2009 IT Spending Roundup
Youd have to live under a rock to not know that economies around the globe are either in, or heading for recession. In the past, when IT was viewed as just a cost-center, this meant sharp cuts in IT spending. This time around things dont look too bad.
Gartner, IDC, Forrester and Computer Economics have all come out with revised IT spending forecasts that factor in at least some of the craziness of the financial markets in September, October and November. Taken as a group, these analysts are only calling for a slowdown in IT spending growth, not cuts in current levels.
While you cant compare these predictions on an apples to apples basis because of sampling metrologies and the metrics they look at, overall, the takeaway, for the moment, is a positive one, said Frank Scavo, president of Computer Economics (CE). You may still be asked to cut out some new projects and hold off on hiring but, overall, IT will have either same amount of money to run on going into 2009 as it had in 2008 or see increases somewhere between two-to-four percent.
Of course, if the economy continues to deteriorate and this week doesnt look real hopeful on that count, this could turn more negative in the coming couple, three months, he said. Its not like 1998, 1999, and 2000 so there was a lot of bloat in IT budgets and many IT organizations coming into this recession were already running pretty lean so theres not a lot of fat to cut out.
According to Nov. 13 numbers from CE, which looks at the buyer-side of things, one-quarter of 159 respondents anticipate spending reductions of at least 3%. But another quarter anticipate that their IT operational budgets will rise by at least 5%. At the median, IT organizations forecast that their spending growth will be flat.
IDC, which looked at worldwide IT spending, predicts IT spending will grow 2.6% year-over-year in 2009, down from its pre-crisis forecast of 5.9% growth. In the
"Although all the economic forecasts went from up slightly to down drastically in a matter of days, the good news is that IT is in a better position than ever to resist the downward pull of a slowing economy," said John Gantz, chief research officer at IDC, in a written statement. "Technology is already deeply embedded in many mission-critical operations and remains critical to achieving further efficiency and productivity gains. As a result, IDC expects worldwide IT spending will continue to grow in 2009, albeit at a slower pace."
Gartner, which is sticking to its Oct. 13 forecast of 2.3% increase. This is down from a prior forecast of 5.8%. Like his brethren at IDC and CE, Gartner sees IT as too embedded in mission-critical activities to be slashed and burned by the current recession.
We learned that in tumultuous times, CEOs want their executives and managers to be advisors and counselors, not just great implementers of directions given to them, said Peter Sondergaard, SVP at Gartner and global head of Research. What they want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion at the same time.
Forresters latest forecast put out Oct. 15, reiterates its earlier position from Sept., just before things went bust on Wall St. That forecast assumed the
Forresters Andrew Bartels does, however, offer up a gloomier assessment of what may come:
Our current forecast that US and global IT purchases will experience slow growth from Q4 2008 to Q2 2009 but no decline assumes that the US economy will have two to three quarters of negative real growth ending in Q2 2009 and that the major European economies and Japan will follow a similar pattern with a quarter lag. Given the strains in financial markets and the global nature of the slowdown, the most likely alternative economic prospect is for a longer and deeper recession that lasts into 2010. In that scenario, US IT market growth in 2009 would slip to 2% to 3% in annual growth, with several quarters of declining purchases, instead of our current projection of 6% for 2009. Global IT market growth would have a similar deceleration, moving from 7% to 8% that we currently project for 2009, to much slower growth of 3% to 4%.
Of course, any cuts to IT budgets be they the increase or not, result in reduced spending by IT. CE asked what their respondents were cutting to save money and found that 35% of IT organizations took actions to reduce expenses from August to October, as the economy declined, compared to 11% that increased their IT spending plans during the three-month period.
When asked what steps they were taking to restrain spending over the last three months, the most frequent actions were cutting travel (55%), delaying the start of major projects (44%), and not filling open positions (40%). Sixteen percent of the respondents said they had taken no action to cut IT spending in response to economic conditions.
"At this point, most organizations appear to be taking only the quickest and easiest actions," Scavo said in a written statement. "Most are not yet making the deeper and more painful reductions, such as cutting staff or outright cancellation of major projects."
Other cost-cutting actions included:
▫ Deferring equipment upgrades (35%)
▫ Cutting contractors and temps (33%)
▫ Cutting back on IT training (26%)
▫ Renegotiating vendor contracts (26%)
▫ Cutting meals/entertainment (24%)
▫ Cutting planned pay increases (17%)
▫ Cutting IT staff (17%)
▫ Canceling major projects (16%)
▫ Investigating outsourcing/offshoring (15%)
▫ Stretching out vendor payments (11%)
▫ Cutting IT staff hours (4%)
▫ Canceling software maintenance (3%) and
▫ Canceling hardware maintenance (3%).
So, while things are certainly not rosy, they could, and may indeed get a lot worse. But, if the current forecasts hold, IT will not be in for as bumpy a ride as other sectors the economy.