Tech Sector Takes a Turn for the Better, Says Annual CIO Survey

Down in the dumps about the state of IT? Cheer up! While the high-tech sector may lack the pizzazz it once had, things are beginning to improve, according to CIO magazine’s annual State of the CIO survey. The good news is that top management no longer considers IT a mere support function. Sixty-nine percent of the 544 senior IT execs surveyed think the information technology division should play a proactive role in identifying and applying technology to take advantage of business opportunities. Last year, just 42% of survey respondents took this view. In keeping with businesses’ growing focus on generating maximum ROI, technology has gained greater visibility in the finance suite. In 2003, 47% of CIOs reported to the chief executive officer; this year, only 40% do so. More CIOs—30% versus last year’s 22%—now report directly to the chief financial officer.

Chief IT execs are also spending more time on higher-level activities. Strategic planning, vendor management, learning about technologies, and making strategic systems decisions occupy most of their time this year; in 2003, they spent the majority of their time on communicating with business executives, managing staff, and developing leadership.

IT headcount is increasing, albeit slowly. Among the respondents, 48% said they had added staff in the past year; 42% reported that headcount remained the same. But there’s a downside to the positive hiring trend. Although CIOs certainly aren’t living in poverty, their average compensation is down 3% this year, from $186,000 to $180,000. This parallels a drop in the IT budget as a percentage of revenue: Last year, that number stood at 6.3%, but has fallen to 5.6% in the 2004 survey. For 62% of the respondents, IT spending is centrally controlled by the IT organization.

As for outsourcing, everyone’s doing it. Eighty percent of the CIOs surveyed outsource part of their IT labor, farming out about 20% of the work on average. In the past 12 months, 24% of the respondents had increased their use of outsourced labor by 21%.

When asked about their top five management priorities this year, CIOs say they’ll focus on increasing business efficiency through IT-enabled process improvement, aligning IT and business goals, improving internal customer satisfaction, creating competitive advantage through IT, and controlling IT costs. On the tech side, they plan to emphasize system and process integration, data security, external customer relationship management, and redesign and rationalization of the IT architecture.

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