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CIO survey: IT spending projections drop

CIO survey: IT spending projections drop

IT spending projections have dropped to their lowest level since November 2003, according to the January CIO Magazine Tech Poll, released Tuesday.

The CIOs surveyed predicted that they would spend 5.4 percent during the next 12 months, compared with a 6.7 percent spending projection last month, according to the survey. "When I saw the data, we went out and asked several hundred CIOs why are we seeing this," said Gary Beach, group publisher at CXO Media Inc.

Beach said there are three main reasons for the falloff in spending expectations: CIOs are concerned about lower profit forecasts for 2005; there has been a commoditization of IT, both in hardware and software; and CIOs see no compelling reason right now to invest in major IT initiatives.

"Hardware prices are continuing to come down, and CIOs have cheaper options like blades on the hardware side, and then there is the whole maturation of open-source, so CIOs are seeing the commoditization of IT," Beach said. "There's no big thing that they have to do. For instance, Windows 2006, if you want to call it that -- we won't see a beta on that until the end of 2005, so they're going to try to extend their aging infrastructures one more year.

"The question is, Can they do it?" he said. "Or will we see an increase in infrastructure failures? I tend to think we will."

Based on the survey results, Beach predicted that e-business software will be the fastest-growing product category during the next 12 months. "And the sector that seems to be most interested in investing in that is the very largest firms, (with) 5,000 or more employees," he said.

"We're seeing an ebbing of interest in security and computer hardware in terms of spending," Beach said. "In January 2004, 51 percent of the CIOs surveyed said they were going to increase spending in computer hardware. In January 2005, that dropped to 43 percent."

Even so, Beach said he doesn't think the decline in IT spending projections will continue. "I think we've kind of hit the wall; I don't think it's going to drop much more," he said.

Each month, CIO magazine surveys a panel of IT executives on current and future IT spending and other issues. The survey is done in partnership with Ed Yardeni, chief investment strategist at Oak Associates Ltd.

The latest poll was conducted Jan. 6-13, and 255 IT executives responded. Twenty percent of the responses came from executives at companies with more than 5,000 employees.

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