Survey: IT Tightens Budget Belt

By Allan Alter  |  Posted 2006-02-27

Editors note: This is the first in a monthly series in which eWEEK excerpts original IT research from its sister Ziff Davis Media publication, CIO Insight.

From a distance, it appears that IT spending is on track for growth. But behind the numbers, CIOs are troubled about the bottom line.

According to the findings of the 2006 CIO Insight IT Spending Survey, budgets are up by 5.4 percent over last year. Thats a slightly larger increase than last years 5 percent. Plus, more than 70 percent of respondents believe they will find more funds for their projects during the year .

So CIOs ought to feel reasonably confident about spending levels, right? Then why are more CIOs concerned that IT budgets are insufficient to meet strategic goals this year than they were last year?

Supply chain spending is on a roll. Click here to read more.

Heres the problem: As the economy grows, companies want to improve revenues, not just cut costs. That pressures CIOs to pursue a wider variety of IT projects this year.

Spending on many categories of hardware and systems is flat or down, the survey noted, as companies keep trimming costs by consolidating systems, replacing legacy systems, investing in virtual servers and storage, adopting open source and VOIP (voice over IP), and hiring outsourcers.

For instance, according to the CIO Insight research, CIOs say they are spending 55 percent of their budgets on maintaining ongoing operations and 24 percent on launching new projects .

The net result? CIOs must continue to do more with less—or, rather, do much more work with just slightly more money.

"Our project list is enormous," agreed Eric Bloom, vice president of IT at Endo Pharmaceuticals, a $615 million maker of pain medications in Chadds Ford, Pa. While the budget is increasing, the IT head count is only 27.

Although executives expressed worry about spending too much on IT, they seemed afraid of spending too little on business continuity and security.

At the same time, CIOs fear losing skilled workers. The largest increase in spending this year is on training and development.

"Training leads to retention," said J. Michael Gabbei, who, as the CIO of Celadon Trucking Services, a subsidiary of Celadon Group, a $437 million transportation company in Indianapolis, is increasing his training budget.

Click here to read the full report on CIO Insight.

Allan Alter is Executive Editor of CIO Insight.

Check out eWEEK.coms for the latest news, reviews and analysis on IT management from

Rocket Fuel