Cloud computing and virtualisation will help UK CIOs cope with a drop of almost seven per cent in IT budgets in 2011, according to a survey of tech chiefs worldwide.
The UK IT spending forecast compares unfavourably with the rest of the world, the Gartner 2011 CIO Agenda survey of 2,014 CIOs found. Globally, tech budgets are expected to rise by an average of one per cent.
To cope with declining or flat IT budgets, CIOs told Gartner they are planning to increase their use of cloud services - automated and scalable IT software, hardware or platform services delivered via the internet - and virtualisation technology, which allows IT resources to be pooled and efficiently shared.
Currently, just three per cent of organisations approached by Gartner use cloud-based software as a service (SaaS) to deliver more than half their IT services, but within four years that figure is expected to rise to nearly half, 43 per cent, rising to 74 per cent by 2020.
While historically the cost of running the IT department swallowed up an average of 66 per cent of CIO budgets, the report predicts that technologies such as cloud computing will reduce infrastructure and operational IT costs by up to 50 per cent.
Dave Aron, distinguished analyst for CIO research at Gartner, said cloud services will add to savings already being generated by virtualisation, offsetting budget reductions and freeing up cash to reinvest in new IT projects.
"Virtualisation is delivering savings across the board," he said.
"CIOs globally and in the UK are more and more being allowed to reinvest those savings in value-adding IT, so [budget drops] will not have as much an effect as one might expect.
"There is now an opportunity to move things into the cloud to get much better managed costs."
Generating and reinvesting savings will be vital to maintaining the current levels of IT service, as Gartner does not see CIO IT budgets recovering to their 2008 peak until 2014.
Aron said: "There are all sorts of these new digital capabilities to engage customers and differentiate the business, and all these new technology infrastructures like cloud.
"If CIOs don't pick their heads up and get engaged on this stuff, and just continue to tune the IT beast in the business, they are going to get left behind."
As well as finding new ways to cut costs, Aron said it was vital that the IT department invests in projects that make their business stand out from the competition.
Aron said organisations could realise savings and competitive advantages by offering more social media channels to customers, with the report finding that adoption of such technology by organisations remained "very low".
He cited the service offered by T-shirt company Threadless, where customers can design T-shirts and vote on their favourite designs, as an example of an innovative use of social media by business.
When it came to using IT projects to realise business objectives, more than half - 65 per cent - of the CIOs questioned said the IT department was only involved in "generic" projects, such as setting up shared-services centres in multinational companies.
The top business objective that CIOs wanted to see realised by tech projects was increasing enterprise growth - followed by attracting and retaining new customers, reducing cost and creating new products and services.
A separate report, the IT Trends in local public services 2010/11 survey by Socitm - the professional association for public sector IT managers, found that local authority IT budgets shrank less than expected between 2009 and 2010, decreasing 2.6 per cent.
About 1,000 public sector staff lost their jobs in 2010, the report estimates, as public authorities responded to budget pressures.
Nick Heath is chief reporter for TechRepublic. He writes about the technology that IT decision makers need to know about, and the latest happenings in the European tech scene.