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BEIJING, PRC, May 19, 2014 View All Press Releases

CIOs in China Expect IT Budget Growth of 13 Percent in 2014, According to Gartner Survey

However IT Spending by Chinese Companies Still Less Than Half of Global Counterparts

In an annual global survey of CIOs by Gartner Executive Programs, CIOs in China reveal a higher business focus on growth and innovation than their global counterparts, and strong budget increases to support it.

The survey found that IT budgets in China are expected to increase by 13 percent, which is much higher than the global average of 0.2 percent. However, the rise comes from a low base. Gartner research shows IT budgets in Chinese enterprises are significantly lower than global averages, with Chinese IT spending typically accounting for only 1.5 percent of a company’s revenue, compared to 3.5 percent globally. Even with a 13 percent increase, IT spending in China is still less than half what the rest of the world is spending.

In addition, at least 45 percent of IT spending is outside of IT organizations, compared with just 26 percent internationally. This shows Chinese CIOs have less influence on the business than their global peers. Moving forward, this could see IT integration, information security, and business agility suffering as a result.

The survey also found that 38.8 percent of Chinese enterprises already have roles to lead digital initiatives in place, compared with just 6.6 percent globally.

Despite this number being five times higher than the global average, Gartner found anecdotal evidence that suggests few are “strategic CDOs” who advise senior business leadership on how to respond to the rapidly digitalising economy. Chinese enterprises are more likely to view the digital leader ship role as the head of e-commerce instead of the all-encompassing strategist.

Gartner research director Owen Chen believes Chinese enterprises need to clearly understand the role of digital leadership and investigate the possibility of having CDO roles in addition to CIO roles.

“The term ‘digital’ refers to a deeper opportunity to transform the business based on the broad array of information and technology available, rather than simply referring to online sales and services,” said Mr. Chen.

Technology focus

Globally and in China, the technology focus of CIOs is split between two important imperatives: the first to renovate the core of IT while the second revolves around a need to exploit new digital trends.

Table 1: Technology Spending Focus: China vs. Global

China

Global

1. Cloud

1. BI/Analytics

2. Infrastructure and Data Centre

2. Infrastructure and Data Centre

3. Mobile

3. Mobile

4. ERP

4. ERP

5. BI/Analytics

5. Cloud

6. Networking, Voice and Data Communications

6. Networking, Voice and Data Communications

7. Digitalization/Digital Marketing

7. Digitalization/Digital Marketing

8. Industry-Specific Applications

8. Security

9. Innovation and Growth

9. Industry-Specific Applications

10. Supply Chain

10. CRM

11. Security

11. Legacy Modernization

12. Social

12. Collaboration

Source: Gartner, March 2014

CIOs in China focus on cloud, infrastructure and data centres, ERP and networking, and voice and data communications to ensure basic IT functions are fit for purpose. They also focus on mobile, big data, digital marketing, and social to engage customers and employees. China has a high priority for cloud, which is probably a reflection of the drive for growth and the need to support larger transaction volumes.

Sixty-one percent of Chinese enterprises claim to have made significant cloud investments, compared to just 25 percent globally. However, Gartner believes China has not spent any more on public cloud than the rest of the world. The reason for the discrepancy is a difference in understanding of the term ‘significant investments’.

While globally the driving factor behind choosing public cloud remains agility, in China cost is a critical factor.

“CIOs need to focus more on bringing value from public cloud to the business, rather than merely seeking to use public cloud to drive down cost,” said Chen.

Attitudes towards sourcing

IT leaders in China have long embraced strategic sourcing, mixing in-house with sourcing from offshore captive units, contractors and fully-fledged outsourcers. The survey data shows 11 percent of Chinese enterprises were mainly or wholly insourced, 7 percent were mainly or wholly outsourced, while 83 percent used mixed sourcing, a significantly higher number than the global average of 63 percent.  

However, anecdotal evidence suggests Chinese CIOs have historically approached sourcing from a tactical perspective and would benefit from a more dedicated sourcing strategy. 

Gartner recommends IT leaders in China make sourcing decisions based on a clear, strategic basis, rather than tactically on a case-by-case basis.

Building bimodal capability

To address the age-old tension between needing to provide slow and steady IT (for critical systems), while responding "at the speed of digital" (for innovative, differentiating opportunities), digital-savvy IT leaders are resorting to splitting their IT organizations in two: conventional and nonlinear teams.

In China, 62 percent of enterprises have adopted this model (compared to just 45 percent worldwide). Based on Gartner’s research, business management in China is more demanding, meaning its requirements need to be filled much faster than in other markets. On the other hand, Chinese CIOs must ensure they are not simply running unsustainably fast nonlinear teams but instead, must put in place appropriate expectations, measures, culture and talent.

“Develop fully bimodal capability, and avoid trying to run faster and faster as a response to the need for speed in China,” said Mr. Chen.

More information is available in the report ‘2014 CIO Agenda: A China Perspective’, available on Gartner’s web site at: http://www.gartner.com/doc/2687520

About the Gartner Executive Programs CIO Agenda Survey

Every year, Gartner surveys the membership of its Executive Programs to expose key priorities, opportunities and threats facing its members across the globe. Of the 2,339 respondents to the 2014 Gartner CIO Agenda Survey, 81 came from China.

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