Corporate IT Spending Inches Up, New Study Shows

June, 2012

Irvine, Calif.––IT operational budgets across the U.S. and Canada are rising 2.2% at the median this year, a rate that is a slight improvement over the 2.0% growth in 2011. However, this modest improvement is accompanied by a decline in confidence among CIOs in their budget plans, according to the recently released IT benchmarking study from Computer Economics Inc. 

“The modest recovery in IT spending we saw last year is continuing, but it is far from robust,” said Frank Scavo, president of the Irvine, Calif.-based IT research firm. “Hiring remains weak and smaller companies are still not showing as much strength as we would expect in an economic recovery.”

The annual survey of IT spending and staffing plans for more than 200 IT organizations in North America found that, while IT operational spending is increasing, 31% of the IT organizations anticipate having to reduce spending plans before year’s end. This negative indicator is up from 23% who forecast budget cuts at this time last year. The decline in confidence signals that the IT spending recovery is losing momentum.

The study also finds that IT operational spending is improving at a faster rate in larger companies than smaller companies, and process manufacturers and wholesale distributors are showing healthier growth than most other sectors. “The IT spending recovery appears to be stuck in the early stage,” Scavo said. “If we saw more growth in the budgets of smaller organizations, we would have more confidence that the rate of improvement was accelerating.”

IT organizations are budgeting a median 2.0% improvement in capital spending this year, which is a slight improvement over the 1.8% rise in the prior year. IT organizations are placing the highest priority on upgrading existing systems and improving cost efficiency, which are taking precedence over developing new systems and upgrading infrastructure.

Hiring is showing some improvement. About 40% of all IT organizations plan to increase IT staff headcount this year. Sectors showing the most improvement include healthcare providers, wholesale distribution, and high tech. Across all sectors, however, the median IT staff headcount remains unchanged in 2012 over 2011.

The Computer Economics IT Spending and Staffing Benchmarks 2012/2013 study is based on a survey of more than 200 IT executives conducted in the first half of 2012. It provides composite statistics of IT spending and staffing data, a segmentation of the same statistics by organization size, and individual chapters for 20 sectors and subsectors. A description of the study’s content, design, demographics, and methodology can be found in the free executive summary.

About the Study
The Computer Economics IT Spending and Staffing Benchmarks study, now in its 23rd year of publication, provides key metrics to assist organizations in the financial and strategic management of information technology. Each year, we conduct an in-depth survey of IT executives in the U.S. and Canada to gather detailed metrics concerning their IT spending and staffing levels, use of outsourcing, and adoption of IT management best practices. The respondents include executives in the public and private sectors. By repeating this survey each year, Computer Economics is in a unique position to identify long-term trends and understand the challenges of managing IT organizations.