ChangeWave Plots a 'Historic Collapse' in IT Spending

Published: November 24, 2008

by Timothy Prickett Morgan

Well, here's some more good news in the IT spending polling business and bad news for IT spending. ChangeWave, a market research collective founded during the dot-com bust to track tech trends and investing, has just finished up a survey of IT shops in the United States that shows companies were freaked out a few weeks ago enough to put a big damper on IT spending plans.

How big? Bigger than the dot-com bust big. Take a look at the historical data that ChangeWave has gathered since 2001 in this article. ChangeWave polled some 1,926 IT organizations between November 6 and 12, and some 45 percent of them said that they did not expect to see a decrease in IT spending in the next quarter versus the current one (which means Q1 2009 spending plans). Given the state of the global economy, this is no surprise. The August survey for spending in the Q4 2008 quarter showed 29 percent expected declines, and back in May, when things first started to get dicey, only 24 percent of those polled expected a decrease in IT spending. Interestingly, in the most current survey, only 10 percent of those polled say they will increase spending in the first quarter of next year.

Now, ChangeWave asks the smart questions in its polls, and asks IT managers to gauge their IT spending in any quarter to their plans for that quarter when they were asked a quarter earlier. This gauges reality against expectations on an ongoing basis. And the trend is that since November 2006, the number of people polled who say they are spending less than planned each quarter has been rising and the number of people who say they are spending more than planned has been falling. The gap between the two is a silly old thing called the profit margin in the IT racket.

Because IT managers deal with reality--albeit the twisted one at the confluence of business and technology--they do not have unrealistic hopes for the new Obama administration. Some 48 percent say that IT spending will not pick up until the third quarter of 2009--twice as many as were saying it would take that long to pick up when ChangeWave did its previous survey back in August.

"U.S. corporate IT spending is in the midst of a huge nose-dive, the likes of which hasn't been seen before in a ChangeWave survey dating back to 2001," explains Paul Carton, an analyst at ChangeWave. "In short, the current ChangeWave survey findings virtually guarantee that we'll be seeing the technology sector get hammered with pre-announcements before the January earnings season gets underway."

The thing to remember about these polls is that they really are a gauge of current sentiments, regardless of the time horizon the questions that pollsters say they are concerned with when they ask their questions. Frankly, I think very few businesses have a solid sense of what 2009 will look like. But the companies I am talking to are doing their best to plan for 2009, and they are not expecting disaster, but merely difficulty.

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