Survey of CIOs suggests wallets are opening

Telecommunications equipment buying by enterprises may be starting to bounce back on the strength of VOIP (voice over Internet Protocol), according to an October survey by CIO magazine in the U.S.

The latest edition of the monthly survey found 37.2 percent of top IT executives plan to increase their spending on telecommunications gear over the next 12 months, the highest percentage giving that answer since August 2001. In the October survey, 17.4 percent said they expect to cut spending on telecommunications gear over the next 12 months and 43.8 percent expect to keep it the same.

Recent conversations with CIOs have indicated that a big factor in the increased spending will be VOIP (voice over IP), which requires some investment in new equipment but is seen as a money-saver over time, said Gary Beach, group publisher of CIO magazine. VOIP gear converts voice calls into IP data packets and sends them over the Internet or a private IP network, so a company can bypass carrier charges for traditional long-distance voice circuits. Maximizing efficiency and productivity are the biggest issues for most CIOs, and they see VOIP as a good tool for achieving those goals, Beach said.

Spending increases won’t stop with telecommunications, according to the survey. On average, the 243 executives who responded to the poll — 95 percent of whom are from North America — said they expect IT spending at their companies to grow 6 percent over the next 12 months. That’s up from 5.9 percent the prior month and is the most positive response to an October survey since 2000, Beach said.

Combined with other results, the response bodes well for upcoming IT spending, he said.

“What we’re suggesting is that … technology spending is in an early stage of recovery. Our take is that the turn happened in June of this year,” Beach said.

Web services may be central to the increased spending, Beach said. Companies that had planned in 1999 to expand their private intranets out onto the Internet, with partners and customers tied in and carrying out transactions electronically, may finally come back and make that a reality after the bad economic years, he said. Today the technology is more mature, the standards more robust and the users more sophisticated, he said.

Another hopeful sign for spending is a backlog of IT projects that are yet to be completed. In August, the last time a question on backlogs was included in the survey, 47.1 percent of respondents said there was a “significant” backlog of projects at their companies. More than three-quarters of those respondents said budget constraints were more important, but clearing out those backlogs eventually will require resources, indicating more spending is to come, he said.

“As profits improve, the work that has to be done is there,” Beach said.

Another survey result may indicate that Web-based commerce is entering the corporate mainstream. Asked what percentage of their companies’ purchases would be made online over the next 12 months, the respondents came back with an average of 23.8 percent. That figure, nearly 1 in 4 dollars out of the aggregate value of goods and services to be purchased, is the highest reported since the surveys began in August 2000, Beach said.

The poll was conducted between Oct. 9 and Oct. 16. CIO sent e-mail invitations to a panel of 2,000 CIOs and 3,000 randomly selected readers of the magazine who matched job function criteria for a CIO. A variety of industries are represented, and companies with more than 5,000 employees represented 17 percent of the results, according to CIO.

The magazine conducts the survey in association with Deutsche Bank Securities and Ed Yardeni, chief investment strategist at Prudential Securities Inc.

CIO is owned by International Data Group Inc., the parent company of IDG News Service.