Over 90 percent firms reduce IT budget in first quarter of 2009

By siliconindia   |   Wednesday, 10 June 2009, 02:32 IST   |    1 Comments
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Over 90 percent firms reduce IT budget in first quarter of 2009
Bangalore: More than 90 percent firms have reduced their IT budget in the first quarter of 2009 since CIOs gained a better understanding and solidified plans for addressing the global financial crisis as per a survey. These CIOs make up more than $77 billion in revised IT spending. The worldwide survey of 900 CIOs conducted by Gartner Executive Programs (EXP) from March 1 to April 30, 2009 to determine the prospective impact of macroeconomic concerns on IT budgets. Forty-six percent of respondents said that their 2009 IT budget had changed after it was finalized. The results of this survey were compared with the results of the survey held from September to December 2008 which had more than 1,500 responses. CIOs in the initial survey reported a flat budget with a minor increase of 0.16 percent whereas in this survey they reported a weighted average decline of 4.7 percent. The change in budget by more than 90 percent of the firms made a reduction in the first quarter with average reduction being 7.2 percent. Fifty-four percent of respondents reported no change in their IT budget, while remaining four percent reported an increase. "CIOs reported that renegotiating vendor contracts and headcount reductions were the primary focus areas for accommodating budget reductions. They reported shifting more work to in-house resources and delaying capital expenditures more than reducing IT project investments," said Mark McDonald, Group Vice President and Head of Research for Gartner EXP. The IT budget reductions were reported across the board based on the size and geography of the organizations. The largest decline was in professional services at -10 percent, followed by telecommunications and high tech also at -10 percent, manufacturing at -8 percent, utilities at -4 percent and financial services at -4 percent. However, CIOs in healthcare-related industries reported an average budget increase of 2.2 percent. CIOs recognize the possibility of further cuts in 2009 and the percentage of CIOs with a contingency plan for the remainder of 2009 has more than doubled compared to 2008. Those with additional contingency plans are planning for the potential of renewed IT spending as well as additional reductions. While 44 percent of CIOs do not believe that they will need to tap into their contingency plans, there are some who believe that they will do so during the next six months. The survey also reported that CIOs expect the economy to recover between the first and third quarter of 2010 and they plan to increase IT investment projects and workforce levels as their first investments in such a recovery. Software, hardware and infrastructure investments are also high on the CIOs agenda on the path to economic recovery. McDonald said, "Based on CIO contingency plans, they are now better prepared for future economic challenges. However, most CIOs do not see immediately implementing those plans. This supports a position that the first quarter budget adjustments reflect firm plans for the remainder of 2009."

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