IT Spending Growth, Hiring Remains Sluggish: Report

A stalling economic recovery has IT executives feeling cautious on hiring and tech spending initiatives.

In light of modestly improving conditions in the U.S. economy, IT spending growth remains subdued, although nearly two-thirds of respondents said they are increasing their IT operational spending this year, according to a survey of more than 200 IT executives conducted in the first half of 2012 by research firm Computer Economics. However, a quarter of respondents said they would actually be decreasing overall IT spending, while 13 percent said spending would remain about the same.

The hiring outlook was also a mixed bag, with 40 percent of IT organizations planning to increase headcount, compared with only 33 percent in 2011. However, 27 percent of respondents said they plan to reduce staff this year, while 33 percent expect no change. €œAs with capital spending and operational spending, there appears to be a rising disparity among organizations,€ the report said. €œSome are prospering while others are still pulling back.€

When asked about their expectations for change in IT operational spending, nearly one-third (31 percent) said they expect budget cuts in the year ahead, compared with only 16 percent who expect a green light to exceed their spending plans. Survey results indicated the mood of IT executives is getting more pessimistic, even though IT budgets are increasing modestly; the lack of confidence is higher today than it has been at any time since 2009, when nearly half of IT organizations anticipated budget cuts amid the deepening financial crisis.

€œNearly half of IT executives find their budgets are inadequate to meet the needs of the business. The meager growth in IT spending has not restored IT budgets, and many IT organizations remain underfunded due to cost cutting. We believe this is unsustainable and, therefore, a potentially bullish indicator for IT spending in the years ahead,€ the report noted. €œBusiness leaders are not aggressively making strategic investments in innovative technologies to gain competitive advantage, at least to the degree that IT spending would rise faster than revenue. Nor are businesses struggling with deteriorating revenue, which can also cause this metric to rise temporarily, as it did in 2010.€

The picture gets even worse when considering the outlook for IT capital spending, with 29 percent expecting to spend less than previously planned. Just 15 percent of respondents are planning on spending more, while 55 percent said spending would remain about the same, suggesting IT executives are cautious and prepared to resume cutting costs as the economic recovery stumbles slowly forward. Upgrading existing systems was the top priority for IT executives, followed by increasing business efficiency and developing new systems, suggesting organizations are placing greater emphasis on squeezing cost out of the IT infrastructure this year.