In the first quarter of 2009, CIOs experienced significant IT budget revisions as executives gained a greater understanding and solidified plans for addressing the global financial crisis, according to a worldwide survey of 900 CIOs by Gartner Executive Programs (EXP).
The results of this survey were compared with the results of the Gartner EXP 2009 CIO Survey, conducted from September to December 2008, which had more than 1,500 responses.
This update survey was conducted from March 1 to April 30 2009 and sought to gauge the potential impact of macroeconomic concerns on IT budgets. These CIOs encompass more than $77 billion in revised IT spending.
CIOs in the original survey reported a flat budget with a minor increase of 0.16 percent. CIOs responding to the update survey in the first quarter now report a weighted average decline of 4.7 percent. The figure below shows the change relative to changes in IT budgets since 2004.
- Fifty-Four percent (54%) of CIOs reported making no change in their IT budgets from their original plans.
- 42% of CIOs changed their budget in the first quarter making a reduction in the first quarter, which averaged 7.2 percent.
- The remaining 4% increased their IT budgets in the first quarter.
Based on these responses, IT budgets moved down 4.7% when compared to IT budgets at the end of 2008. The figure below shows the distribution of changes made in the first quarter and the distribution of those changes.
CIOs are responding to the budget changes in by changing the mix of external and internal spending. CIOs reported concentrating on renegotiating vendor contracts, salary freezes and head count reductions, as well as reducing CAPEX on software and hardware.
CIOs reported shifting more work to in-house resources more than reducing IT project investments. Few, only 9% see increased use of outsourcing as a way to address the budget challenge.
First quarter 2009 IT budget reductions were reported across the board based on both size and geography of the organization.
- CIOs in healthcare-related industries reported an average budget increase of 2.2 percent.
- The largest decline was in professional services at -10 percent,
- followed by telecommunications and high tech at -10 percent,
- manufacturing at -8 percent, utilities at -4 percent and
- financial services at -4 percent.
CIOs recognize the potential for further cuts in 2009, but most see that as unlikely.
The percentage of CIOs with a contingency plan for the remainder of 2009 has more than doubled compared with 2008.
CIOs with additional contingency plans for 2009 are planning for the potential of renewed IT spending, as well as additional reductions. While 44 percent of CIOs do not believe they will need to tap into their contingency plans, those that do believe they will do so during the next six months.
The survey found that CIOs expect the economy to recover between the first and third quarter of 2010. CIOs 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 CIO’s agenda on the path to economic recovery.
Bottom line: Executives making plans in the fourth quarter of 2008 faced an uncertain future as the global financial crisis unfolded. Based on CIO contingency plans, they are now better prepared for future economic challenges. 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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Link to CNBC Interview on June 8th, 2009 http://www.cnbc.com/id/15840232?video=1145267494&play=1
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