IT Budget 2009: It's the Economy, Stupid

The economy and Wall Street rumblings are casting a pall over IT budgets, but there could be light at the end of next year.

As the economy goes, so goes IT. Right now, the lackluster economy-made darker by the recent collapse of Lehman Brothers and the acquisition of one-time powerhouse Merrill Lynch by Bank of America-is casting a pall over 2009 IT budget planning. Even so, some experts say the second half of 2009 could see a return to brighter days.

"We're going to play it by ear until next year," said Jim Michael, associate director of IT services for California State University and vice president of SHARE, an association of IT professionals. "How soon will we feel the effects of recovery? The state budget might not recover as quickly as private industry. It's definitely wait and see."

The current doldrums in IT spending began in 2008 following a strong year in 2007. "2009 and 2008 are going to be one and the same; we've tapered down from 2006-2007," said Paul Tinnirello, CIO of a company in the insurance information business. Robert Rosen, CIO of the National Institute of Arthritis and Musculoskeletal and Skin Diseases and an eWEEK Corporate Partner, took a similar view: "At the very best, [our budget] will be flat. With the cost of living, it's effectively a cut."

Analysts said the economy is dictating the pace of IT spending.

"It's all about the economy-that's underlined by all of our surveys," said Stephen Minton, an analyst at IDC, pointing to his company's interviews of IT professionals. "They've told us pretty clearly that the only reason for them to be pulling back on tech projects is because of the economy. Banks, retailers, wholesalers, construction companies-all those that have felt the slowdown of the economy-they are being forced to cut back on their tech spending," Minton said.

Forrester Research analyst Andrew Bartels said his company assumes a recession in late 2008 that will carry over into 2009. "Consumer spending showed a decline in real terms in July 2008, and there is weak growth in personal income," Bartels said. "Stimulus checks have been propping things up, and U. S. exports were propped up by the weak dollar. Europe is slowing, and Japan seems to be in recession. Consumers look like they're going to be hitting a wall."

IT execs are taking note, Bartels said: "They're going to be looking at an economy that will be looking pretty feeble during the budgeting process, so they'll be approaching 2009 very cautiously and very conservatively in terms of spending."