Back to the back office? Economy shifts CIO attention away from new projects

Dive Brief:

As investment in revenue-driving business technology initiatives loses some appeal in the contracting economy, businesses are expected to lean in to investment in back-office technology to cut operating costs, according to a Forrester report. Several years from now, CIOs looking back "will probably mark 2018 as the best year for tech budgets over that period."
In 2019, almost three-quarters of global tech purchases, around $2.6 trillion, is expected to go to the back office for support systems such as core software, risk management and systems for finance or HR. The remaining $963 billion is expected to go to business technologies, such as customer analytics, CRM or product lifecycle management, according to Forrester.
Forrester also divided the $3.5 trillion in global tech spend between new projects versus existing systems. More than three-quarters of total spend, around $2.7 trillion, is projected for the maintenance and operation of the organization, systems and equipment (MOOSE); new project spending is expected to account for $864 billion. Within MOOSE spending, more than $2.2 trillion is expected for back-office technology and $461 billion for business technology initiatives, according to the report.

Dive Insight:

Changes in spending correlate with economic and business prospects, with a slowing economy leading businesses to reduce new project spending, according to Forrester.

A slowing economy is beginning to affect growth projections and business outlooks. Last year, geopolitical tensions, such as the U.S.-China trade conflict, caused short-term volatility in global and technology-specific markets, according to IDC.

Nevertheless, the U.S. is still one of the fastest growing technology markets, and "explosive growth" in cloud infrastructure providers is driving up tech spending overall.

Increased spending in business technology maintenance and operations, especially as a result of rising cloud adoption, will continue to drive up overall maintenance and operations spending by more than 5% annually through 2020, according to the Forrester report.

Back office maintenance and operations spending, already a larger chunk of overall IT spending, will expand more slowly at 3.7% annually.

Many organizations are already fighting compounding technology costs. Public cloud spend is expected to increase by almost one-quarter in 2019, with businesses struggling on governance and cost optimization strategies. Half of enterprises and 22% of SMBs spend more than $1.2 million on the cloud, according to a Flexera report.

Greater emphasis on the back office could also refocus the perception of CIOs and IT in a business. Many technology teams struggle to throw off the back-office perception, and while CIOs have become "trusted business partners," they still face challenges elevating their teams in the business.