Last week I posted a question in the "CIO Conversations" forum on this site. The question was:

It's often said that the biggest IT challenges are not technical but are related to people issues (communication, leadership, management, collaboration, etc.). Do you agree? What was your biggest IT challenge and how did you deal with it?

A response from CXO Art Sedighi said:

"In the current time and environment, the biggest challenge is [to] convince upper management to open up their wallets again after almost 3 years. The IT staff has been pulling things together with nothing short of band-aids since 2008, and things are about [to] fall apart. All management sees is the fact that spending was down, and they survived."

That post struck a chord with me, especially since I just finished reading an article in the summer issue of MIT Sloan Management Review called "Where the Money Isn't."  The point of the article is that while most executives recognize that IT innovation is important, it's not reflected in IT budgets. According to a study by A.T. Kearney in 2009, 84% of nearly 150 business executives and board members said that over the past five years IT innovation was becoming more important to the company's top executives but, in reality, their IT budgets didn't reflect that fact. When asked what percentage of their IT budget went to innovation, the responses for four different years were:

1999 - 30%

2002 - 28%

2005 - 20%

2009 - 14%

Not a very encouraging trend. The biggest chunk of the IT budget went to improving operations (45%)-not a surprise given today's focus on day-to-day operations and lowering costs-while 41% went toward business enablement/process improvement. Study respondents told the researchers that ideally the numbers should be closer to 35% for operations and 24% for innovation.

The other distressing fact from the IT Innovation and Effectiveness Study was the poor perception of many IT departments by executives. Many felt their IT departments were performing a "keep-the-lights-on" function and that innovative ideas came from other departments. Some executives said they even took their most innovation projects "off the grid," meaning they ran them without the support of the IT department.

Executives indicated there was a need for a portfolio approach (not just individual IT projects), along with stronger leadership and more effective execution. It's the same old refrain we always hear: CIOs need to be business leaders who can communicate how IT can be used for competitive advantage. How does your company stack up? Has your company been more successful at driving innovation and does your budget reflect that?