CIOs Forecast Flat Spending Growth, but No Declines

By Jessica Davis  |  Print this article Print


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Two new surveys of IT decision makers, CIOs and IT managers show that the spending forecast for 2009 is lower than usual but not dramatically lower. That means it's time for vendors and IT solution providers to plump up marketing and sales initiatives to ensure they get their piece of the smaller 2009 pie.

CIOs are forecasting lower spending for 2009 but not dramatically lower. That's news that should cause both vendors and IT solution providers to breathe a sigh of relief and then look at how to pump up their marketing and sales to answer sales objections to ensure they get their piece of the smaller 2009 IT budget pie.
While IT organizations increased cost-cutting in the third quarter of this year, going into 2009 most are not expecting to make big cuts in either IT operational spending or staffing levels, according to a survey of 159 North American IT organizations, conducted by Computer Economics, an IT research and advisory firm in Irvine, Calif.

Meanwhile, an October CIO survey conducted by Bernstein Research forecasts IT spending growth in 2009 of 0 percent to 3 percent, down from the typical levels of 3 percent to 5 percent. While author A.M. Sacconaghi Jr., a senior analyst at the firm, noted that that the levels were the lowest since his firm started the survey, the growth level remained flat to up.

The Computer Economics survey also found that one-quarter of respondents anticipated spending reductions of 3 percent, but that another one-quarter of respondents said their IT operational budgets would rise by at least 5 percent. And the survey indicated that at the median, IT organizations are forecasting flat spending growth.

Staffing levels looked stable to slightly up, according to the survey with several companies forecasting no change in headcount and a few forecasting a 5 percent growth in staffing levels. That is probably due to the conservative approach that companies have already taken in their IT staffing.

In terms of spending, 35 percent of IT organizations looked to reduce expenses between August and October of 2008, compared to just 11 percent that increased their IT spending plans during the same period.

The most frequently cited cost reductions taken over the last three months included cutting travel expenses at 55 percent, delaying the start of major projects at 44 percent and not filling open positions at 40 percent.

Other cost reduction measures included the following:

  • Deferring equipment upgrades, 35 percent
  • Cutting contractors and temporary workers, 33 percent
  • Cutting back on IT training, 26 percent
  • Renegotiating vendor contracts, 26 percent
  • Cutting meals/entertainment, 24 percent
  • Cutting planned pay increases, 17 percent
  • Cutting IT staff, 17 percent
  • Canceling major projects, 16 percent
  • Investigating outsourcing/offshoring, 15 percent
  • Stretching out vendor payments, 11 percent
  • Cutting IT staff hours, 4 percent
  • Canceling software maintenance, 3 percent
  • Canceling hardware maintenance, 3 percent.

Computer Economics noted that 16 percent of the respondents said they had taken no action to cut IT spending in response to economic conditions.

The firm also noted that nearly 37 percent of companies reported increasing staffing levels over the last 12 months while only 28 percent said they reduced headcount. Rather, companies have been leaving positions unfilled and cutting back on contractors.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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