2011 IT Spending is on the Mend, Says ESG

February 14, 2011 Jenny Thomas

The 2011 IT Spending Intentions Survey was just released by Enterprise Strategy Group, and its findings indicate the economy is turning around in many areas of IT, with 51 percent of respondents reporting their 2011 IT budgets will increase when compared to 2010 levels.

The survey conducted by ESG, an IT analyst and business strategy firm located Milford, Massachusetts, was based on data gathered from 611 North American and Western European senior IT professionals from midmarket (100 to 999 employees) and enterprise-class (1,000 employees or more) organizations.

In addition to a majority of respondents stating they plan to increase spending over 2010 levels, another 32 percent reported they expect their 2011 spending will be the same as last year. Just 17 percent of organizations surveyed said they expected a decline in year-over-year IT spending plans, which is down from 20 percent of firms in 2010, and 31 percent in 2009, the year many IT organizations began slashing budgets during the height of the global financial crisis.

While the news of continued stabilization in IT spending is good for IT and the overall economy, it is also interesting to look at where IT managers are saying they want to spend their new budgets. According to the survey, big priorities out of the gate are increasing efficiency, risk mitigation, and data management. But the biggest movement is looking to be in the area of cloud computing.

“One key finding of this year’s research is the ongoing emergence of cloud computing as a viable cost containment strategy for IT groups,” said John McKnight, vice president of research at the company. “ESG has witnessed a steady three-year increase in organizations looking to increase their use of cloud computing as a more cost-effective alternative to traditional IT delivery methods. Indeed, companies looking to reduce IT costs are now more likely to be considering cloud services than they are to be reducing IT headcount, a complete reversal of organizational priorities from just two years ago, when shedding staff was one of the first places CIOs looked to trim costs.”

When compared to 2010 survey results, respondents to ESG’s 2011 survey said the use of cloud infrastructure has increased from number 22 to number 12 on a list of IT priorities, and the increased use of Software-as-a-Service (SaaS) for application delivery has risen from number 24 to number 14.

Other top strategic IT initiatives over the next 12 to 18 months include:

Increased use of server virtualization
Managing data growth
Information security
Major application deployments and upgrades
Improving data backup and recovery

The report includes detailed information on specific 2011 spending plans across different segments of the IT market, including virtualization, information security, data storage, networking, information management, infrastructure management, and professional services.

ESG also published an industry-specific analysis of its IT spending survey results in its 2011 Vertical Opportunity Index Score (VOIS) Rankings research brief. According to this analysis, industries where 2011 IT budget increases are expected include business services, retail, financial, and communications and media, which should come as extra good news to IT Jungle readers considering the IBM i can be found in most of these industries with a representative share of the back-end systems.

But not every industry will be experiencing growth. Ongoing budgetary crises are clearly dampening IT spending plans in public sector institutions, such as state and local government, federal government, and education. For example, nearly 40 percent of state and local government agencies surveyed expect to cut IT spending in 2011.

The 2011 IT Spending Intentions Survey is available to ESG subscription clients on the ESG Web site. The 2011 Vertical Opportunity Index Score (VOIS) Rankings brief is being provided free of charge and is available here.