IT Organizations Put Capital Spending on Hold

January, 2013

IT operational budgets will rise 2.5% at the median in North America in 2013, according to Computer Economics, Irvine, Calif., but worries that the fragile U.S. recovery could be derailed has caused many organizations to put IT capital spending plans on hold. This finding and others are outlined in the firm’s latest research report, Outlook for IT Spending and Staffing in 2013.

The IT research firm surveyed IT organizations during the fourth quarter about their spending and staffing plans in the year ahead and found that IT executives were anticipating another year of slow growth in IT operational spending.

Underlying the forecast is the U.S. budget deficit negotiations, recession in Europe, and uncertainty about the Chinese economy. Because of the lack of clarity, IT executives are planning for a scant 0.3% rise at the median in IT capital spending.

“The forecast is in stark contrast to very positive growth in IT capital budgets and hiring that occurred at the end of last year,” said John Longwell, vice president of research for Computer Economics. “That momentum seems to have stalled moving into the New Year.”

Many organizations have been turning to outsourcing to restrain headcount and that strategy is likely to continue. If the economy does not stall, however, capital spending budgets could be revised upward and IT organizations could take on more permanent workers. On the other hand, if the U.S. economic recovery weakens, there remains room for budget reductions.

Our top-line forecasts for North America in 2013:

  • IT operational budgets will rise 2.5% at the median. IT executives will continue to examine outsourcing alternatives as a means of improving agility and lowering their cost structure. Cloud computing service providers will be the primary beneficiaries, but desktop support and help desk outsourcing could also rise.
  • IT capital budgets will remain flat, showing little or no growth at the median. Most spending will favor software over hardware upgrades.
  • IT staff headcount will remain largely unchanged. While many IT organizations plan to do some hiring, overall job growth will be muted. Most IT workers will receive pay raises in the 2.0% to 3.0% range.

This annual Computer Economics outlook study provides guidance for IT executives as they firm up spending plans for the coming year. It is also useful for IT product and service providers in forecasting economic trends for IT spending for 2013. The report is based on a fourth-quarter in-depth survey of 162 organizations worldwide, including about 86 IT organizations in North America. The study assesses the spending and staffing actions IT managers are currently taking, the budget actions they took over the past year, and what they are including in their budget plans for the year ahead. Our outlook report provides 2013 forecasts for IT operational spending, IT capital spending, and IT hiring by organization size. We also forecast pay raises for IT workers.

A high level comparison of North American IT spending trends with Europe and Asia is also included.