Non-CIO Retail IT Spend Hits $11.6B, Nearly 20% of Total Tech Budgets

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Non-CIO Retail IT Spend Hits $11.6B, Nearly 20% of Total Tech Budgets

By Adam Blair - 08/03/2013
It's another mark of the spread of technology through every facet of the retail enterprise, particularly the increasingly IT-fueled marketing area. Of the nearly $60 billion North American retailers will spend on IT this year, $11.6 billion – nearly 20% – will come from budgets outside the purview of the CIO, according to a new study from IHL Group.

Of this total, $6.6 billion comes from the activities of the Chief Marketing Officer (CMO) and their purchases of hardware, software, SaaS and services outside the CIO budget. The CMO represents an IT spending increase of 15% over the last two years, according to the report, Black Ops IT Spend: When IT Starts Being Paid Outside the CIO. "Black Ops" is a military term referring to operations hidden from traditional command and control operations.

"The CMO is the leader in generating this spend outside of the books of the CIO," said IHL Group president Greg Buzek. "But this trend of IT spending doesn't end there and is extending to HR, operations, and many other business units, providing added opportunities for vendors and increased security and operational risks for retailers.

"This Black Ops IT spend represents money spent on IT that the CIO may never know about until something breaks and he is called in to fix it," added Buzek. "As such, it represents a budget adder to the CIO's budget."

The amount and categories of Black Ops IT Spend varies widely by retail segment, with the CMO exerting the greatest influence in the specialty hard and soft goods segments. Black Ops IT spend amounts to about 35% of the software, SaaS and third-party services spending in the retail and hospitality industries.

"Retailers are at differing levels of sophistication in terms of how much of this spend is under operational control of the IT infrastructure," said Buzek. "In some cases retailers are very mature, in that even though marketing might pay for it, IT manages it so as to protect against security and other threats. Many retailers, however, do not exert the same due diligence."

The areas with the greatest spending impact coming from business unit budgets beyond the CIO's are:

Activity                                                                                   Budget Increase
Marketing services (CRM, digital signage, mobile,
Offers, etc.)                                                                 $3.2 billion
Reporting and Analytics (social, mobile, reporting)               $336.4 million
E-Commerce (B2C, B2B, Mobile Commerce)                       $359.9 million
Core Operations (Store operations, merchandising,
Infrastructure)                                                             $7.7 billion