IT spending remains flat
New spending priorities
CAPEX a bright spot
A recent global survey conducted by Gartner Researchof more than 500 Chief Information Officers from June to August 2010 found overall IT spending is essentially flat as companies face continued economic challenges.
IT budgets remain tight and CIOs report having to move resources around to meet increasing operational and infrastructure upgrades in the face of stressed budget and economic environment.
And there appears to be no let up.
As the economic challenges continue, CIOs expect to face more transition with changes in enterprise strategies and the introduction of lightweight technologies such as cloud computing and software as a service.
The CIOs who took part in the survey reported that on a weighted global average, IT spending would grow 1.1 percent in 2010.
This projection remains consistent with Gartner’s survey of nearly 1,600 CIOs in the fourth quarter of 2009 when CIOs reported IT budgets would increase on average 1.3 percent.
Overall IT spending is essentially flat after a reported average 8.1 percent drop in actual spending in 2009.
The economic conditions are changing CIO spending priorities
CIOs reported trading operating expense to pay for capital expenditures as revised plans for 2010 call for an increase capital spending by 3 percent and a 1 percent decrease in operating budgets.
This represents a “dollar for dollar” exchange as firms spend an average of $3 of operating expense for every dollar of capital expense.
CAPEX is a bright spot
CIOs felt they could no longer delay infrastructure upgrades and other capital investments, and they funded them at the expense of operating budgets.
The strength of commercial and government IT capital spending could wane as organizations complete their upgrade plans and do not have funding for sustained spending. This is particularly the case as CIOs are funding Capex with reductions in operating budgets.
"CIOs report having to move resources around to meet increasing operational and infrastructure upgrades in the face of tight budget and economic environment."
CIOs from industries hardest hit by the global financial crisis in 2008/2009 showed signs of rebounding in the first half of 2010.
Consumer/retail, financial servicesand manufacturingCIOs responding to the survey indicated modest growth in IT budgets during the first half of the year.
Industries such as Utilities and Healthcare are going through deep structural change and continue to invest in IT regardless of economic outlook. Government and education industry CIOs reported budget declines in the face of tight economic conditions.
Budget plans varied by company size.
Smaller firms, those with IT budgets of less than $50 million USD, report continued strong budget increases with an average of 20 percent. However these gains were more than offset by the scale of IT budget decreases of larger companies. This continues a trend we have observed since 2008 as larger IT organizations started reducing their resource requirements through consolidation, waste elimination and other measures. CIOs of the largest firms indicate that further budget opportunities remain.
Editor's Note:Mr. McDonald will appear on CNBC's Squawk on the Street, Wednesday, September 8 at 9:50am/et.
Mark McDonald, Ph.D., is a group vice president and head of research in Gartner Executive Programs.
He is responsible for the research agenda focused exclusively on CIOs and the business of information technology.
Mr. McDonald is the lead author of research in the areas of CIO credibility, the business use of advanced technologies, enterprise architecture and business process transformation.
Gartner, Inc. is the world’s leading information technology research and advisory company.