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CIOs Forecast Flat Spending Growth, but No Declines

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 […]

Written By

Jessica Davis

Nov 13, 2008

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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.

CIOs Forecast Flat Spending Growth, but No Declines

Jessica Davis

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