Attacks shrink IT budgets

The Sept. 11 terrorist attacks have led IT managers to cut their projected budgets for IT purchases over the next 12 months, according to the September CIO Magazine/ poll of CIOs (chief information officers) and other high-level managers (CIO is owned by the same parent company as the IDG News Service, International Data Group Inc.).

Respondents said that they expect their IT budgets to grow by 3.7 per cent over the next 12 months. Previous polls had indicated a revitalization of technology spending, with most figures trending up. The drop in projected IT spending seen in September is the result of the attacks, and the resulting impact on confidence in the economy, said Ed Yardeni, chief investment strategist at Deutsche Banc Alex. Brown Inc., in a statement.

In August, the poll – taken monthly – showed that respondents expected IT budgets to grow by 7.2 per cent over the subsequent 12-month period. In the September 2000 poll, the figure was 18 per cent.

Additionally, over the past 12 months, IT budgets grew only 3.5 per cent, the September poll found. The August poll found that IT budgets had increased 7.2 per cent in the prior 12 months; the November 2000 poll found the figure to be 22 per cent.

The poll received 198 responses from the over 4,600 CIOs and managers surveyed, and was taken between Sept. 13 and Sept. 20.

The poll also tracks spending in six individual categories of IT equipment and services – infrastructure software, outsourced IT services, storage systems, hardware, networking equipment and telecommunication equipment – and found that only 37.5 per cent of those polled expected any increase in spending on these categories, down from 42.4 per cent in August.

Storage systems tallied the most expected spending, with 49 per cent of respondents saying that they expected to increase spending, the same as in August. Outsourced IT services moved up slightly, with 30 per cent of those polled expecting to increase their spending, up from 27 per cent in August. Computer hardware and telecommunication equipment both dropped off sharply, with hardware dropping 12 percent as only 30 per cent of those polled expected to increase spending and telecommunication equipment spending increases pegged at 34 per cent, down from 43 per cent in August.

Poll respondents did not provide much hope for the immediate future, with only 12 percent saying they expect IT spending to increase in the second half of 2001, though 54 per cent foresee increases in 2002. Related to this, 48 per cent said they are now replacing a significant number of PCs, or are planning to do so in the next six months.

Income related to Internet commerce did rise, however, with expected revenue from Internet commerce over the next 12 months hitting 13 per cent, up from 10 per cent in the previous year. Also, respondents expect to purchase 20 per cent of their business materials, supplies and parts online in the next year, up from 14 per cent in the last year.

Compensation costs, excluding stock options, rose by six per cent over the 12 months ending in Sept., the poll found. However, that number is unchanged since August and down from 14 per cent in Oct. 2000, according to the poll.

Ninety-seven per cent of those who returned their surveys were based in North America. Very large firms, those employing 5,000 or more people, comprised 20 percent of respondents.

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Jim Love, Chief Content Officer, IT World Canada

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