Economy boosts CIO budgets, as A.I. helps IBM, says Morgan Stanley

Economy boosts CIO budgets, as A.I. helps IBM, says Morgan Stanley

Security is a top priority, cloud is hurting hardware, and desktops are near the bottom of spending priorities

CIOs in the U.S. and Europe are increasing their IT budgets thanks to an uptick in optimism, said Morgan Stanley in a new report.

IT budgets are expected to grow 4.5% this year, "a tick above the historical average," according to a survey 100 CIOs of large firms in the U.S. and Europe.

The top spending priorities include cloud computing, security software, analytics tools, networking equipment and ERP and CRM applications, Morgan Stanley said in its report, "CIO Survey: 2017 IT Budgets Improve on US Strength."

Most hardware categories, including servers, printers and desktops, ranked near the bottom of the budget priority list as spending shifts to the cloud.

IBM, which has seen ongoing revenue declines, is still having particular success with A.I., Morgan Stanley found. IBM "is gaining customer traction in growth such as security, cloud and AI/machine learning."

That should help IBM, overall, in customer contract renewals, Morgan Stanley noted. "Within artificial intelligence, IBM outpaces Google, Amazon, and Microsoft in both market and mindshare."

The investment bank surveyed 100 CIOs, 75 in the U.S. and 25 in Europe, at firms across the industrial and services spectrum ranging in size from $500 million in revenue to more than $20 billion.

The survey found an increase in the pace of cloud adoption. Data is "suggesting 22% of application workloads will migrate to public cloud by the end of 2017 and 49% by the end of 2020, up from 19% today," it reported.

Best positioned for the shift to cloud services are Amazon and Microsoft.

If the economy takes a downturn, the technologies most susceptible to spending cuts are desktop virtualization, infrastructure hardware and HR software, the report found.

Other surveys have supported some of Morgan Stanley's broader findings, especially in regard to cloud. The interest in A.I. may be getting help by a shift to a more ill-defined category of spending, "innovation," according to a recent CIO survey by the Society of Information Management.

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