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IT budgets suffer more shrinkage

Cisco network equipment, enterprise iPhone deployments among the few bright spots for IT spending
By Denise Dubie , Network World , 09/10/2008
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Industry watchers are once again lowering their forecasts for IT spending as enterprise IT buyers report they are cutting budgets and approaching future investments with caution.

Goldman Sachs this week released the results of its quarterly IT Spending Survey that polls 100 managers with decision-making authority at Fortune 1000 companies. The research firm adjusted its forecast for U.S. IT spending to 4% for 2008. That number is down from 6% in 2007, and Goldman Sachs attributes the shrinkage to IT buyers thinking about long-term investments.

"Tech's high correlation with the broader economy means that a deceleration in tech spending in 2008 appeared inevitable at the beginning of the year and seems even more pronounced as we enter [the second half of 2008]," the report reads. "Our IT spending indices hit their lowest level of the year, indicating that macro concerns continue to weigh on spending expectations. Indices still imply mild growth, but clearly a downward bias."

Separately Forrester Research reported that 43% of 950 senior IT managers polled have already cut their overall IT budgets in 2008 in reaction to the slow economy. Another 24% put discretionary spending on hold. Forrester's study found that 49% of U.S. companies polled are cutting budgets, while 31% of companies polled in Europe are doing the same.

"This is not an across-the-board spending slowdown; the impact of the economy on IT budgets varies widely by industry and geography," stated John McCarthy, Forrester vice president and principal analyst, in a press release.

But the research firms did find bright spots in spending plans. For instance, Goldman Sachs discovered a rebound in investing in networking equipment. The technology area had dipped to 42% of respondents expecting to increase spending in the firm's June survey, but jumped to 54% during this quarter. And the percentage of respondents expecting a decrease in network equipment spending declined to 13% from 17%. Specifically, spending for Cisco products shows positive signs, the research firm says.

"In our August reading, 53% of respondents expect to increase spending on Cisco products in the next 12 months, up from 44% in June and within the 50% to 70% range that we consider healthy," the report reads. "Likewise the number of respondents who expect to reduce their spending on Cisco declined to 11% from 15%."

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Budgets Shrinking? It's about time!By Schratboy on September 10, 2008, 1:35 pmThrowing technology at the network doesn't increase the bottom line especially when there is no goal in mind. Companies have drunkenly spent millions on expanding...

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