How CIOs in Southeast Asia are managing IT budgets

As resources get tighter and costs continue to sprawl, just how does today’s CIO keep a handle on their IT budget?

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As the global business landscape continues to face growing uncertainty, executives across all departments are increasingly being faced with tightening budgets and expanding remits. No one knows this better than the CIO, responsible for the ever-sprawling IT budget that houses one of the most expensive outgoings: Digital security.

Whilst ensuring that everything is properly funded for the entire fiscal year can sometimes feel like you’re swimming against the tide, it’s not all bad news. Last year, CIOs in Southeast Asia reported modest growths in their IT budgets, allowing them to keep pace with IT leaders around the globe and limit the number of financial compromises they have to make.

However, now is not the time to become complacent. Despite this small spending increase, there are still a number of challenges CIOs face when it comes to prioritising what they put their hard-fought allowance towards.

So, in light of all this, just how does the modern CIO in the ASEAN region manage their IT budget?

Why is budgeting properly so important?

From a young age, we’re all taught the importance of managing our money properly. Be it the pocket money we’re given as a child or ensuring we have enough money left over at the end of each month to pay our bills, knowing how to budget properly is a necessary life skill.

As you can imagine, managing with the budget of an enterprise-size organisation is no easy feat. Everything from recurring expenses like employee salaries and hardware leases to one off payments such as a technological upgrade or a company-sponsored event need to be taken into account, whilst still ensuring there is something left in the pot for an unexpected emergency.

Budgeting is about more than just having enough money to ‘keep the lights on’. If your department is only just keeping itself afloat from one month to the next, you need to revisit it and work out where you’ve gone wrong and how best to re-allocate your resources.

Budgeting is also a way of allowing you to prioritise your initiatives from the outset, rather than having to justify why you suddenly need X amount of money six months down the line for a project no one else understands.

Having a plan from the outset means your also more likely to get the funds you’ve requested, as those in charge of allocating the budget can see clearly what the money will be spent on and how it will benefit the business. No one wants to take a mid-financial year gamble that might not deliver a ROI.

What are CIOs spending money on?

According to research by Gartner, CIOs throughout the Southeast Asia saw their budgets rise by around 2.2% last year. While this growth was lower than that seen by Asia-Pacific as a whole, the figures are in line with the global average and are enough to allow businesses to make smart investments that could then be translated back into profit growth; 11.5% on average.

So, what are CIOs in Southeast Asia spending these bigger budgets on? The top answer is digitisation initiatives.

Over recent years, the percentage of IT budgets earmarked for digital transformation has consistently grown, reaching an all-time high of 38% in 2018 – the global average is closer to 43%. However, there are some who don’t believe digital spending has gone far enough in the region, suggesting that at least 40% of IT budgets should be dedicated to digitisation.

It’s no secret that digital innovation has fundamentally changed the business landscape. Recent closures of long-established corporations are a stark reminder that failing to adopt this new digital-first approach could result in the end of your organisation.

Digitisation is a top business priority for the countries in the ASEAN bloc because unlike other IT investments, increased spending on digital transformation can be linked to real term revenue growth.  

Furthermore, these spending increases can also be used to further digital innovation, research and development efforts throughout the region; a priority for 7% of CIOs in Southeast Asia according to Gartner.

Public cloud services have also been tipped as another potential spending priority in the coming year however, after digitisation the biggest budget percentages are expected to go towards advanced analytics, the Internet of Things and, unsurprisingly, digital security.

All three of these areas have the potential to greatly impact the future of business, helping to further promote a digital-first approach and enabling organisations to meet changing business expectations and get ahead of their market competitors.

The relationship between the CIO and CFO

While the CIO has always been responsible for setting the IT agenda within an organisation, the role is now starting to expand beyond the purely technical. As a result, many are now being challenged to use IT strategies and solutions to drive business-wide innovation and transformation.

There is an obvious amount of fiscal responsibility that comes from divvying up the IT budget However, unless your CIO comes from financial background, they’ll need the skills and know-how of someone who does in order to fully understand the long-term financial goals of their organisation. Enter the Chief Financial Officer.

Earlier this year, Deloitte reported that globally, 28% of CIOs now report directly to the CFO – a figure that might be considered low in light of another report that states of the 500 global business executives surveyed, 96% believe that close CIO/CFO collaboration is important for business success.

However, despite the business benefits of this working relationship, traditionally there have been a number of barriers stopping this partnership from flourishing.

CIOs often report that CFOs can have limited technical knowledge and don’t understand the changing nature of their role. CFOs often regard IT as the department of sprawling costs and limited fiscal self-control.

Furthermore, this lack of communication has been directly linked to cybersecurity failings, with CIOs stopping complaints of poorly performing security systems from ever reaching the desk of CFO out of fear the Chief Financial Officer will pull the plug on something they deem to be too financially draining.

While their priorities might sometimes conflict, the success of these digital technologies relies heavily on the CIO and CFO having a collaborative and mutually beneficial relationship.

Nevertheless, the role of the CIO is not the only one that is expanding in the modern enterprise, the CFO is now routinely tasked with helping the company to foster growth strategy, acting as a catalyst for enterprise-wide change. As a result, the two roles are now more likely to overlap than ever before.