The Frozen Ground Breaks: Signs Appear of IT Recovery

Theres a barely perceptible but significant thaw in the IT spending freeze, IT researchers are finding.

“Theres unrelenting pressure on cost for the third year in a row. But now there is a requirement that companies innovate. People are becoming concerned that the future of companies is being put at risk,” said Ellen Kitzis, group vice president of Gartners executive programs. The discovery was unearthed in Gartners third annual CIO Agenda survey, released this week, which elicited responses from 620 CIOs.

Many businesses are recognizing that a risk-free technology universe is neither possible nor desirable, so they are beginning to look once again at enterprise-level projects, Kitzis says. “An enterprise-level project, if youre a global company, has risk. It might be ERP, CRM, a major change in an order entry process or business process change at an enterprise level,” she said.

Companies are realizing that even with rigorous cost cutting, they are still spending between 3 percent and 8 percent of their total revenue on IT, so it makes sense that they should gain some strategic value from it, rather than merely maintain the status quo, Kitzis explained.

Gartner is not alone in this finding. Boston-based Aberdeen Group also found that companies are considering new application purchases, although Aberdeen says they are not yet ready to buy. But just considering the purchase is a positive indicator and indicates that a slow recovery is in progress, said Aberdeen analyst Hugh Bishop. Aberdeen has found that budgets are no longer shrinking and is predicting that IT budgets will increase over the next six to 12 months by 2.7 percent.

As the corporate purse strings gradually loosen, CIOs will need to improve their ability to communicate with corporate management. Gartners Kitzis said that Y2K hysteria and the dot-com boom and bust had, fairly or not, left many business managers skeptical of IT.

IT spending is picking up, Gartner found, when business management and IT management are closely collaborating. “People fund things when they think there is a real business advantage,” said Kitzis.

One IT executive, who asked to remain anonymous, suggested that upper management, for whatever reason, seems newly aware of the competitive advantage that can result for wisely spent IT dollars. The result is that IT projects that reduce cost or enhance competitive advantage are being given priority.

In the government sector, meanwhile, one IT pro at a federal agency, who also asked not to be named, said because economic trends are generally felt about a year later in the government sector, there is no thaw there as yet.

The return to normalcy in IT appears inevitable, notwithstanding a possible military conflict in Iraq, said Kitzis. “Even with fear and doubt with regard to politics, people are starting to see a turnabout. They are beginning to prepare themselves for a better economy.”

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