Computer Economics Study Predicts 'Anemic Growth' for IT in 2008

Published: December 4, 2007

by Timothy Prickett Morgan

It's that time of the year again. All of the pundits, pollsters, and analysts are trying to pick the brains of IT managers to try to figure out where their budgets are going--up, down, or the same--in 2008. Computer Economics has been tracking systems and storage equipment pricing and IT budget trends since 1990, and has just put out a report that suggests IT budget growth will not be spectacular in the coming year.

The recently released IT budget report is a subset of a larger study from Computer Economics called 2007/2008 IT Spending, Staffing, and Technology Trends, and it suggests that while IT spending in the United States and Canada was strong in the first half of 2007, IT managers are right now wrestling with how they can budget for 2008 with economic uncertainty on the horizon. Among the 125 companies surveyed by Computer Economics, IT operational budgets were up 5 percent in 2007, but only 54 percent said they would spend as much as they budgeted for this year, with 21 percent spending more and 25 spending less. So on balance, there has been a pullback in IT spending. Among large organizations (those with more than $750 million in sales in the Computer Economics survey pool), a third say they will spend less on IT than they budgeted in 2007 and only 22 percent say they will spend more; only 10 percent of the mid-sized companies (those with between $250 million and $750 million in annual sales) surveyed said they would spend less than planned, and 20 percent said they would spend more.

As far as 2008 is concerned, 66 percent of the companies polled expected their IT spending levels would increase in 2008, with 22 percent flat and only 12 percent saying they would be making cuts. Mid-sized companies are not feeling the same pinch as larger companies, with 83 percent of those surveyed saying they would boost spending and only 7 percent expecting to make cuts in their IT budgets. Small businesses were more or less the same as the larger pool, with a slightly higher tendency to spend more or stay the same.

The IT spending budget trend that Computer Economics has been tracking puts 2008's estimated 2.5 percent operational budget increase on par with levels seen in 2005. IT budgets were flat in 2004, up 4.1 percent in 2006 and up 5 percent in 2007, according to the company's data. On average, small organizations expect a 3 percent increase, medium companies average out to a 2.75 percent increase, and large companies average to a 2 percent increase. And this is before the economy has actually gotten bad in North America.

"Our survey data indicates that IT executives have already scaled back their expectations for IT spending increases in 2008," the report states. "If economic conditions do worsen, we expect that median IT spending increases in 2008 will be flat compared to 2007. We do not yet, however, see widespread IT spending cuts in 2008."

Computer Economics will take another snapshot of IT spending expectations in the first quarter of 2008.

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