Good News for Tech: Spending Stays Strong

By Allen Bernard

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Even though no one seems sure if we are in a recession or not, IT exec’s are not planning to cut their spending this year. In fact, manufacturing, retail and healthcare CIOs will be busy figuring out how to spend more money.


According to research from Enterprise Management Associates (EMA) released Thursday technology spending by organizations large and small will remain strong in 2008, with 77% of nearly 1,000 IT professionals surveyed planning to maintain or increase IT spending during the year.


“The fundamental thing is IT—for very progressive organizations certainly and even for less mature organizations—is fundamentally becoming a strategic asset rather than just a cost center," said Andi Mann, an EMA research director. "When you look at what (business') need to be doing right now in the face of potentially lower demand cycles, is to be even more competitive, and IT helps them do that—if it's done well, IT helps them do that."


Overall, most business' seem to agree. Fifty five percent (55%) of respondents said they planned to increase spending, 26% said they would maintain current spending levels and the remaining 23% indicated they are looking to trim budgets during 2008. The research was conducted between January and March 2008.


"There has been a lot of concern that IT spending may be negatively impacted this year due to recent economic concerns, such as the sub-prime mortgage collapse," said Scott Crawford, EMA research director, who co-led the research with colleague Andi Mann, in a statement.


Research highlights include:


       Industries planning to increase IT budgets include manufacturing, retail/wholesale/distribution and healthcare/medical/pharmaceutical.


       Seventy nine percent (79%) of large enterprises with between 10,000 and 20,000 employees plan to increase or keep budgets steady in 2008.


       Twenty five percent (25%) of respondent companies plan to increase spending by 10% or less, with 17% looking to increase budgets by 10-to-25 percent.

       Sixty percent (60%) of security professionals report increased IT spending in their organizations over the past year.

       Sixty four percent (64%) of companies in the high technology sector
have higher IT budgets in 2008.


       Non-IT manufacturing is most likely to be increasing their IT spending in 2008, with 62% of all respondents in this industry reporting a budget increase over 2007 IT spending.


       In retail, wholesale and distribution 58% of respondents are

       planning to increase IT spending this year.


       Fifty five percent (55%)of respondents in healthcare are planning on increasing their IT spending in 2008.


According to the report, one of the main reasons many companies are not cutting IT spending is the increased role technology plays in helping organizations become more profitable, more efficient, more agile and more competitive. Citing a recent EMA research report on virtualization, Mann said during Q1 2008 they found nearly 70% of enterprises with current virtualization deployments had improved utilization of existing hardware, thus driving demand and growth for this technology.


According to other insights from Crawford and Mann, the sub-prime mortgage problems have led some financial organizations to take market risks that could threaten to bend or break existing business controls in IT, exposing businesses to huge financial risk. Because of this and such recent scandals, such as Societe Generale, it is expected that IT spending in areas such as fraud risk detection will increase.


"(Another) key driver we're seeing—and it's directly related to the whole sub prime issue and some of the explosions we've seen—is another part of the spending is around audit and compliance spending," said Mann. "It may not be strategic to the business … but it's definitely not something you can skimp on. It's almost mandatory spending in IT to get that audit control, that risk, governance, compliance issue under control."


Along these lines, Q1 2008 EMA research on IT governance, risk and compliance management showed 73% of survey respondents reporting stable or increased IT spending during the past year. Among security professionals surveyed in this research, 60% reported that their organizations had increased IT spending.


"When you look at our primary research on IT spending, coupled with insights from other recent EMA studies on sectors like security and virtualization, the outlook for IT spending is very favorable," said Mann in a statement. "While increased caution and reduced budgets are affecting certain parts of the economy, IT appears to be showing a real resilience."