IT Budgets Thawing?

Flat tech spending means battling for deeper discounts and slashing costs.

IT budgeting has been a zero-sum game for the past few years as CIOs search high and low for technology investments that will drive down costs while driving new business. As CIOs budget for 2004, the focus will continue to be on cost cutting. Keeping an eye on economic volatility and uncertainty through next year, many CIOs say they plan to maintain their goals of improving technology alignment with business, keeping budgets down and increasing productivity.


Roundtable: Members of eWEEKs Corporate Advisory Board discuss their spending priorities for 2004.

"Weve done a really good job of driving costs out and taking that savings and continuing to invest it in technology," said Tim Ferrarell, senior vice president of enterprise systems at W.W. Grainger Inc., in Lake Forest, Ill. "Were expecting our budget to be roughly flat this year and over next year. At the same time, we are making sure we get more for our money."

While the economy shows glimmers of improvement, most IT decision makers said theyll continue to budget conservatively, with the expectation that 2004 IT budgets will remain flat.

Rather than invest in the latest and greatest technologies, many organizations will spend their discretionary dollars on finishing large projects that will deliver the most impact to the business quickly. This includes such projects as improving upon an existing enterprise resource planning system by adding a module or investing in a new collaboration application that will quickly meet business needs.

In a survey of 133,000 IT managers, research company Wendover Corp., of Haverford, Pa., reported that IT spending declined 14 percent in the second quarter of this year. This drop signals that IT spending will remain flat through the end of the year, Wendover officials said.

"Peering into the pipeline of new IT dollars, we see a cautious trickle, not the bold flood others predict," said Wendover analyst Larry Dillon in a statement.

Chris Hagler, national managing director of strategic services at Resources Connection Inc., said that although the specialized staffing company has seen continued investment in improving existing systems, it has not seen an uptick in new IT spending.

IT budgeting is not all about doom and gloom, however. Research company International Data Corp. estimates that vertical industries worldwide will continue to invest in IT through 2007, despite the sluggish global economy. In fact, IDC reports that the manufacturing and banking sectors are expected to be among the biggest overall IT spenders. The company also estimates that ongoing investments by the manufacturing industry will represent a $225 billion market by 2007.

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