2009 IT Budgets: Flat, but Not in Free Fall

Ann All

As the year draws to a close, folks are cutting their IT budgets. But the picture for 2009 is less clear. Both Gartner and Forrester Research have lowered their expectations for IT spending, but still expect it to increase next year. Other analysts, including UBS and Friedman, Billings, Ramsey & Co., are less positive.


Members of the Society for Information Management (SIM) are siding with Gartner and Forrester, reports InformationWeek. Forty-four percent of them expect their 2009 IT budgets to be higher than 2008 levels, while 37 percent believe spending will be flat and 19 percent expect to spend less than in 2008.


The SIM numbers aren't that different than those seen in 2008, when 46 percent of respondents increased IT spending over 2007 levels, 28 percent had flat budgets, and 26 percent shrank spending. According to the survey, the average IT budget in 2008 was 3.82 percent of revenue, up from 3.5 percent in 2007.


Though the SIM survey was conducted in June, Jerry Luftman, the society's VP of academic community affairs, doesn't think the numbers would change significantly if the same survey was conducted today. He thinks companies will continue to invest in IT because of its ability to improve overall cost reduction.


Concerning staffing, 43 percent of companies intend to add staff, while 42 percent say staffing levels will remain the same. Just 15 percent expect to cut staff. This is actually more optimistic than 2008. Forty percent of respondents say they added IT staff this year, while 36 percent say staffing remained flat and 24 percent shrank head count.


Interestingly, many respondents also plan to increase outsourcing, both offshore and onshore. On average, respondents expect to earmark 5.6 percent of projected 2009 IT budgets for offshore outsourcing, up from 3.2 percent in 2008. And 6.2 percent of budgets will be allocated for domestic outsourcing, up from 5.2 percent this year.


A recent Computer Economics survey trended much the same way. Respondents weren't quite as positive as the SIM respondents, but this may be because Computer Economics conducted its inquiry just last month. While a quarter of respondents anticipate spending reductions of at least 3 percent, another quarter think their budgets will rise by at least 5 percent. At the median, IT organizations forecast flat spending growth.


Similar to the SIM survey, Computer Economics found that companies at the median and 25th percentiles expect to maintain head counts in 2009, while companies at the 75th percentile anticipate a 5 percent boost in staffing levels.


Frank Scavo, president of Computer Economics, thinks IT budgets will largely hold firm next year, rather than shrink, because of the belt-tightening practiced by many IT organizations in the latter months of 2008. He says:

Our study forecasts that IT operational budget growth will be flat for 2009. If this forecast proves to be true, it may be because IT organizations have already been proactive about tightening the belt in 2008.

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