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Most IT Budgets Decreased or Remained Flat in Q1

By CIO Update Staff

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While many CIOs survived last year with only reduced increases to their budgets, this brought about budget cuts as companies continue to find ways to weather the recession. In the first quarter of 2009, CIOs experienced significant IT budget revisions as executives gained a greater understanding and solidified plans for addressing the global financial crisis, according to a worldwide survey of 900 CIOs by Gartner Executive Programs (EXP), a membership-based organization of more than 3,600 CIOs worldwide.

The survey was conducted from March 1 to April 30 2009 and sought to gauge the potential impact of macroeconomic concerns on IT budgets. These CIOs encompass more than $77 billion in revised IT spending. Forty-six percent (46%) of respondents said that their 2009 IT budget had changed since it was finalized. The results of this survey were compared with the results of the Gartner EXP 2009 CIO Survey, conducted from September to December 2008, which had more than 1,500 responses.

CIOs in the original survey reported a flat budget with a minor increase of 0.16%. CIOs responding to the survey in the Q1 now report a weighted average decline of 4.7%. More than 90% of firms changing their budgets made a reduction in the first quarter, with the average reduction being 7.2%. Fifty-four percent (44%) of respondents reported no change in their IT budget, with the remaining 4% reporting an increase in their IT budget.

“CIOs reported that renegotiating vendor contracts and head count reductions were the primary focus areas for accommodating budget reductions,” said Mark McDonald, group vice president and head of research for Gartner EXP, in a press release. “CIOs report shifting more work to in-house resources and delaying capital expenditures more than reducing IT project investments.”

First quarter 2009 IT budget reductions were reported across the board based on both size and geography of the organization. CIOs in healthcare-related industries reported an average budget increase of 2.2%, but CIOs in all other major industries reported a decline in the first quarter of 2009. The largest decline was in professional services at (10%), followed by telecommunications and high tech at (10%), manufacturing at (8%), utilities at (4%) and financial services at (4%).

CIOs recognize the potential for further cuts in 2009, but most see that as unlikely. The percentage of CIOs with a contingency plan for the remainder of 2009 has more than doubled compared with 2008. CIOs with additional contingency plans for 2009 are planning for the potential of renewed IT spending, as well as additional reductions. While 44% of CIOs do not believe they will need to tap into their contingency plans; those that do believe they will do so during the next six months.

Recovery

The survey found that CIOs expect the economy to recover between the Q1 and Q3 first and third quarter 2010. CIOs plan to increase IT investment projects and workforce levels as their first investments in such a recovery. Software, hardware and infrastructure investments are also high on the CIO’s agenda on the path to economic recovery.

“Executives making plans in the fourth quarter of 2008 faced an uncertain future as the global financial crisis unfolded,” McDonald continued. “Based on CIO contingency plans, they are now better prepared for future economic challenges. However, most CIOs do not see immediately implementing those plans. This supports a position that the first quarter budget adjustments reflect firm plans for the remainder of 2009.”