CIO Agenda, part 2: Boardrooms demand more from IT

What's in store for IT over the next 12 months? To find out, we polled members of silicon.com's CIO Jury about their outlook and key concerns for 2006. The results make up our second annual CIO Agenda survey. Today Andy McCue takes a reading on how IT budgets are shaping up for next year and what CIOs plan to do with their hard-fought cash.

Next year looks like it'll be another 12 months of cutting costs and getting more out of existing systems for CIOs as overall IT budgets continue to be squeezed and boardrooms demand further efficiency gains and tangible value from technology investments.

That is one of the key findings of silicon.com's second annual end-of-year CIO Agenda survey, which polled 12 members of our CIO Jury IT user panel on their IT budgets, priorities for 2006 and the ongoing evolution of the CIO role.

On IT spend three-quarters of respondents said they expect their headline IT budget figure - expressed as a percentage of company revenue - to fall or stay flat in 2006. This is despite the fact that almost half are already given less than two per cent of their company's revenue and even those who expect their IT budget to rise predict only marginal increases in 2006.

But this doesn't tell the whole story and while operational expenditure - keeping the lights on - continues to stay flat or fall, half of CIO Agenda respondents predict a significant increase in the proportion of their IT budget that will be devoted to new technology investment in 2006.

The average level of new technology spend over the past 12 months has been in the '15 to 25 per cent of overall IT budget' range but some CIOs expect big increases on that. Davesh Shukla, IT director at London City Airport, expects the 40 per cent of his budget already devoted to new IT investment to more than double in 2006 while Andy Pepper, IT director at Tetley, is looking at a 15 per cent increase that will mean more than a third of his IT budget will be devoted to new investment in 2006.

This is a notable change from last year's survey when two-thirds said they expected the IT investment share of the budget to fall or remain the same in 2005.

That money is likely to be spent on major infrastructure projects such as new billing systems, consolidation, voice over IP and expanding the functionality of SAP systems with the overall emphasis on driving cost out of the business and improving productivity.

John Hemingway, CIO at Sheffield Hallam University, will be moving the institution's applications infrastructure towards a service oriented architecture in 2006 while Sean Powley, head of IS strategy at the London Borough of Barnet will completely reposition and re-engineer the IS service around a shared services centre and new devolution arrangements.

But the emphasis isn't just on cutting costs. All the CIOs said they are under more pressure than ever to not only deliver value for money but demonstrate it too.

Gavin Whatrup, group IT director at advertising agency Delaney Lund Knox Warren & Partners, said: "My priority is acquiring more budget to introduce applications that improve the productivity or 'product' of each business unit."

Read more of silicon.com's exclusive CIO Agenda series: part one on the 2006 IT shopping list and part three on the evolution of the CIO role.