15 Jan How could IT budgets be flat in tough economic times?
Editor’s note: Mark McDonald, group vice president and head of research for Gartner Executive Programs, writes a blog on the Gartner Blog Network.
In tough economic times, it’s logical to think that IT budgets across the board would see deep cuts like they did in 2002, when IT budgets went from a projected 10 percent growth in 2001 to zero growth in 2002.
However, the results of the 2009 Gartner CIO survey indicate that global commercial and government IT budget growth is expected to be flat, with a modest increase of 0.16 percent (0.0016). Given the range of economic news, how is this possible?
These are challenging times punctuated with uncertainty, and we can only work with the information we have at hand. The 2009 CIO survey is based on more than 1,500 responses gathered from September to December 2008; while budgets can always change, CIO responses indicate the reasons why the average IT budget for 2009 is flat.
First, CIOs have been managing with modest budget growth since 2003. The average projected growth reporting in the survey over the prior five years was just 2.5 percent. Hopefully CIOs are being recognized for their ability to manage IT operations and finances.
Second, CIOs report that business expectations of IT are concentrating more on changing the enterprises cost structure through business process, workforce, and organizational change, than just running IT. Under this rationale, the CEO holds the IT budget stable and focuses IT on reducing enterprise costs. This makes sense as IT is a leverage point representing an average of four percent of sales while it has the ability to change the structure of the other 96 percent of enterprise cost.
Third, there is a large group (33 percent) of CIOs reporting no change in their spending plans, while 46 percent of CIOs are reporting budget growth in 2009, versus 21 percent reporting budget cuts. The increases are slight, but they are across geographies and industries indicating at least for now a base of support.
A flat IT budget is not a reason for celebration, as no growth requires CIOs to cut spending in some areas as they redirect it to other initiatives. Also, CIOs report that business demand for IT solutions has not declined in the face of tighter resources, so there is much hard work to be done.
In this volatile market, this all could change as executives look to balance resources to revenues and costs. But at this point in time, based on what we now know, many CIOs are facing the future with the same resources they had in 2008 or 2007 as the average budget is flat.
The headlines will report individual companies making severe budget cuts and individual departments within companies may see significant changes. That will happen, and it’s one of the caveats when working with averages. Averages provide an indication of what is going on, but it does not define the future for each organization.
The pertinent questions are as follows:
What are you seeing with IT plans in your companies?
What are the rational people are giving for changes in spending plans?
How confident are you that the budget you set now will last across the new year?
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.