IT Budget, Capital Spending Growth Weakening, According to Computer Economics

(IRVINE, Calif.) Computer Economics’ 19th annual study on IT spending, staffing, and technology trends indicates that enterprises are putting the brakes on capital spending this year while restraining IT operational budget growth to 4.0%.

The newly released study, which the research firm has conducted annually since 1990, found that the growth rate of IT operational budgets is slowing this year, bringing to a halt a three-year upward trend. Capital spending plans, meanwhile, show no growth at all over 2007 levels.

“To be sure, IT spending and staffing levels are not generally falling, just as the U.S. economy is not yet technically in a recession,” said Frank Scavo, president of Computer Economics, an IT research and advisory firm. “Nevertheless, it does not take an outright recession for organizations to pull back on IT spending.”

The annual study is based on an in-depth survey of more than 200 IT executives who provide detailed breakdowns of their budgets, staffing, and technology adoption plans for the 2008-2009 period. The survey sample includes a roughly equal number of small, medium, and large enterprises. The respondents are also stratified according to 11 industry sectors to provide a representative sample of IT organizations across all industries.

While IT managers are generally demonstrating a cautious mood, not all sectors are equally impacted by the economic downturn. Energy/utility companies and high-tech organizations are continuing to increase their IT budgets by 8% and 7%, respectively. IT spending is slowing the most in the banking and finance, retail, and process manufacturing sectors, with growth rates of 2.5%, 2%, and 0%, respectively. In general, growth is also slowing more significantly in smaller companies than in larger organizations.

The Computer Economics IT Spending, Staffing, and Technology Trends study also produced several other major findings:

• For the second year in a row, IT spending as percentage of revenue declined from the previous year. Median IT spending this year is 1.5% of revenue, down from 1.8% in 2007.
   
• IT organizations are prioritizing managing risk and improving service levels over developing new systems. The top three priorities for IT management this year are improving IT service levels, improving disaster recovery capabilities, and increasing IT security. Developing new systems–last year’s highest priority–fell off the top-three list entirely this year.
   
• While IT managers are generally not cutting staff, they are holding the line on staff increases. Thirty-nine percent report plans to increase staff compared to 24% planning to reduce staff.
   
• Enterprises are continuing to report incremental growth in outsourcing across 11 categories tracked by the study. Application development continues to lead the way with 15% of organizations planning to increase outsourcing in that area compared to 11% planning to reduce application development outsourcing.

A free copy of the study’s executive summary is available at https://avasant.com/research/computereconomics.