CIO survey shows IT budget growth broadly stable

STAMFORD, USA: Despite economic concerns, global enterprise IT budget growth remains unchanged at 3.3 percent in 2008, according to a worldwide survey of 1,011 CIOs conducted in the first quarter of 2008 by Gartner Inc.

While 62 percent of CIOs reported no change in their 2008 IT budgets, 23 percent indicated a decline in their budgets, and 15 percent of respondents reported an increase in their budgets. Of those respondents reporting a decline in budget, the decrease averaged at 10 percent in their committed 2008 budget. For those respondents that reported an increase in their budget, they said the increase was approximately 15 percent.

The study conduced from February 12, 2008 to March 12, 2008, sought to gauge the potential impact of macroeconomic concerns on IT budgets. Respondents were asked since they finalized their 2008 IT budget, has that budget changed. The results of this survey were compared with the results of Gartner Executive Programs 2008 CIO survey conducted from September to December, 2007, which had 1,500 responses.

“Overall, the majority of CIOs reported no change in their 2008 committed budgets. This indicates that IT budgets are not the ‘target rich’ enviornment for cost cutting they have been in the past. However, there is some softness, particularly in the U.S.,” said Mark McDonald, group vice president and head of research for Gartner Executive Programs. “CIOs responding to the study report that IT budgets are still growing, even in the US, but growth rates are muted slightly. Historically, the revised numbers are in keeping with the past four years where IT budget increases have averaged 2.4 percent.”

US IT budget growth rates are softening. Overall US IT budgets for 2008 are expected to grow, but the growth rate has slowed from 3.1 percent to an increase of 2.3 percent. One in four US CIOs indicate that their IT budgets were reduced in the first quarter, 65 percent were unchanged and 10 percent reported budget increases in the first quarter.

CIOs reported budget changes that are in keeping with a general belt-tightening program rather than a restructuring of the IT budget or spending levels. Almost two-thirds, 72 percent of those reported a decline of 10 percent or less. “We are seeing caution rather wholesale cutting,” McDonald said. “This is due to CIOs increasing diligence in managing IT spending over the past few years.”

Geographically, IT budgets continue to exhibit growth with budget growth increasing in Europe (+3.86 percent) and Asia/Pacific (+5.98 percent). The strength of European and Asian CIOs in their economies is reflected anecdotally in their response to this study. On several occasions, CIOs in these geographies commented that they saw the current belt tightening as a US only phenomenon indicating a level of independence from conditions in the US.

“The first quarter should be the toughest in terms of budget changes as executives are cautious at the start of the year. CIOs are managing their budgets differently than in the past, on a greater business basis and that is showing up in the results of this first quarter study,” McDonald said.

CIOs were asked about their contingency plans. Only one-third (32 percent) reported having contingency plans for 2008. “Given economic conditions, CIOs should be prepared and have a contingency plan for both increases or decreases in the next 90 days (by the end of the second quarter of 2008),” McDonald said.