A View of IT Spending: Part Two

The last Analyst Views Weekly examined several reports on IT spending from Forrester Research. In brief the findings of those reports indicated a slowdown in current and upcoming IT investment; six percent growth in 2006 and only 3 percent growth in 2007. The number of IT decision makers anticipating increased budgets in 2007 was 32 percent, a ten percent drop from the previous year. This week, in part two of the look at IT Spending, Analyst Views Weekly looks at a report from EQUS Group which, “investigated major IT trends for 2007,” and briefly at the results from CIO Magazine’s quarterly Tech Poll. Due to the differing nature of the three reports, the specifics they report on and how they divide categories of spending, a complete synthesis of the data is challenging. However, though EQUS Group paints a slightly more optimistic trend in spending, the three sources do overlap in some areas; particularly that spending on computer hardware will be hit particularly hard in the next several quarters, and that IT security is a palpable concern.

According to EQUS Group, the number one IT concern among those interviewed was security, “If one issue haunts IT managers, architects, and execs, it’s security.” Though all areas of security and privacy were rated as, “high or very high importance by most IT decision-makers,” it was unsupervised access to organizations’ networks and proprietary data that is the cause of most concern. Such access includes employee-supplied equipment for use in telecommuting, employee-owned mobile devices, login from public terminals, and thumb drive use. The control that the organization exerted over such devices had an impact on the level of concern, however, with newer devices such as thumb drives, “several IT decision-makers indicated that they do not have a firm policy on thumb drives and other writable storage.”

As far as budget projections go for 2007, EQUS reports that, “IT budgets look strong again for 2007; 92 percent reported flat or increasing expenditures for 2007, and in most IT areas many more businesses are increasing spending than are tightening purse strings.” This is despite the fact that, “most IT execs continue to stress a strong ongoing focus on cost reduction.” With security as the top concern among IT executives, it is not surprising that all respondents indicated that this area of spending will either stay flat or increase. For 53 percent spending will stay as is and 47 percent state that it will increase; an average increase of 16 percent is noted. Also seeing little decrease in allotted budget were Server Software and Hardware; 44 percent of respondents see an increase in spending on software and 45 percent indicate the same for hardware. Enterprise software is also expected to see significant increases.

According to the EQUS Group, there were only two areas that are receiving, “significant decreases” in spending. Only 29 percent of respondents indicated an increase in Desktop Hardware spending; for 18 percent the amount spent will decrease and for the remaining 53 percent it will stay the same. This should not come as a surprise, as overall market projections for desktop hardware have been in decline for some time. Also, not surprisingly, the amount spent on consulting will also drop; this is anticipated by 22 percent of respondents.

CIO Magazine released the results of its CIO Magazine Tech Poll on October 2 and though the CIO poll reports data differently than EQUS, the two do report on some of the same areas. For example, CIO does not separate spending on desktop vs. notebooks; it reports that overall spending on, “Computer Hardware” rose for 46.9 percent of respondents. Likewise, it does not report on overall IT Security spending, but does report on, “Security Software.” Here, the conclusion can be drawn that this is indeed an area of high importance; for both those expecting spending to increase or remain the same the number is identical, 46.9 percent. (EQUS reported virtually the same, 53 percent staying the same and 47 percent increasing.) However, though the two reports concur that Security is a major issue, they differ on how high on the list of concerns this is. EQUS respondents placed Security as the number one concern while according to CIO, where the results show 48.1 percent plan to increase spending here, “Storage regained its position as the top spending priority for CIOs.” Overall according to the poll, IT spending projections decreased in July-September with CIOs predicting IT spending increases of 6.5 percent over the next 12 months, down from 6.9 percent in April-June.

Perhaps the most obvious thing to learn from the resources examined for the Analyst Views look at IT spending is that no one source may be enough, and that even one may be too many.

A more complete version of this posting, with accompanying informational charts, journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the IT Services Section of Northern Light's Software, Computers, & Services Market Intelligence Center

And in the following articles:

CIOs Are Sitting on a Gold Mine
CRM Today, October 15, 2006
A just-released research study — Unlocking the Value of IT - from Ventana Research confirms rigorous management of IT operations leads to more effective IT spending and revealed that companies that take this approach also have had the fastest growth in IT budgets over the past three years. Moreover, CIOs in companies with more effective spending practices also had greater influence in setting IT budgets than those that did not.

Just How Important Is IT Anyway?
BusinessWeek Online, October 9, 2006
Nicholas Carr touched off a heated debate on the role of information technology in business with the publication in 2003 of his Harvard Business Review article "IT Doesn't Matter" and the 2004 book Does IT Matter? Information Technology and the Corrosion of Competitive Advantage. Almost three years later, the discussion continues. Businessweek.com's Kate Norton spoke with Carr and Robert L. McDowell, Microsoft's vice-president for information worker business value, following a Microsoft-hosted panel in London on Oct. 4, about how the debate has changed and where it's headed.

CIOs: IT Budgets to Grow 6.5% over Next Year
Circuits Assembly, October 2, 2006
A September poll of CIOs predicts IT budgets will grow 6.5% over the next 12 months, down slightly from 6.9% in June. Optimism among CIOs at the biggest companies was higher than in the previous two quarters, suggesting seasonal strength among the biggest companies as the year ends, said Deutsche Bank, which cosponsors the poll.

What Keeps CIOs Awake at Night? Old and New Worries, Says Survey
InformationWeek, September 18, 2006
What's keeping CIOs up at night? Issues involving IT alignment, staff, security, and speed are among the challenges that many business technology leaders are most likely to lose sleep over, according to a new survey by the Society for Information Management. The top three IT management concerns of CIOs in 2006 are the alignment of IT and business at their companies; attracting, developing, and retaining IT talent; and security and privacy issues, according to SIM's latest annual survey, which polled 139 CIOs.

CIO Survey: IT Spending Projections Down in Q2
ComputerWorld, July 5, 2006
IT spending projections for the next 12 months decreased in the April-June quarter, as CIOs predicted that they will increase IT spending by only 6.9% during the next year. That's down from 8.6% in the first quarter of the year, when CIOs said they expected spending to rise over the next year, according to the quarterly CIO Magazine Tech Poll released last week.