IT Spending for Services a Mixed Bag in 2010

Nov 13, 2009

CIO Update Staff

Responding to a still sluggish economy, IT executives in North America and Europe are taking a variety of measures to get more value for the money spent on IT services, according to the latest enterprise IT services survey by Forrester.

According to the survey, IT contractors and consultants will see the deepest decreases in spending for their services, while systems integration and outsourcing services will have the most increases. The survey of more than 900 IT executives and technology decision-makers in Canada, France, Germany, the UK, and the US offers insights into the decisions large companies are making with regard to their IT services and outsourcing. Unlike the last recession from 2001 to 2002 when outsourcing and offshoring experienced growth from firms seeking to reduce internal IT costs, the spending picture for IT services this time around is much more mixed.

When asked about changes they expect to see in their organization's total spending on IT services, 30% of executives said they plan to increase spending on systems integration and project work, 26% plan increases in applications outsourcing, and 25% expect to increase spending on infrastructure outsourcing. However, 41% of executives expect to reduce spending on contractors, and 34 % foresee lower spending on IT consulting.

"As the global economic downturn puts pressure on IT services spending, firms are taking a range of actions to deal with the cuts," said John McCarthy, vice president and principal analyst at Forrester, in a statement. "The pressure to reduce IT spending is going to continue well into 2010. The data shows no quick turnaround. It's going to be a tough year for services firms as clients increasingly ask them to justify the ROI for IT projects and provide more value for a lower price."

Other key highlights of the survey include:

Infrastructure outsourcing priorities - When asked what infrastructure services their firm is currently outsourcing or plans to outsource to a third-party company in the next 12 months, survey respondents placed convergent telecommunication/network management services and data center management services at the top of the list.

Application outsourcing priorities - Managed hosting services lead the list of application outsourcing priorities, with 44 % of respondents currently outsourcing and six percent (6%) planning to use managed hosting services in the next 12 months. In addition, the outsourcing of packaged applications maintenance and support services increased from 27% in 2008 to 38% in 2009, and another seven percent (7%) of respondents are planning to do so in the next 12 months.

Systems integration priorities - Integration work installing or upgrading packaged applications remains a top activity, with 42% of respondents saying they already have a project under way or will hire a consultant for this in the next 12 months. Custom application design and development follows, with 38% of firms doing a project or hiring a consultant to do so in the next 12 months.

IT consulting priorities - Forty-three percent (43%) of respondents have a security assessment project either already under way or one that will commence in the next year. Infrastructure virtualization and automation programs follow, with 32 % of respondents hiring a consultant in the next 12 months or already having a project under way.

More information about Forrester's Business Data Services and custom data analyses for B2B Market Research professionals is available at A top-line overview of the full survey responses is available in the report The State Of Enterprise IT Services: 2009

About Forrester

Forrester is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 20 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs.

Tags: IT spending, outsourcing, recession, consultants, 2010,

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