08 Jun 2009
IT budgets were cut by nearly five per cent in the first quarter of 2009, with nearly half of IT leaders (46 per cent) having to make changes to their spending plans, according to research by analyst Gartner.
The global survey of 900 chief information officers (CIOs) showed that only four per cent of respondents reported an increase in IT budgets, with 54 per cent showing no change and 90 per cent of those changing their plans making an average reduction of 7.2 per cent.
The study suggests a marked decline in IT confidence - Gartner's corresponding survey for the last quarter of 2008 showed CIOs reporting a nearly flat budget, up by just 0.16 per cent.
Gartner vice president Mark McDonald said the primary areas for clipping IT budgets were renegotiating vendor contracts and reducing staff numbers.
“CIOs report shifting more work to in-house resources and delaying capital expenditures more than reducing IT project investments,” he said.
CIOs in healthcare-related industries reported an average budget increase of 2.2 per cent, while CIOs in all other major industries reported a decline.
Professional services reported a 10 per cent drop, as did telecommunications and high-end technology firms. Manufacturing showed an eight per cent decrease, with both utilities' and financial services' budget cuts coming in at four per cent.
Gartner's survey said CIOs were expecting the economy to recover between the first and third quarter of 2010. First items on the agenda that CIOs would address when the upturn occurs were increases in IT investment projects and workforce levels.
“Based on CIO contingency plans, they [CIOs] are now better prepared for future economic challenges. However, most CIOs do not see immediately implementing those plans, supporting a position that the first quarter budget adjustments reflect firm plans for the remainder of 2009,” said McDonald.
According to COLT's latest survey of CIOs at large UK enterprises, reducing costs is overwhelmingly the key business priority for IT, closely followed by business transformation. These priorities are driving greater demand for managed services, with 63 per cent of survey respondents planning to use more third party managed services in the next year and a further 26 per cent looking to invest more in managed services in the longer term.
When asked what IT issues are top of mind, 78 per cent of the CIOs selected cost reduction as a top IT priority, with 52 per cent choosing business transformation and 43 per cent infrastructure flexibility. Interestingly, security was shown to be less of a current concern for the CIOs who responded, with only 35 per cent stating that it is a top priority.
Virtualisation was found to be critical for CIOs looking to achieve cost savings: 82 per cent said virtualisation technologies will be either important or very important for their business within the next 12 months. Only 13 per cent said that they have no current plans at all to implement either server or storage virtualisation.
The survey also confirmed that enterprise cloud computing solutions are growing in importance for IT decision-makers with 27 per cent stating that they were planning to introduce them in the future. Enterprise cloud computing solutions are defined as those that combine a dedicated, virtualised and shared IT infrastructure with network connectivity to deliver the high quality and consistent user experience that enterprises demand.
Maggy McClelland, Managing Director, COLT Managed Services commented, "Our survey shows that an overwhelming majority of CIOs are planning to increase their use of third party managed IT services, with a significant number also looking at cloud computing. With most businesses feeling the effects of the global recession, it is clear that they are increasingly looking for different models for IT that are far more efficient and flexible than the traditional build-and-manage approach. It is more important than ever to provide robust managed services that offer the performance levels, cost structures, security and control that enterprises demand."
Brian Gammage, Vice President and Research Fellow at Gartner added, "For enterprises, it is time to re-evaluate approaches to IT assets. Many assumptions regarding ownership and how to build IT capabilities are now no longer valid. For most organisations, the shift from buying and building IT to accessing IT as a service is not new. However, the trend is set to accelerate - in part, because the range of viable service options is extending, which is highlighted by the interest in virtualisation and cloud computing."
Posted by: Maggy McClelland 08 Jun 2009
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