Organizations Expect Flat Growth in IT Spending in 2016

Computer Economics' forecast indicates that IT operational budgets will grow about 2 percent at the median--representing a slowdown in growth.

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While some IT organizations are bullish about the future and even forecasting a revival in IT capital spending, others, particularly larger ones, anticipate no growth in their budgets and appear to be hunkering down.

These are among the findings in Computer Economics’ 2016 IT budget outlook, which is based on projections of IT spending plans by 86 organizations in the U.S. and Canada.

The company’s forecast indicates that IT operational budgets will grow about 2 percent at the median, and while still positive, the growth rate is slowing from the rate of improvement over the previous four years.

"Large companies are more concerned about the global environment than anything going on in Washington, D.C.," John Longwell, vice president of research at Computer Economics, told eWEEK. "While you can make a case that the party in power always props up the economy in an election year, right now there is no party in power and we’ve pretty much run out of tools for propping up the economy."

Longwell noted the Fed is raising interest rates, and there is no appetite for fiscal stimulus, and the best that can be said is that House budget hawks are shying away from shutting down the government, but that is hardly cause for bullish optimism.

"I think most companies see continuing restraint in healthcare inflation and rising wages at the low end of the scale as net positives for the economy," he said. "Some sectors will benefit more than others, of course. For IT budgets, it will not be a big factor. IT workers are not making minimum wages. Hiring will remain tight and personnel expenses will continue to decline as a percentage of the IT budget. This will translate into more dollars being available to spend on applications, particularly cloud applications. But this is being driven more by rising productivity than lower costs."

Longwell explained businesses are investing most of their new IT dollars in applications of all types, and we are continuing to see strong uptake in cloud-based applications.

"Our research indicates 46 percent of IT organizations are increasing spending on business applications in 2016. We also anticipate some growth in spending on network infrastructure," he said. "In contrast, spending on end-user devices such as PCs and printers will be flat and we will continue to see some decline in data center infrastructure spending. IT budgets are definitely shifting towards applications and the cloud."

Longwell noted more than half of the organizations polled expect to increase spending on cloud applications, pointing out that another big area in 2016 will be security and privacy, while business intelligence will remain an important solutions area.