IT Spending Curves Upward, Salaries Show Sign of Life

Published: January 17, 2011

by Alex Woodie

More indications of an economic rebound were uncovered last week through two reports, including an IBM study of midmarket companies that shows businesses have become more bullish with their 2011 IT spending plans compared to 2009, particularly when it comes to innovative technologies that can fuel growth. Meanwhile, it looks like IT salaries have finally bottomed out and are slowly rising, according to a new report from Janco Associates.

According to IBM's 2011 midmarket study, 53 percent of midsize businesses plan to increase their IT budgets over the next 12 months, compared to only 20 percent who planned an increase in mid-2009. By comparison, 16 percent of midsize companies are planning to decrease their budgets, while 31 percent will keep theirs the same.

Shoring up existing IT systems and making existing business processes more efficient continues to be the dominant theme among midsize businesses. But there is less of a focus today on cost reduction and operational efficiencies than there was in 2009, when it absolutely dominated the "strategic mindset," according to IBM.

Instead, midsize businesses are starting to open their wallets to plan for growth, which means more investments in new and innovative technology and a renewed focus on customers, according to IBM.

For example, spending on analytics and business intelligence software--which used to be the domain of much larger enterprises--is on the rise among midsize businesses. According to IBM's survey, 70 percent of midsize companies are actively pursuing analytics and BI software. The data suggests that companies want to know their customers better, and they will use analytics and BI software to do it.

Similarly, about 67 percent of midsize outfits are planning or currently implementing cloud-based technologies. Cloud computing, with its heavy emphasis on cost savings, is not as great an indicator as the adoption of analytics that a company is willing to spend money on potentially risky but innovative technologies. But to the extent that cloud computing can improve customer service and make its adopter more nimble, it brings some elements of innovation to the customer. (Or perhaps cloud computing is only as innovative as it is risky to the adopter, but that's a discussion for another day.)

The gist of it is this: IBM detected a palpable shift from making IT systems more cost efficient in 2009 to making them more innovative today. Instead of looking at IT as a necessary cost of doing business, midsize companies are once again viewing IT as a way to boost revenues and profits.

"When we spoke to midsize firms 18 months ago, most were focused on reducing costs and improving efficiencies," says Andy Monshaw, general manager of IBM's midmarket division, in a statement accompanying the stats. "Today, the conversation is about how to grow, improve decision making and better connect with customers. It's a much different environment."

Meanwhile, it looks like IT salaries are back on the upswing after a period of decline.

Data from Janco Associate's 2011 Salary Survey of about 1,000 IT workers shows that compensation rose slightly--very slightly--for both IT executives and the rank and file. Total compensation for executives in enterprises and midsize companies rose less than 1 percent, to $140,960 for enterprise CIOs, and $123,378 for midsize CIOs. Overall compensation for all IT professionals increased about $270 per year, to $77,873.

This puts total compensation for IT workers back where it was in January 2008, according to Janco. While this news is not worth jumping up on your chair and screaming with joy, it sure beats a sharp stick in the eye and it indicates things are (ever so slowly) getting back on track for IT workers--for those who still have jobs, anyway.

Janco, which has been doing annual IT salary surveys since 1996, noticed an interesting change in the nature of bonuses. The Park City, Utah, company found there was a 5 percent increase in employees receiving enterprise-based performance bonuses, which corresponded with a 5 percent decrease in employees getting personal performance bonuses.

In other words, corporate generosity will only flow when times are good, and not as a reward for an employee who performs well. "This shift in bonuses reflects managements' desires for revenue improvements and push to motivate employees to improve the company's bottom line over and above everything else," states Janco CEO Victor Janulaitis in a press release.

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