IT Spending Still in Recession: Report

Jun 23, 2010

David Needle

The economy may be improving but there is still a dark cloud over IT spending, according to the annual IT Spending and Staffing Benchmarks study by Computer Economics released Wednesday.

The research firm frames the IT spending outlook for this year as in a recession based on its coverage of the field since 1990. Computer Economics makes the recession claim when less than 50 percent of those surveyed plan to increase their IT spending. For 2010, only 45 percent of the more than 200 IT executives surveyed in the first quarter of 2010 said they planned to increase IT spending.

"Remarkably, even though the general economy is improving, this is the same percentage as were increasing their budgets last year," the report stated. "Even more striking, 42 percent of organizations are actually cutting their IT operational spending this year -- a higher percentage than the 38 percent recorded last year. This is not a good outcome for those who were expecting an IT spending recovery in 2010."

Those looking for good news in the report can find comfort in a few areas.

First, the outlook for spending is far from the worst it's been in the last decade. Back in 2002 (post Y2K spending boom), only 36 percent of those surveyed said they were increasing their IT budgets. That figure increased to 44 percent in 2003 and rocketed to 65 percent in 2004 only to be trumped again in 2005 when 82 percent said they planned to increase IT spending.

"If the same pattern holds now, we should expect to see this metric break through the 50 percent threshold in 2011," said the report.

Computer Economics also noted that IT executives are far more confident this year that they will get to spend all the money they've budgeted -- only 27 percent expect their operational budgets to be cut and 15 percent expect to get the green light to spend more than they've budgeted for 2010. Last year, 49 percent expected their budgets to be cut.

Whether IT departments are happy living within their budgets is another story. Fewer than half of the IT executives, 48 percent, said they feel their IT budgets are "adequate" or "more than adequate" to meet the needs of their businesses. A year ago, the figure was 58 percent.

Computer Economics concludes that deep cuts in IT spending over the past two years have left many executives feeling their budgets are inadequate. On the plus side, the report said IT spending could turn bullish as growth returns and companies realize they need to increase their investments in IT.

IT spending per user declines

Further evidence for why so many IT execs feel their budgets are barely adequate is the drop in spending per user this year over 2009 ($6,889 for 2010 versus $7,259 last year). A recent high-water mark was 2006 when the per-user spending level reached $7,985. The study makes a point of noting that IT spending per user varies significantly by industry sector and these stats are more an indication of overall trends than specific dollar figure benchmarks that can be broadly applied.

As for the decline in per user spending for 2010, Computer Economics concludes: "We would be surprised to see this metric decline again next year."

A free download of the 36-page executive summary of the report is available here.

David Needle is the West Coast bureau chief at, the news service of, the network for technology professionals.

Tags: IT spending, IT budgets, economic recovery, y2k, Computer Economics,

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