(IRVINE, Calif.) While IT budget-cutting is increasing in most sectors of the economy, a few industries, such as embattled banking and finance organizations, are actually increasing their IT operational spending at the median this year, according to the 20th annual Computer Economics survey of IT spending and staffing metrics.
Computer Economics, an IT research and advisory firm, reports that most IT operating budgets are showing no growth over the prior year, a stark departure from typical years when IT operational spending tends to grow with normal business expansion, and about 38% of companies are cutting their IT operational spending. Capital spending budgets are also flat at the median, with nearly half of all organizations reducing capital expenditures.
The research shows that there is not likely to be any recovery in IT spending this year and that, in fact, further budget reductions are likely to occur at many organizations by year’s end.
Certain sectors, however, are continuing to show positive growth in their 2009/2010 IT operational budgets. These sectors include banking and finance at 4.9%, healthcare providers at 4.7%, professional and technical service firms at 4.0%, and utilities and energy at 1.3%.
“It may seem counterintuitive, but in the commercial banking area it appears consolidation activity is actually driving an increase in IT spending,” said Frank Scavo, president of Computer Economics. “This is an IT-intensive sector, and it takes resources to merge systems.”
Meanwhile, sectors showing the sharpest decline in median IT operational spending includes discrete manufacturing, process manufacturing, and retail. Median IT budgets are down 5.5%, 2.5%, and 1%, respectively in those sectors.
The zero growth rate for all organization is the worst performance since 2004, when IT spending was just beginning to recover from the Internet-investment spending bust. On a positive note, however, the Computer Economics study also found that IT operational spending was declining in step with corporate revenue. As a percentage of revenue, the typical company plans to spend 1.5% of revenue on information technology this year at the median, the same as last year.
“The positive news is that this recession is not as acute in terms of IT spending as the 2001 recession, which was lead by the technology sector,” Scavo said.
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 2009-2010 period. The survey sample includes a roughly equal number of small, medium, and large enterprises. The respondents are stratified according to 12 industry sectors to provide a representative sample of IT organizations across all industries.
In related findings, the study shows:
- Only 45% of organizations are increasing IT operational spending over the prior year. This number typically falls below 50% only during recessions. The percentage of IT organization increasing spending is still ahead of the 2002 level, when only 36% increased IT spending.
- The worst may not be over. Many IT executives expect further budget reductions in the future. About 49% reported that they expect to spend less than the amount allocated in their 2009/2010 IT spending plans compared to only 9% who anticipate being able to increase their IT budgets.
- Median IT spending per user rose slightly to $7,284, from $6,924 the prior year, after adjustments for inflation. The slight increase reflects reductions in employee headcount rather than a rise in IT spending.
- Despite budget reductions, most IT managers (57.2%) find that their IT budgets are at least adequate to support their businesses.
A free copy of the executive summary for the IT Spending and Staffing Benchmarks 2009/2010 study is available on the Computer Economics website.