance - HIPPA, SarBox, SAS70, PCI, etc

6 6 1. Alignment of IT and the business 2. Business agility 3. Business Cost Reduction/Controls Following the pattern of the past 30 years, alignment of IT and business has been close to the top of the list of top concerns since 2000 (Luftman et al., 2013) (Derksen, 2013). Despite being in the spotlight for such a long time, it still remains a pervasive and persistent goal. The data shows that it remains the number one concern in North America, Europe, Asia, and Africa, but slipped to 8th position in Australia, and 35th in Latin America in Alignment of IT and business has been considered an important area right from the beginning of the trends research. Initially, it was ranked 8th in 1980, and remained in the top ten until After that, it remained in the number one position; except in 2012, 2010, 2009, and 2007 when it slipped either to the second or third position. It is expected by many pundits that it will continue to occupy the top spots in the coming years; hence, it is not a surprise that it has been ranked at or near the top of the list of concerns in all geographies. While there are some that advocate using a different term (e.g., integrate, fused, harmony), the important concepts that are espoused are similar; improve the business-it relationship to provide demonstrable business value. Whatever term one prefers, IT will continue to be seen as an integral enabler and driver of efficiency and effectiveness throughout the business, especially with the emergence of leveraging IT for revenue generating initiatives. Both IT and business processes are relatively mature on their own, but it is their alignment that holds the key to driving the businesses forward (Luftman et al., 2013). Alignment will remain high on the list as IT and business evolve. It is more important to continue efforts to improve the IT-business relationship, than debate what term to use. Business agility and speed to market are essential for business growth in today s competitive economy, especially as organizations continue to increase their use of IT for competitive advantage. Business agility was first introduced into the survey in It has been ranked among the top ten IT management concerns except when it was ranked 17th and 13th. Business Agility was ranked 7th in 2003, 5th in 2005, and 7th in It has been ranked among the top three global management concerns since 2009; mostly at number 2. Over the years, it has maintained the 3rd position in North America, 2nd in Europe, Asia, and Africa, and 1st in Australia and Latin America. This year, it is ranked 2nd in North America and Europe, while 7th in Asia, and 5th in Latin America. As organizations leverage IT to quickly reduce business expenses and increase revenues, Business Agility will remain an important concern for management. Business agility in concert with IT time to market/velocity of change (ranked 3rd in 2014), IT value proposition to the business (9th) is also indicative of the future impact that IT will have (is having) on revenues (which has fluctuated between 2nd and 17th over the last seven years). Business Cost Reduction has been ranked among the top four management concerns across the globe since In the authors previous trends surveys it was combined with business productivity; this year they are separate, albeit even independent they are both among the top management considerations. Business productivity was ranked among the top four concerns since 2007; except 7th in This year Business Cost Reduction /Controls is ranked, 2nd in Latin America, 3rd in Europe, 4th in Asia, 9th in North America. Cost reduction is considered the foundation of long- term sustainable competitive advantage especially during economic stagnation, and therefore this will continue to be highly ranked in all geographies. Leveraging IT to attain these cost reductions and improvements in productivity are essential to the success of organization and the future of IT. As organizations continue to increase their focus on leveraging IT for cost reduction, improving productivity, and revenue generating initiatives, we anticipate seeing a continued change in IT roles, spending, and organizational considerations; perhaps a transformation.

7 4. Business Productivity There is general consensus on the importance of business productivity and cost reduction using IT, even though IT is still perceived within a majority of enterprises as an expense. While the research demonstrates productivity slowly moving down the list, to reflect this change in business perspective, as previously noted they are both included in the survey and both are among the top management concerns this year. Business productivity has been ranked in the top four management concerns for the past decade, except 2008 when it was ranked 7th. In 2014 it has been ranked among the top 6 management concerns across all geographies except Australia (ranked 32nd). The ranking of business productivity as a management concern shows a very erratic behavior, moving from 7th place in 2008 to 1st in Business productivity is rated among the top 4 management concerns across all geographies. We expect that it will continue to remain among the top 10 for the foreseeable future. Conversely, we anticipate IT cost reduction (ranked 23rd in 2014) to drop off the list in the coming years. 5. Security (Previously combined with Privacy) Since 1980 security has been included with privacy. It was rated between 2nd and 9th since From 1980 to 1990 it was ranked between 12th and 19th position, except 1985 when it was rated 6th. From , it was either 2nd or 3rd, and then 6th to 9th between 2007 through 2013 (Luftman and Zadeh, 2011, Luftman et al., 2013). This year security is ranked 6th globally; second in North America, 32nd in Europe, 30th in Asia, 38th in Australia, 31st in Latin America and Africa. Security (like alignment) remains as a pervasive and persistent concern. Recent headlines like the NSA fall-out and the Sony Pictures breach exemplify the need for companies around the globe to continue investing in their security systems. It is expected that business continuity/ disaster recovery (ranked 7th in 2014) and security will remain in the top ten. Security is also the 8th ranked technology in 2014 and ranked 4th overall in technology investments. 7

8 8 IT management Issues Most important or Worrisome to IT Leaders For a second year, we asked respondents to report not only on the IT management issues important to their organization, but also on issues that were personally most important or worrisome to them ; the things that keep you up at night. While we have only two years of data to present in Table 3 (worldwide), the year to year changes are significant in that new or revised selections have moved into the top ten. Security and Privacy moved from second to third place where as alignment kept the number one place. New in the top three is Business Agility. New in the top ten are Business Continuity, Vendor Management, Business cost reduction and IT time-to-market. Table 3. Things that keep you awake at night Your most Impt. or Worrisome Most Important / Worrisome to YOU This question was asked for the first time in Org s most important Alignment of IT and / with the business 2 5 Business Agility Security / Privacy IT Talent / Skill Shortage Business Continuity Business Productivity Vendor Management CIO Leadership Role Business Cost Reduction IT Time-to-Market 3 1 Interestingly CIO Leadership role moved from the top three to eighth place, indicating that the CIO is becoming less worried about their perceived responsibilities in the enterprise; albeit leadership is a top skill required for CIOs. From the Europe countries perspective Vendor management interesting. Within Europe vendor management is ranked 2nd; a ranking which is not to be found in other geographies. Belgium, France, Italy, and Portugal ranked vendor management first. In Table 4 the European top 10 is presented.t

9 9 Table 4. Management concern awake at night Europe Austria Belgium Finland France Germany Italy Luxembourg Netherlands Poland Portugal Spain Switzerland UK Business & IT Alignment Vendor Management Business Continuity Business Productivity Business Cost Reduction / Controls Business Agility CIO Leadership Role IT Agility Globalization of IT Innovation There are significant differences within Europe when considering the top ten. Both Austria and Switzerland ranked alignment outside the top ten. Vendor management seems to be important across Europe, but both Finland and the Netherlands ranked it 19th and 14th whereas the other European countries placed it within the top ten. Vendor management is ranked higher than other continents. A possible explanation might be the Cloud trend in which many Cloud suppliers are from North America (e.g. Salesforce, Amazon, Apple, Microsoft) and in which European countries concentrate more on the legal implications, also supported by the European Union. Moreover, these changes in the top 10 of things that keep you awake at night also point to a shift in priorities and focus among senior business and IT leaders, away from tactical and operational IT issues like disaster recovery, service delivery, and change management to more strategic and organizational priorities like the IT value proposition, IT strategic planning, faster delivery, and coping with changing conditions.

10 Largest investments and most important technologies 10 Participants were asked to select, from a list of 53 technologies, up to three of their organization s largest/most significant current or near-future IT investments ; up to three that they consider most important to their organization, and up to three that cause the greatest concern. Some items on the selection list from last year were deleted (based on very low selection rates the previous years) or modified, and additional ones added to this year s study. Table 5 lists the top 22 technologies identified as the largest investment for the 2,552 participating organizations worldwide, along with their rankings since The rankings have shifted when compared to 2013, yet all, but one entry in this year s top 15 were also top 15 entries last year. Specifically, a new item, Data Center Infrastructure, which ranks third, and Legacy Applications, tied at 17th. Next to Data Center a new entry to the top ten is Security/Cyber security (ranked 8th). Customer/Corporate Portals and Network/Communications fell out of last year s top 10. Generally speaking, and consistent with last year, a relatively small percentage of the 2,552 respondents selected any one technology. This indicates that IT investments are well diversified across a broad number of options. Only the top six were selected by more than 10% of the respondents. This is not particularly different than the IT management issues shown in Table 1, of which also the top six were selected by more than 10% of the participating organizations. 1 Blank cells indicate that the technology was not asked about in that year of Study. Table 5. IT Trends, Analytics / Business intelligence Application/Software Development (previously Apps developments) Data Center / Infrastructure 3 new Cloud Computing (SaaS. PaaS. IaaS) Enterprise resource planning (ERP) Customer relationship management (CRM) Big Data Security / Cybersecurity Workflow tools Integration (previously EAI/EAM) Networks / communications Disaster Recovery Collaboration Tools Customer/Corporate Portals Virtualization Legacy Applications Employee Portals Outsourcing IT 19 Innovation / Disruptive Technologies 20 Continuity Planning Consumer Oriented Devices 22 36

11 European Organization s IT Trends Investments The Europe differences in the most important IT Trends/investments can be found in Table 6. There is, like around the globe, consensus looking at Analytics/Business Intelligence (A/BI) being ranked first. Only Austria (7th) and Finland (4th) rank A/BI outside the top three. In the other IT Trends in the top twenty there are significant differences in the selected top IT Trends depending on the country perspective. Big Data, ranked 2nd, is a top three IT trend in Austria, the Netherlands, Spain, and UK; whereas it is ranked outside the top ten in Italy and Luxembourg. Ranked 3rd is CRM and is within the top five in Austria, France, Italy, and Luxembourg; but outside the top ten for the Netherlands, Poland, Switzerland, and the UK. Cloud Computing is a top five trend within Germany, Italy, Netherlands, Poland, Spain, and the UK, but is outside the top ten in Austria, Belgium, Luxembourg, and Switzerland. 11 Table 6. Top 20 IT Trends Europe Europe Austria Belgium Finland France Germany Italy Luxembourg Netherlands Poland Portugal Spain Switzerland U.K. Analytics / Business Intelligence Big Data Customer Relationship Management Cloud Computing Shared Services BYOD (Bring Your Own Device) Enterprise Architecture Workflow Tools Employee Portals Master Data Management Web Services Voice Over IP (VOIP) Customer/Corporate Portals Application / Software Development Continuity Planning Unified Communication Enterprise Resource Planning Collaboration Tools Security / Cybersecurity Innovation / Disruptive Technologies

12 Five largest IT Trends investments Analytics/Business Intelligence 2. Application and Software Development 3. Data Center Infrastructure Analytics/Business Intelligence (A/BI) remains in first place as the largest IT investment, a ranking it has held for six years straight. It has ranked in the top three since 2003, when it was first added to the list. A/BI was selected by 801 organizations Comprehensive Report: 2015 IT Trends Study A big THANKS to all CIONET members who completed the IT Trends Study Questionnaire! 12 (31.4%), as one of their three largest or most significant IT investments. However, the percentage of organizations selecting this is down from 42% last year. It is worth mentioning that potential synergies exist between A/BI systems and the data made available via investments in 5th-ranked ERP, 6th -ranked CRM, and 7th-ranked Big Data, as well as many of the other technologies listed in Table 5. Selected by 330, or 12.9% of the respondents, Application and Software Development is ranked 2nd this year. Interestingly, software development has been moving up in the rankings since its introduction in This high ranking may come as a surprise in the world of off-the-shelf software, Software-as-a- Service (SaaS), and Cloud Computing; and yet, custom software development is still a critical undertaking in many organizations. SaaS and Cloud should not imply no application/software development. Nearly 35% of the responding organizations are in industries where developing and/or using custom software is common. From an industry perspective it shows that 13.84% of the 2,552 responding organizations are in financial services; IT hardware, software, and services (8.28%); government (7.89%); and medical technology, telecommunications, and electronics (6.14% combined). Data Center Infrastructure was added to the list of options this year and was in 3rd place, selected by 327 or 12.8% of responding organizations as one of their three largest technology investments. These large investments in infrastructure are surprising in light of the significant growth of publically traded cloud providers and the many who reported moves to the Cloud appearing in the business and IT press, where capital investments can be leveraged into other current expenses. Increasing use of the Cloud is confirmed by this year s IT Trends Study s IT budget and the cloud utilization data, as reported below. Nevertheless, nearly 20% of the respondents reported making large investments in Data Center Infrastructure. It is noteworthy; however, that this year s study finds that nearly half of cloud-base IT services are delivered via in-house private clouds, and that only five responses separated the second- and fourth-ranked technology investments.

13 4. Cloud Computing 5. Enterprise Resource Planning (ERP) 13 Cloud Computing was selected by 311 organizations (12.2%) as one of their three largest IT investments. As indicated in Table 5, the first appearance of Cloud Computing was in 2009, when both Cloud Computing and Softwareas-a-Service (SaaS, PaaS) appeared separately. These listings continued in 2010 and 2011; but in 2012, Cloud Computing was redefined to include SaaS, PaaS (Platform-as-a-Service), and IaaS (Infrastructure-as-a- Service). Despite this single, expanded definition, Cloud Computing dropped to fourth place this year as the largest or most significant investment, down from second place in 2013 and 2012 and third in That does not necessarily mean, however, that fewer IT budget dollars are going to Cloud Computing, or that fewer IT services or solutions are being delivered that way; and in fact, it appears quite the opposite is occurring (as discussed the Participating Organizations and Their IT Practices section below). Investments in ERP systems have been ranked among the top five position since This year it was selected as one of the three largest investments by 288 (11.3%) of the respondents. Like data centers, ERPs tend to be large investments. However, unlike data centers, ERP systems are designed to provide a vehicle for reducing business expenses and optimizing business processes, both important management objectives. Also, ERP systems, by virtue of the comprehensive and integrated data that they provide about internal operations, as well about supply chains and customers, they enable second- and third-order benefits when used in combination with technologies such as A/BI. Thus it is not surprising to see that ERPs continue to be large, significant investments for many organizations.

14 14 Last year, for the first time, respondents were asked to report on both their organization s largest IT investments as well as those of greatest concern personally to the senior IT leaders themselves. This proved quite revealing 2, and so it was repeated again in this year s study. Additionally, this year respondents were also asked to select up to three technologies that are most important to their organizations. By separately assessing organizations largest technology investments, those of greatest importance, and those of greatest concern to IT leaders, additional detail and granularity are added to the research. This also provided some interesting insights as detailed below. 2 Kappelman, L. A., McLean. E. R., Luftman, J., Johnson, V. (2013) Key Issues of IT Organizations and Their Leadership: The 2013 SIM IT Trends Study, MIS Quarterly Executive, 12(4), Comparing organizations largest IT investments to their most important ones The technologies identified by the respondents as being most important to their organizations map fairly well to those technologies where the organization is making the largest investments. As indicated in Table 7, seven of the top ten are present on both of the lists, but with different rankings. Also, asset management (at 4th), Customer/Corporate Portals (at 6th) and Service Management (at 10th) only appears on the most important list. In the most significant IT investments workflow tools (8th), employee portals (9th) and Master Data Management (10th) are in the top ten. Table 7. Comparing organizations largest IT investments to its most important (2014 Europe) Most significant IT investment Most important IT Trend to the organization Analytics / Business Intelligence 1 1 Big Data 2 7 Customer Relationship Management 3 2 Cloud Computing 4 5 Shared Services 5 8 BYOD (Bring Your Own Device) 6 3 Enterprise Architecture 7 9 Workflow Tools 8 48 Employee Portals 9 13 Master Data Management Web Services Voice Over IP (VOIP) Customer/Corporate Portals 13 6 Application / Software Development Continuity Planning 15 11

15 The most worrisome technologies for senior IT leaders in Europe This year s top six technologies that are most personally worrisome to senior IT leaders ( things that keep you up at night ) were selected by more than 11% of the respondents, with numbers 7 thru 19 by between 5% and 10%. The top 10 most worrisome technologies remained fairly consistent when compared to last year. However, there are some differences. In particular, BYOD (18th this year), Enterprise Architecture (15th), and CRM (13th) all dropped out of the top 10 to be replaced by Application Development (fifth, up from 15th last year) and the two new items, Data Center Infrastructure (tenth) and Innovative/Disruptive Technologies (tied for seventh). Security moved up from second to first, being selected by 224 or 31.2% of the respondents, while second-ranked Analytics and Business Intelligence was selected by 160 respondents (22.3%). Disaster Recovery ranks third this year as the most worrisome technology, selected by 106 (14.8%). Integration is fourth with 14.5%; and rounding out the top five is Software Development, selected by 13.1%. The only other item selected by at least 10% of the respondents is Cloud Computing, at sixth with 11.6%. Looking over this year s rankings of the things that keep senior IT leaders up at night, they seem about evenly divided between keeping the IT lights on (i.e., security, disaster recovery, legacy, and infrastructure) and increasing business capabilities (i.e., analytics, integration, software development, innovation, and ERP). Cloud could be in both categories, and disruptive technologies could be seen as in a strategic IT-value proposition category of its own. 15 Table 8. IT Trend most worrisome for senior IT leaders - Europe ( ) Europe Austria Belgium Finland France Germany Italy Luxembourg Netherlands Poland Portugal Spain Switzerland U.K. Security / Cybersecurity Asset Management Smart Gadgets (e.g., smart watches/ gadgets) Service Management Analytics / Business Intelligence BYOD (Bring Your Own Device) Business Process Management Systs Social Networking / Media Customer/Corporate Portals Cloud Computing Continuity Planning Enterprise Application Management Big Data Enterprise Resource Planning Innovation / Disruptive Technologies

16 16 Comparing IT Leadership s most worrisome technologies to the largest technology investments As was the case last year, the technologies that keep senior IT leaders up at night are different than the largest IT investments in their organizations 3. Nevertheless, as indicated in Table 9, the differences in some ways outweigh the similarities. This is more than last year. However, there are still some interesting similarities, with Cloud Computing, BYOD and Analytics/Business Intelligence in all three perspectives in the top ten. These three IT Trends are important to the organization, gain significant IT investments and keep the CIO awake at night. Some of the other differences include technologies that may not require a very large investment but are critical for keeping the IT lights on, and thus are fundamental for the credibility, reputation, and job security of senior IT leaders. Security is an example of this, as it ranks as the number one personal concern with 33.1% selecting it. Other examples are Smart Gadgets, Social networking and Service Management. 3 Derksen, Luftman. CIONET report 2014 Table 9. Comparing Europe s most significant IT investment, organization important it and keeping the CIO awake at night Most significant IT investment Org. important IT Things that keep you up at night Security / Cybersecurity Asset Management Smart Gadgets (e.g., smart watches/ gadgets) Service Management Analytics / Business Intelligence BYOD (Bring Your Own Device) Business Process Management Systs Social Networking / Media Customer/Corporate Portals Cloud Computing

17 Security issues, asset management and smart gadgets are what keep the CIO awake most at night 17

18 IT Practices (Organization, Budgets, Staffing) 18 The average IT spending as a percent of revenue in European organizations is 4.8%, which is less than the other global geographies. The comparison is shown in Figure 1. Although more depending on industry than country the countries (9.27%) Netherlands (7.11%), Luxembourg (9.06%) and Spain (6.92%) have above average IT spending. Finland (4.34%), Germany (1.94%) and Portugal (3.89%) are below the average. These differences are the result of the kind of industries involved within the countries. Comparing Europe to the other geographies (Figure 1) it can be seen that Europe is more oriented on IT cost reduction than the other geographies. Which is similar to the economic state of Europe in the research period. Figure 1. Percentage of revenue allocated to IT budget (2015) % 8% 6% 4% 2% 0% 4,7 % ,1 % 5,8 % 5,6 % 5,5 % Global 9,27 % ,8 % ,6 % 9,38 % 330 3,3 % ,4 % 6,1 % 5,4 % 4,8 % ,9 % 3,6 % 4,9 % 5,0 % % 5,3 % Africa Asia Europe North America Latin America Australia 5,8 % 10,9 % 6,3 % 5,5 % 5,9 % 5,6 % 5,2 % 5,5 % Europe is the only geography which is focusing as much on reduces IT spending. We do expect to see a turning point in the near future. Compared to the other geographies Europe is in catch up regarding IT investments making up for the lean Great Recession years of , when both revenue and IT investment contracted in most organizations. The increase in many of the other geographies (Figure 1) is also being affected by new investments in cloud, shared services, digital marketing and analytics as well as the increasing digitization of organizations in general.

19 IT organization structure Within the surveyed European countries the most popular organization structure (Figure 2) identified by 48% of the respondents is decentralized, followed by centralized with 34%, and federated with 14%. Globally the centralized IT organizational structure is the most popular (69%), followed by federated (14%), and decentralized (12%). A possible explanation for this difference is likely the European decentralized usage of new technologies. Quite often business units do tend to invest in IT that they require within their own function. This might also explain the lower IT spending (hidden IT costs) as discussed in the previous section. 19 Figure 2. IT Organization Structure Europe Centralized Decentralized Federated / Hybrid Matrixed Networked U.K. Switzerland Spain Norway Portugal Netherlands Luxembourg Italy Germany France Finland Belgium Austria = 29% 57% 14% = 40% 20% 40% = 53% 13% 20% 7% 7% = 20% 60% 20% = 9% 82% 9% = 8% 67% 17% 8% = 50% 33% 17% = 13% 80% 7% = 50% 17% 33% = 14% 71% 14% = 61% 4% 30% 4% = 13% 80% 7% = 63% 13% 25%

20 20 The IT organizational structure tends to change over years globally, as can be seen in Figure 3. This year globally both the centralized and decentralized IT organizational structure increased whereas federated decreased. Often a centralized IT structure is chosen for cost reduction reasons whereas the decentralized IT structure is chosen customer focus and flexibility. Large changes to the IT organization structure is complex, time consuming, and costly. Thus structure change is not something most organizations do frequently, take lightly, or do simply because it is fashionable, lending credence to the demonstrable value of a federated structure which can facilitate minor changes more readily. Overall, Figure 3 suggests that while IT is centralized in most organizations, there is a slow-moving trend toward more decentralized IT structures and fewer centralized ones. Time will tell whether that is in fact the case, or if that trend has begun to reverse. On the other hand, this distinction between centralized and decentralized/federated IT organization structures (as shown in Figure 3) may be blurring, as IT governance becomes more federated and IT delivery becomes more centralized. That is a matter to explore in future IT Trends Studies. There is a clear trend towards decentralised IT structures Figure 3. Global organization structure % 60% 40% 20% 0% 20% % 34% 25% 30% 18% 22% 18% 15% 12% 10% % 9% % 10% 9% 11% % 69% 62% 62% % 68% 72% Federated / Hybrid Decentralized Centralized 69% 77% 74%

21 IT budgets and Staffing Trends Economic conditions have had a significant impact on IT budgets. As indicated in Figure 4, prior to the great recession ( ), the majority of global organizations reported increasing IT budgets. However, as the economy slowed in 2008 only 47% of respondents reported an increase in IT budgets; and in 2009 only 27% of organizations reported increases, with 73% of the respondents indicating that their IT budgets had remained flat or decreased. Things tentatively improved in 2010 with 36% reporting increases, but 64% still indicated flat or decreasing IT budgets from the prior year. In 2011 the trend improved further with 55% of the respondents reporting increasing IT budgets, 27% flat, and only18% decreasing (a bit more than half of the 2010 rate of decreases). The percent of organizations reporting increases pulled back in 2012 with nearly 40% of organizations seeing budget increases and 20% decreases. In last year s IT Trends Study, 56% of the respondents reported increasing budgets, and respondents accurately forecast a slight increase for this year. 21 Figure 4. Change in IT budget from previous year ( ) Increase No change Decrease 610= 180= 210= 470= 280= 250= 270= 220= 510= 340= 300= 360= 61% 18% 21% 47% 28% 25% 27% 22% 51% 34% 30% 36% 55% 27% 18% 40% 35% 26% 53% 21% 26% 56% 20% 24% 45% 30% 25% 550= 270= 180= 400= 350= 260= 530= 210= 260= 560= 200= 240= 450= 300= 250= This year the number of organizations reporting IT budget increases is 56%, up from 53%, but still not above the 2007 high of 61%. Organizations with budget allocations remaining flat are a bit lower (20%), while decreasing budgets are down from 26% to 24%. However, when asked to project next year s IT spending, the outlook is more pessimistic. Only 45% of organizations expect to have an IT budget increase in This represents almost a 20% decline in the number of organization s currently reporting budgetary increases. Moreover, 30% (50% more than this year) are projecting flat budgets, and 25% anticipate a decrease in IT spending (about 4% more than in 2014). This could be a signal of further economic uncertainty, and likely an anticipated overall weakening in the global economy, or perhaps the end of the catch up period in IT investments making up for the lean investment years early in the recession.

22 22 European IT budgets developments 29% of the European organizations reported an IT budget decrease in the 2014 budget (see Figure 4). This percentage is highest of all continents (North America 24%, Australia 20%, Africa 11% and Asia 3%). Also the percentage of European organizations reporting a flat IT budget in 2014 in comparison with 2013 was highest of all continents with 42%. The number of European organizations reporting an increased IT budget was lowest of all continents with 30%. Within Europe (Figure 5), 14% of the UK organizations reported an increased 2014 IT budget, lowest within Europe. In Portugal and the Netherlands just 24% of the organizations reported an increased IT budget. Austria and Germany are at the other end of the scale with 60% and 54% of the organizations reporting an increased IT budget. Only 7.7% of the German organizations reported a decreased IT budget in When comparing the forecasted changes in IT budget with regard to 2015, the European countries are slightly more positive (see Figure 6). 79% of the European organizations anticipate an increased or flat IT budget in comparison to 72% in % of the European organizations reported a decreased IT budget, whereas 29% of the European organizations reported a decreased IT budget in German organizations are most positive with 60% of the organizations reporting an increased IT budget over % of the IT budgets of organizations in Austria report a flat IT budget in % of the organizations in Switzerland report an expected decreased IT budget in Figure 5. Change in IT budget from previous year (2014 compared to 2013) in Europe 2014 > = < 2013 Figure 6. Change in IT budget from previous year (2015 compared to 2014) in Europe 2015 > = < 2014 Europe U.K. Switzerland Spain Portugal Netherlands Luxembourg Italy Germany France Finland Belgium Austria = 30% 42% 29% = 14% 29% 57% = 31% 33% 36% = 31% 33% 36% = 24% 41% 34% = 24% 52% 24% = 29% 53% 18% = 44% 33% 22% = 54% 38% 8% = 36% 29% 36% = 26% 35% 39% = 29% 38% 33% = 60% 20% 20% Europe U.K. Switzerland Spain Portugal Netherlands Luxembourg Italy Germany France Finland Belgium Austria = 31% 48% 21% = 36% 55% 9% = 14% 43% 43% = 40% 45% 15% = 28% 59% 14% = 29% 43% 29% = 35% 59% 6% = 33% 39% 28% = 60% 20% 20% = 31% 38% 31% = 26% 48% 26% = 17% 46% 38% = 20% 60% 20%

23 IT budget allocations Since 2009, when these Global IT Trend Study first began gathering IT budgetary data, the survey focused on two major categories: people and things. These two categories were further subdivided into In-House, Outsourced, and Foreign and Domestic spending. In Table 10 both Europe (2014 & 2015) and the Global figures ( ) are provided. The internal staff-domestic spending is 19.7% of the European IT organizational budget. The surveyed organizations predict a decrease to 17.9%, whereas the anticipated global budget allocation for internal staff-domestic increases from 17.1% in 2014 to 19.5% in Considering the internal staff offshore, the trend to increase in Europe and globally. Interestingly the trend for domestic outsourcing (within the continent) shows a flat budget allocation within Europe (12%) in the years 2014 to 2015, whereas the global trend shows a significant decrease of allocated IT budget to outsourced services domestic (from 16.9% to 6.8%) with regard to people services. Spending on consulting services shows a decrease in Europe and globally. Considering the spending on things, the global and European trend is decreasing for in house-domestic expenses. At the same time, in-house offshore increased globally from 5.4% to 11.9% whereas within Europe the trend is less significant with 6.9% in 2014 compared with 7.3% in Both Global and Europe show a significant increase in outsourced things both domestic and offshore. 23 Table 10. IT budget allocations Europe & Global IT Budget Area 2015 projected Europe 2014 Actual Europe 2015 projected Global 2014 Actual Global 2013 Global 2012 Global 2011 Global 2010 Global 2009 Global AVERAGE: PEOPLE V. THINGS PEOPLE Employees / Internal Staff: Domestic 17,9% 19,7% 19,5% 17,1% 30,4% 21,0% 31,0% 43,0% 39,0% Offshore 11,4% 10,3% 10,9% 9,9% 4,2% 11,0% 5,0% 3,0% 4,0% Outsourced Services/ Contractors: Domestic 12,0% 12,0% 6,8% 16,9% 8,7% 10,0% 9,0% 7,0% 8,0% Offshore 9,8% 9,3% 7,1% 10,5% 3,9% 8,0% 3,0% 5,0% 4,0% Consulting Services 5,6% 6,1% 6,1% 6,6% 7,2% 10,0% 11,0% 10,0% 12,0% TOTAL People 56,8% 57,4% 50,4% 61,0% 54,4% 60,0% 59,0% 68,0% 67,0% 59,2% THINGS: HARDWARE, SOFTWARE, FACILITIES In-house - domestic 16,4% 18,7% 12,7% 15,9% 28,3% 22,0% 30,1% 32,0% 33,0% In-house offshore 7,3% 6,9% 11,9% 5,4% 3,7% 2,0% Outsourced - domestic 11,2% 9,6% 12,8% 7,3% 10,5% 13,0% 10,9% Outsourced - offshore 8,3% 7,3% 12,2% 10,4% 3,2% 3,0% Total Things 43,2% 42,6% 49,6% 39,0% 45,6% 40,0% 41,0% 32,0% 33,0% 40,8%

24 24 IT staffing and salary trends To provide greater insight into the IT personnel practices, IT staffing is another area that was refined and expanded considerably in this year s IT Trend Study. IT staffing as percentage of the total company s personnel differs between the European countries as displayed in Figure 9. On average more than six percent of the total staff within the organization is IT staff in Belgium (7.16%), Luxembourg (8.15%), the Netherlands (6.72%), Portugal (7.78%), and UK (8.60%). In Italy (2.29%), Macedonia (2%), and Norway (2.33%) the percentage of total staff being IT personnel is below three percent. Interesting are the changes in IT staffing. These changes in previous year are displayed in Figure 8. When comparing Figures 7 and 8, the decrease in IT staff looks on average to be higher in countries with a higher percentage IT staff compared to total staff. Within Belgium, Finland, Luxembourg and Switzerland the IT staff decreased more than in other countries. In Germany 50% of the organizations reported an increase in IT staff followed by Norway with 45% of the organizations reporting an increase in IT staff. In Austria 75% of the organizations reported a flat number of IT staff in 2014 compared to Figure 7. Percentage of company s personnel is IT (%) Figure 8. Total in house IT staff size in Europe 2014 > = < 2013 Europe U.K. Switzerland Spain Portugal Poland Norway Netherlands Macedonia Luxembourg Italy Iceland Germany France Finland Belgium Austria 558= 5,58 860= 8,60 600= 6,00 778= 7,78 550= 5,50 360= 3,60 233= 2,33 672= 6,72 200= 2,00 815= 8,15 229= 2,29 300= 3,00 346= 3,46 592= 5,92 447= 4,47 716= 7,16 359= 3, Europe U.K. Switzerland Spain Portugal Norway Netherlands Luxembourg Italy Germany France Finland Belgium Austria = 27% 43% 30% = 25% 50% 25% = 70% 20% 10% = 16% 61% 24% = 26% 48% 26% = 10% 45% 45% = 28% 48% 24% = 36% 36% 29% = 33% 33% 33% = 4% 46% 50% = 21% 36% 43% = 48% 24% 28% = 44% 16% 40% = 6% 75% 19%

25 IT employees and their salaries To provide greater insight into IT personnel practices, IT employees and their salaries was expanded considerably in this year s IT Trend Study. The salary changes in 2014 compared with 2013 by country are displayed in Figure 9. In Europe 68% of the organizations reported a decrease (22%) or flat (46%) total salaries for IT staff in 2014 compared to Only 32% of the organizations reported an increase in the total salaries for IT staff. Within Europe, 57% of the organizations in Luxembourg reported increased total salaries in 2014 compared to At the other end of the spectrum, only 15% of the organizations in Portugal reported an increase in total salaries. In Spain 38% of the organizations reported a decrease in total salaries for IT staff in 2014 compared to The lowest decrease is reported by United Kingdom (9%) and Germany (10%). Both UK and Germany expect a higher decrease of total IT salaries in 2015 (Figure 10). 25 Figure 9. Total salaries for IT staff in 2014 compared to > = < 2013 Europe U.K. Switzerland Spain Portugal = 22% 46% 32% = 9% 45% 45% = 14% 57% 29% = 38% 38% 23% = 26% 59% 15% Netherlands Luxembourg Italy = 26% 48% 26% = 21% 21% 57% = 14% 52% 33% Germany France Finland Belgium Austria = 10% 60% 30% = 14% 36% 50% = 24% 39% 36% = 24% 44% 32% = 13% 53% 33%