CIOs Cut IT Spending 5 Percent in Q1, Gartner Says

Published: June 15, 2009

by Alex Woodie

A Gartner survey released last week found that CIOs around the world reduced their IT spending by an average of nearly 5 percent during the first quarter of the year. Many organizations slashed spending even more, particularly in the telecommunications and professional services sectors, where IT spending was down more than 10 percent. The good news is that most organizations do not foresee any more drops in IT spending for the rest of the year, Gartner says.

About 900 IT chiefs from organizations all over the world participated in Gartner's survey, which was conducted from the beginning of March through the end of April. The survey sought to gauge the impact of macroeconomic concerns on IT budgets, and would be directly compared to the results of a similar survey of 1,500 CIOs that Gartner conducted from September to December last year.

The earlier study found that 2009 IT budgets would be flat to slightly up (.16 percent, which doesn't even cover the error rate; it was not disclosed, but it should have been around 2 percent). But the most recent survey found that actual IT spending is decidedly lower than CIOs initially budgeted for.

According to Gartner, more than 50 percent of CIOs reduced their IT spending, while only 10 percent said they increased spending. Of those who oversaw lower IT spending, the average decline was 7.2 percent. Overall, the average decline in IT spending was 4.7 percent for the first three months of the year.

Organizations saved money primarily by laying people off and renegotiating vendor contracts, according to Mark McDonald, group vice president and head of research for Gartner EXP, the analyst group's executive program. "CIOs report shifting more work to in-house resources and delaying capital expenditures more than reducing IT project investments," McDonald stated in a press release.

Gartner says there was no particular geographic region that was hit harder with IT spending reductions. Everybody is sharing the pain. But there are big differences among industries. CIOs in healthcare-related organizations, for example, reported a 2.2 percent increase in IT spending. But that was the only bright spot, as all other industries reported slowdowns. Utilities and financial services both saw a 4 percent drop, while manufacturing saw an 8 percent drop.

While the global financial crises has taken a large toll in IT spending, there is optimism that the worst is over and that things have stabilized. While most CIOs have contingency plans for further cuts in IT spending this year, only 44 percent of CIOs say they expect to put them into action Gartner says.

CIOs are "better prepared for future economic challenges" with contingency plans, MacDonald says. "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."

The survey found that CIOs, on average, expect the economy to recover between the first and third quarter of 2010. When that happens, the first thing they will do is hire more workers, followed by investments in software, hardware, and infrastructure.

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