Organization Structure Determinants of Information Technology Budgets

The information technology (IT) budget of a firm is one of the key financial ratios in information systems (IS) management and a persistent issue of discussion on corporate boards. Yet, many firms determine their IT budgets by relying on simplistic industry benchmarks. With the goal of understanding what structural organization characteristics influence the IT budget, we study the associations of five constructs measuring outsourcing, control span, and globalization of the organization with the relative IT budget level. Our data from a multiyear cross-country survey provides evidence for IT outsourcing being related to lower, and business process outsourcing, control span increase, and globalization increase to higher IT budgets. Our findings advance prior research on IS financials, which has so far centered around technology and industry variables, by providing insight into the structural organization characteristics that co-determine IT budget levels. Implications for the broader IS literature and for practice are discussed.