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Midyear IT spending outlook: Continued weakness

Midyear IT spending outlook: Continued weakness

Stock markets are rising, and consumer confidence has jumped in recent months. But those developments have so far had little effect on corporate IT spending plans.

Stock markets are rising, and consumer confidence has jumped in recent months. But those developments have so far had little effect on corporate IT spending plans. In fact, while a majority of North American companies surveyed separately by Forrester Research Inc. and Meta Group Inc. said they're holding steady with their IT budgets for the year, a respective 23 percent and 30 percent of the respondents said they plan to shrink their tech spending.

The survey results this week led Cambridge, Mass.-based Forrester to revise its 2003 IT spending forecast downward from the 1.9 percent average budget increase it projected in December to a mere 1.3 percent rise. For instance, 33 percent of surveyed companies in both the manufacturing and technology sectors now plan to "pull back the reins" and spend below their initial budgets for the full year, wrote Forrester analyst Tom Pohlmann in a research note.

"If you look at IT spending from a Buy, Hold or Sell perspective right now, most companies are taking a Hold approach," said Howard Rubin, executive vice president at Stamford, Conn.-based Meta.

In general, companies are spending more on IT in areas like Web services and server consolidations -- one area where companies "are investing money to save money," said Rubin. Meanwhile, spending is shrinking on technologies such as ERP systems, he said.

The Meta study, completed last month and involving 500 companies, found that 41 percent of the respondents plan to leave their IT budgets unchanged. The rest were almost evenly split: 30 percent planned to cut their budgets, while 29 percent were planning increases in IT spending, Rubin said.

The Hold approach maps with Corning Inc.'s plans. "At this point, we aren't changing our full-year target," said Richard J. Fishburn, CIO at the Corning, N.Y.-based maker of optical fiber, cable and photonic components.

Fishburn said Corning's full-year IT budget showed higher spending in the first half, as the company continued to invest in ongoing productivity programs such as the application of ISO 9000 practices in its global IT shared services center. In addition, it consolidated help desk activities at three regional locations worldwide.

"Half over half, therefore, we'll be seeing a decline" in IT spending throughout the remainder of the year, Fishburn said.

Genessee & Wyoming Inc., a Greenwich, Conn.-based operator of short-line and regional railroads, built a marginal increase into its IT budget this year. That's because the company's annual revenue is projected to grow by $20 million, and the IT budget is typically 2 percent of revenue, said Mike Meyers, vice president of information management and technology.

But Meyers said he doesn't expect to see any changes made to the IT budget for the remainder of the year. -- Computerworld (US online)

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