A new report on IT spending trends for the coming year suggests there is a significant opportunity for managed service providers (MSPs) to help organizations get a better handle on where and how IT budgets are being allocated.

The survey of 303 IT executives from organizations with more than 2,000 employees (published this week by Flexera, a provider of tools for managing IT spending) finds that on average these organizations are allocating 8.2 percent of the revenue they generate to IT budgets. The survey also shows 56 percent of respondents plan to increase IT spending in the next year, versus 20 percent planning to decrease IT spending. The survey notes that 26 percent of all IT spending is now controlled by line of business units within those organizations.

The challenge is the survey finds roughly 12 percent of that spending is being wasted. Some organizations might be willing to live with that waste factor. However, if as much as a third (30 percent) of IT spending is being wasted, then most organizations are experiencing something of an IT financial crisis.

The primary issues organizations have with determining how much of the IT budget might be wasted in any given year is that they are often unable to collect the data in the first place (43 percent), or associate IT spending with a specific business service (61 percent), or even application (38 percent).

Not surprisingly, the biggest challenges identified with managing IT budgets are ensuring the IT organization is efficient (89 percent and dependencies on too many manual processes (86 percent).

Transition in IT spending

In the meantime, the top three drivers of IT spending are digital transformation, cybersecurity, and the shift to cloud. In fact, the survey notes cloud services, including software as a service (SaaS) applications, infrastructure as a service (IaaS) platforms, and platform as a service (PaaS) environments, now consumes a larger percentage of the budget (25 percent) than on-premises software (22 percent).

As part of that transition, 65 percent of respondents said that within the coming year they plan to reduce the number of data centers they manage next year, with a third saying that reduction will be significant. A total of 40 percent of respondents have six or more data centers.

More than 80 percent plan to increase SaaS and IaaS/PaaS spend in the next year, with 32 percent of workloads already in the cloud (SaaS, IaaS, or PaaS). Respondents, on average, expect that number to increase to 43 percent in the coming year.

In terms of how IT budgets are allocated, the survey identifies the most heavily employed used technology vendors as Microsoft, VMware, SAP, ServiceNow, and Amazon Web Services (AWS) and Oracle tied for fifth. A full 65 percent of respondents expect to increase their use of AWS in the next year, while 30 percent plan to decrease their use of Oracle in the next year.

It’s apparent that a lack of visibility into return on investment (ROI) in IT is not hampering additional investments. However, there’s a strong desire to understand how those investments benefit the business. Given their unique monitoring capabilities, most MSPs are in a much better position to provide that ROI than many of the internal IT teams that claim to be more efficient. Now, MSPs must go out and prove it.

TruMethods MSP Improvement Plan

Photo:  fongbeerredhot / Shutterstock

Mike Vizard

Posted by Mike Vizard

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications including InfoWorld, eWeek, CRN, Baseline, ComputerWorld, TMCNet, and Digital Review. He currently blogs for IT Business Edge and contributes to CIOinsight, The Channel Insider, Programmableweb and Slashdot. Mike blogs about emerging cloud technology for Smarter MSP.

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