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IT spending in 2015 moving to the cloud

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IT spending in 2015 is down for capital equipment but up for cloud applications. Photo: GotCredit/Flickr Creative Commons.

Yes, IT spending in 2015 is all about the cloud. Businesses are budgeting more than ever to power their information technology operations while, at the same time cutting back on capital expenditures for IT, according to new research.

That means companies are buying fewer servers for their own data centers and fewer licenses for software downloaded to hard drives, while those same companies spending more money on monthly fees for outsourced data services and software as a service in the cloud.

Frank Scavo, president of Computer Economics, which just put out its latest annual study, IT Spending and Staffing Benchmarks for 2015/2016, doesn’t think that lagging capital spending for IT is just a result of a slow economy. Scavo thinks it’s a fundamental change from in-house to outsourced IT spending in 2015:

There is a notable shift from IT capital spending to operational spending, which is exactly what we would expect as companies move from software licenses implemented on premises to cloud subscriptions. Economic uncertainty is also at play, but we think the shift to cloud computing is the greater factor.

This year, more than half of corporate IT departments are increasing spending on the cloud while a mere 10% of companies are investing in larger data center infrastructure, according to the study, which concludes that cloud applications are making IT more efficient.

“Cloud computing will deliver real value to enterprises in lower cost of IT and higher service levels. The data [are] indicating that the cost of IT is declining on a per-user basis and as a percentage of revenue.”

CFOs need to lead, not follow

As companies move more IT functions to the cloud, CFOs need to be involved, advises PriceWaterhouseCoopers, to both evaluate opportunities to increase profits and to consider the risks of exposing services in the cloud.

But lack of technical knowledge may prevent CFOs from digging down into their company’s plans for the cloud. To help, in a white paper on cloud computing and the CFO, PwC empowers financial officers with five questions to ask their IT manager or CIO:

How do the organization’s short- and long-term cloud computing strategies reduce IT and business costs while helping drive new opportunities?

How does the cost structure of our IT compare with that of public clouds? Have you analyzed the two approaches?

How is our security group approaching the use of both private and public cloud models?

If we have started implementing cloud, what are the detailed plans for migration and implementation? Is internal audit involved?

What is the strategy to prevent proliferation of shadow IT among business units? How are we monitoring acquisition of technology?

PwC concludes that financial officers should not just leave the transition to the cloud in the hands of their colleagues in IT. Instead, a CFO must be prepared to actively lead the IT spending in 2015 to the cloud to make sure that big changes in technology have a positive effect on finance. [/av_textblock]