Analysts: Companies Cutting IT Spending

6,573 Views

26 Comments Flag as inappropriate

NEW YORK – Many large companies, especially those in the financial services, utilities and telecommunications industries, have cut their technology budgets this year because of the economic slowdown.

In a report released Tuesday, Forrester Research Inc. found that 43 percent of large U.S. and European businesses it surveyed have cut their overall spending on technology products and services in 2008. Some companies, meanwhile, have put discretionary spending on hold and others are planning to negotiate lower rates for information-technology services.

The research firm did not change its annual technology spending forecast, but it is reviewing it. In its most recent forecast, in February, Forrester had said it expects tech spending to grow 2.8 percent this year. That marked a significant downward revision from a December 2007 forecast of 4.6 percent growth.

Tuesday’s report, said Forrester vice president and principal analyst John McCarthy, is “really just a snapshot” of companies’ spending sentiments.

In general, corporate technology buyers were less optimistic than they were in the last such survey, in October 2007, just before the credit market tightened and the housing market “really fell apart,” McCarthy said.

Forrester’s survey found that the effects of the economic downturn varied by geography and by sector. U.S. companies were more likely to cut their budgets than those in Europe, for example. And while companies in finance, utilities and telecom are tightening their belts considerably, those in media and entertainment are spending more. McCarthy noted that such companies are going through a “fundamental upheaval” that requires they spend on technology regardless of how the economy is doing.

In the survey, taken in late May and early June of nearly 950 IT managers at companies in North America and Europe, nearly half of the U.S. respondents said they have already cut their IT spending budgets, compared with 38 percent of those in Canada and 28 percent of companies in Germany. And 70 percent of respondents said they expect to negotiate lower rates with IT service suppliers.

“Clearly we are entering a period of very judicious IT spending,” McCarthy said. But, he added, this isn’t the “outright slash and burn” of technology budgets seen in 2002. Last time around, the fallout was from the a bust in the tech sector itself, while this time it’s the financial, real estate and auto industries that are leading the downturn.

“We see continued growth in service spending overall,” McCarthy said.

In August, research firm Gartner Inc. said it expects worldwide IT spending to exceed $3.4 trillion in 2008, an 8 percent increase from 2007. But much of this growth, analysts said, was based on the decline of the U.S. dollar. Otherwise, Gartner forecast IT spending to grow about 4.5 percent.

Share this Article: Digg It! Stumble It! Reddit Facebook Technorati

larry_blac

7 months ago

4 comments

First, I must agree with MagiAwen regarding enterprise-wide spending analysis, and perhaps some business process reengineering (or elimination) w/i both business units and upper management. After all, how many idiots does it take to decide to change the light bulb when the room goes dark....same number as the number of engineers needed to install the bulb, and we get paid a lot less than the CEOs, COOs and CFOs, who are indeed valuable for their uncanny grasp of the obvious "it's dark in here, we'd better call someone to repair the light...just don't spend too much". Well Chief, should the bulb not be the problem and I have to perform an analysis of your building's electrical system to lite up your life again, as an independent consultant, bend over while you can't see what's coming...I'll lower my bill rate, fine, but perhaps I should bill for ALL hours spent on your company rather than about 2/5, which is the norm for IT Consultants.
After 2 decades with a 'Big Six', now down to five, or four even, our regional office was shut down and without notice, 63 very talented and highly skilled engineers/consultants were put on the streets with no remorse from the corp partners who made the decision. At least one of them, Oui, is now taking at least one position away from their engaged contracts as opportunity arises, and at a bill rate that makes my old salary look like a welfare check...after all, I'm a consultant, I have places to go and people to do...they know who they are! Now, that's capitalism...and I'll take that olive in my martini thank you....shaken, not stirred!
haighar

7 months ago

6 comments

You gotta love how we are expected to give notice when it is our decision yet get taken to another floor to get escorted out on the spot when its their decision due to "downsizing".
MsTek

7 months ago

12 comments

this is scary, i've only started to come back to work after being home for 17 yrs. Now i've got the creds and am seeing not only no jobs, but those who do have the jobs, being outsourced. am beginning to think i chose to spend money on the wrong career
NMc

7 months ago

2098 comments

If this happens to me and I must return to the workforce as an admin assistant or something....and my computer/printer/software has problems....I'm not fixing it. I'll pretend I don't know how. ;)
denise_kelly

8 months ago

10 comments

We know more about what is happening in the IT space than the idiot that wrote this article. I am IT software. There are major problems in ERP software with Security &, Compliance, The master data files need management daily. The SME's (small to medium enterprises) are entering the ERP market in 2009 and they are going to need SME's (subject matter experts). Expand your knowledge of IT so you are a resource that can and will bounce back.

There is space for all of us - young, old, male, female, white, black or Asian. The IT solution is in all of us.
MagiAwen

9 months ago

84 comments

Since the entire technology and economic slowdown which started at LEAST two years ago (even though only now is Wall Street freaking out), we see this over and over. The one thing I can't quite figure out is why larger companies don't reduce all over costs by assessing the entire organization. Some say they do but more often than not it looks like what they do is say oh...we can cut spending in the tech. services by eliminating jobs. Why not try to eliminate spending first...this doesn't mean you go and give everyone a pay cut either.

There is so much waste in large organizations they often are amazed if they actually look at the small things that add up. I read somewhere that an airlines once saved $37,000.00 a year by eliminating one olive from the salads they serve in first class. Pricey olives.

Seriously, if most organizations took each department and found out where their overhead is, find out what they are simply storing and recycle, sell or give it away (as an example).

As a former small business owner it is those types of cutting (when there are no employees to lay off or anything else to cut) is what really makes the difference in the checkbook.... or at least can make a large difference before you resort to cutting people.

Sometimes it is not in a company's interest to simply pick a number out of the hat for a budget...which is really what most of them seem to do. They also don't seem to spend wisely in the first place, usually over purchasing and on top of that spending too much on those over purchases.

These sorts of things give me a headache because it seems that common sense goes out the window. But usually it's because the people making decisions about budgets may know numbers, but they certainly don't know technology...and some of the time..okay a good portion of the time they don't understand how their company utilizes or CAN utilize the technology they have. That probably irritates me the most.

Watching a mid sized company spend money on paper and couriers for inter and intra office memos kills me.... when everyone has a computer, email, fax machine, etc.
primie

9 months ago

12 comments

Cost-cutting? sensible enough but HURT a lot to my pocket... LOL ,who else will theY call (I.T. GUY) when there is no there maybe soon left to work... There are still options :> just that their nose is too big to see it
pooponh1bs

9 months ago

2 comments

H1b's are worthless and need to die. There's gonna be a forthcoming of asskicking all around you same as poop colored metro-fags.
rksii

9 months ago

8 comments

I agree with marcparaiso and I don't think this trend started with the current economic environment. It has been coming on for years. Just like in the blue-collar segment, companies are using cheap foriegn labor to drive down salaries. Unfortunately, this has led to two serious situations: 1) Many experienced Americans are getting out of the technology field and 2) there are not as many younger Americans entering the technology field. At the same time thanks to both improved education in developing conutries and our willingness to give our jobs and training to foriegn workers, the skill level of foriegn technology workers has been steadily increasing. Ultimately, this is going to destroy the American technology segment, assuming that its not too late already.
SrQAinNH

9 months ago

2 comments

Gonna HIT? - I was laid off in June after 9 years , I know 15-20 year vets that were axed too.......It is INSANE!
killerbeez

9 months ago

2 comments

It hit Ohio already. The car warranty aftermarket business is dying...They just axed part of the IT staff. Web programmers and network admin's. The F&I managers cannot sell these expensive contracts any more. The management cut spending about 1 year ago and have been trying to figure out how to swim. This is a very tough market. Good Luck.
babs1265

9 months ago

2 comments

Just got the news about a contract expired and not renew from a large corp which can trigger lots of labor cuts across the nation.
marcparaiso

9 months ago

2 comments

Johnny Harpo you're wrong about this--->What we need to focus on is the deluge of H1B's taking away AMERICAN jobs from fully qualified AMERICAN consultants.

The real reason is you AMERICANS give your jobs away to some INDIAN outsource. The influx of H1Bs contributes to your economy and keeps dollars in the country. Use your head!
NamorX

9 months ago

2 comments

Hell, I got hit LAST year (in IT for over 20 years), and it was just recently that I was able to get another IT job Media. I had to take a pay cut, but a job is better than no job. Yes, we were outsourced.
LinguisticMaster

9 months ago

2 comments

I don't know how other department got their jobs if they don't even know how to use a computer. Oh yeah I forgot they get rich of of the labor work that we do for them to get their server working...Without the computer they got no business and not even a pay-check....Pathetic