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CIO Insight: IT Spend As a Percentage of Revenue

As technology leaders, not only are we often fighting for a seat at the table, we are also working to align our organization toward strategic investment in the technology function. Called upon to innovate, build our function, and align toward key business initiatives requires an ongoing and healthy IT investment but also appropriate operational budget to sustain those capital investments. 

In August 2020, The National CIO Review polled our 2000+ member CIO Professional Network on their reported IT spend as a percentage of company revenue.

As IT spending can vary greatly from industry to industry and in companies large and small our respondents clearly represent a case of the haves and have-nots. With over 34% of technology leaders reporting an IT spend of less than 2%, one could conclude that many companies aren’t quite to the point where IT spend is seen as a long term investment of company resources that may position the company for future growth.

In fact, fewer than 65% of companies are spending less than 4% of revenue on technology operations and capital investment.

A lower IT spend can be attributable to a variety of factors. For some it may represent a lack of understanding of the value of IT, in other cases it may be a thoughtful construct during a private equity process and often it is attributable to the current business climate. Regardless, the end result is immense pressure on CIOs to maintain a motivated workforce and generate business value.

In each case technology leaders must balance the high intensity parallel activities of optimizing your current portfolio to free up resources and cash to self-fund initiatives; going with a fail fast approach, conducting quick and inexpensive pilots to show business value; and most importantly, creating a healthy, high performance innovative culture to squeeze the maximum value out of current investments with innovative thinking.

Satyaki Lodh, Chief Information Officer for Borden Dairy Company

However there are organizations which report a very healthy IT spend. Over 35% are reporting an IT spend of over 4% with 21% of organizations offering a very robust investment of greater than 6% of revenue.

As an international design firm, we were familiar with the technology investment to deliver a seamless work experience across geographies. Adding our work from anywhere mantra expresses the criticality of expanding these solutions and the subsequent technology investments into everyone’s home. Our pursuit of engaging anyone from anywhere is how design must be accomplished in the future. It is how we will continue to bring the best team to the conversation. Our commitment to technology as a part of that solution is threaded into every solution and visible in the investments we make. We have been around for over 100 years, our next 100 is only guaranteed by delivering under this mindset.

Stephen Held, Chief Information Officer for LEO A DALY

Our overall investment strategy in technology makes up close to a third of our overall organization’s total budget. As, CIO it is incumbent upon me to establish a sound partnership with our executive team and set a technology vision that allows our executive members to support such vision that drives modernization for all business processes. Consequently due to our executive leadership’s commitment towards technology investment, our operational teams can leverage our technology portfolio of services to enhance their capacity to serve by utilizing leading edge software and hardware instruments of service delivery to meet our customer’s needs.

Carlos Garcia, Chief Information Officer for Flagler County Clerk of the Circuit Court & Comptroller

Prior to the pandemic, most business leaders expected a continued growth in revenue and earnings for this calendar year and a resulting alignment for IT investments, although many have since restated those expectations. Some organizations have and will continue to invest in business transformation and the technologies required to achieve those objectives. Others will continue to hold tight on the purse strings while proceeding cautiously in this economic climate.

CIOs, CTOs, and CISOs nevertheless will continue to be called upon and held accountable in quickly pivoting their operational models to align with the current business climate and ongoing recovery. The question remains in that will businesses align the expectations for the IT organization with the appropriate investments to achieve those results.

The CIO Professional Network is an active, 2000+ member, invitation-only network where technology leaders share best practices and insight on common issues. The network provides a forum for ongoing and mutually beneficial interactions. Vendor-free membership is by invitation only and is restricted to the top IT, security or digital professional for their respective organization. To request membership navigate to the CIO Professional Network.

H. Michael Burgett, TNCR Contributing Writer
H. Michael Burgett, TNCR Contributing Writer
H. Michael Burgett has more than 30 years of experience in the technology sector. He is the founder of CIO Partners, a nationally recognized executive search firm with a niche in the technology sector specializing in top-level leadership engagements.
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