IT Spending to Rise Moderately

A U.S. survey of 150 CIOs by Morgan Stanley Dean Witter & Co. shows corporate IT budgets are expected to increase at a more modest rate in 2001 than they did in 2000.

CIOs surveyed say their companies plan to increase IT spending by an average of just 8 per cent in 2001. That compares with an average budget increase of 12 per cent in 2000, New York-based Morgan Stanley adds. And 16 per cent of the respondents say their IT investments will actually decrease from 2000 to 2001.

Those results come as no surprise to Ed Tobin, CIO at Colgate-Palmolive Co. in New York, who says he’s cutting his technology budget this year, mainly as a result of the efficiency of recently installed enterprise application integration systems.

“We’ve got a strategy covering several years where we’ve been implementing several new systems, such as SAP, all around the world and consolidating by decommissioning our legacy systems,” he says.

Jack Cooper, CIO at Bristol-Myers Squibb Co. in New York, says his IT spending will remain level only because his company installed Y2K-compliant software in 1999. Bristol-Myers installed SAP AG’s R/3 enterprise resource planning software and Ariba e-commerce applications. “That saved us a lot of money,” Cooper says.

Cooper says technology initiatives in 2001 will focus on productivity issues, including supply-chain management and business-to-business e-commerce. He adds his shop is also planning to equip the Bristol-Myers sales and marketing force with more laptops and wireless communications devices and to implement video streaming.

Charles Phillips Jr., a technology analyst at Morgan Stanley, agrees the Y2K bubble contributed to spending on technology being front-end-loaded in 2000. In addition, IT spending soared in the frenzy of e-commerce activity that took place before concerns about the viability of many dot-com ventures dampened the enthusiasm for them, he says.

Economic concerns have left many corporate leaders wary of overspending on IT, Phillips adds. In fact, 12 per cent of the CIOs who responded to the survey say they recently downsized their IT budgets because of the slowing economy. And 14 per cent say they plan to keep a close eye on the economy and spend money more gradually in the first half of 2001.