Most CIOs Say 2008 IT Budgets Are Stable, So Far

Published: April 9, 2008

by Timothy Prickett Morgan

Even with the confusion and consternation going on in the economies of the world, many of the chief information officers responsible for the corporate computing purses say that their IT budgets for 2008 are holding, albeit at a lower growth rate than we have seen in prior years. The analysts at Gartner, who want to get their piece of the $1.2 trillion global IT pie as well, recently polled 1,011 CIOs to take the pulse on IT spending.

The survey, which Gartner conducted in the first quarter of 2008, shows that 62 percent of CIOs say their budgets will stay the same as levels set in 2007, with another 15 percent showing an increase and 23 percent seeing a decline. When you do the math on the actual budget numbers--which Gartner did not share in its report--then those spending are actually planning on spending quite a lot more, since the overall global IT spending as projected from these survey results is calculated to climb by 3.3 percent. (When you average the increase in spending across those companies who say they are spending more, the average growth is 15 percent, while the average among those who are spending less comes to a 10 percent cut in spending.)

This 3.3 percent global IT spending growth rate is the figure that Gartner was projecting as 2007 came to a close, which implies that despite the difficulties in the housing market, the subprime mortgage crisis, the global credit and private equity crunch, and issues with IT spending among city, state, and the Federal government as people begin projecting tax revenue declines, IT spending is holding up. This is good news for all of us who make our living in the IT area, obviously. It is also subject to change.

Gartner did its initial 2008 IT spending projections based on surveys of 1,500 CIOs from September through December of 2007; the latest figures are based on 1,011 responses from customers in February and March of 2008.

"Overall, the majority of CIOs reported no change in their 2008 committed budgets," says Mark McDonald, group vice president and head of research for Gartner Executive Programs. "This indicates that IT budgets are not the 'target rich' environment for cost cutting they have been in the past. However, there is some softness, particularly in the U.S. CIOs responding to the study report that IT budgets are still growing, even in the U.S., but growth rates are muted slightly. Historically, the revised numbers are in keeping with the past four years where IT budget increases have averaged 2.4 percent."

Gartner's most recent surveys show a fairly significant decline in IT spending growth in the United States. In the September to December survey forecasting 2008's spending levels in the U.S., the spending increase averaged 3.1 percent, just a bit lower than the global average. But in the February to March survey, spending is now only averaging 2.3 percent growth across all companies. The rest of the world is growing at nearly twice the rate to pull the average up to 3.3 percent growth in 2008 over 2007's spending levels, therefore. Among IT shops in the United States, 65 percent said their budgets remained the same as originally projected, 10 percent said they had been increased, but 25 percent said they had been cut. The CIOs indicated that IT was being asked to cut costs just as other company departments are being asked to do so, and not by any more than other departments.

Based on the survey data, Gartner is projecting IT spending in 2008 will be up 3.86 percent in Europe and up 5.98 percent in the Asia/Pacific region.

Since last year, Gartner has been advising its customers to prepare two budgets: The one for when things are OK and the other for when the economy heads south and they have to cut costs a lot deeper than they might otherwise want to. Thus far, only a minority of those surveyed have heeded Gartner's advice. Only 32 percent of customers say they have a contingency plan for lower IT spending in 2008. "Given economic conditions, CIOs should be prepared and have a contingency plan for both increases or decreases in the next 90 days, by the end of the second quarter of 2008," McDonald says.

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