IT Cost Cuts in 2008 May Be a Trend, Study Says

• By Kurt Mackie
• 07/24/08

A first-quarter 2008 survey conducted by Computer Economics suggests a possible slowdown in IT spending and staffing lies ahead.

The group's analysis found that the growth rate in the median IT operational budget was four percent among its 2008 survey participants. That figure represents a decline from the five percent growth rate measured in 2007.

The four percent increase in IT budgets for this year "may prove to be optimistic," according to the report, because one in four IT executives say they don't plan to spend all of the money in their budgets.

The top priority for IT organizations in 2008 was "to improve IT service levels." In contrast, the 2007 response was "developing new systems." The report interprets this shift to indicate "a general softening in the focus on new systems and tighter attention on cost control."

The other top priorities for IT organizations in 2008 included risk management and disaster recovery, security, and lowering IT maintenance and support costs.

The report, "IT Spending, Staffing & Technology Trends 2008/2009," said it found indications of "a decidedly cautious mood among our survey respondents this year, in contrast to the optimistic tone in last year's survey."

IT spending per user was $6,667, representing a decline from $7,397 in 2007. The report's analysis suggests that this decrease in spending means that IT management is finding a way to get along with less.

"In other words, in today's weak economic conditions, IT managers are showing their ability to support an increasing number of users without corresponding increases in IT spending," the report states.

In terms of long-term capital IT spending, the report sees a drawback. The median IT capital spending for 2008 was flat, whereas it constituted a four percent growth rate in 2007.

Does all of this mean less hiring or layoffs? The report found that prospect to be a mixed bag, with 39 percent of respondents saying they are adding staff, 37 percent indicating no change in staffing and 24 percent planning to cut staff. However, outsourcing is on the rise among companies of all sizes, the report indicates. Respondents in organizations that have outsourced their software development work say they plan to increase outsourcing by 15 percent.

Computer Economics' survey was conducted from January to April, 2008. Respondents were IT staff knowledgeable about spending and staffing in the United States and Canada. Participants included "201 CIOs and senior IT management" in large, medium and small companies.

For access to the report or a free executive summary, go here.