InformationWeek
Defining The Business Value Of Technology
September 28, 1998
Behind The Numbers:
'99 Budget Advice: Don't Worry
ne day the bulls are charging, the next they're scared off as the bears emerge, roaring loudly, from their caves. The stock market suddenly seems like a yo-yo as the Dow Jones industrial average climbs 170 points one day only to plummet 220 points the next.With plenty of bad news from Seoul to Moscow roiling Wall Street, what's an IT executive to do in trying to make plans for 1999? Lower the budget because world economic troubles might affect overall corporate revenue? Stay on an even keel? Or raise the budget to finish that new project that has the potential to sharply increase sales and profits?
It's not an abstract question to be contemplating right now. An InformationWeek Research survey of IT executives responsible for their organizations' IT budget planning found that 56% currently are working on their spending plans for the coming calendar year. Another 18% have completed the process--and the rest haven't even started.
Nearly one-third of the IT managers surveyed seem to have a high tolerance level for pain. No matter how much the stock market might drop in the coming weeks, 31% say it won't have any effect on their IT budgets or their organizations' capital spending. Only 4% of IT executives qualify as faint of heart, conceding that a decline of 5% or less in the stock market would trigger a downward revision in their IT spending plans. Everyone else falls somewhere in between.
On the whole, however, most IT executives seem relatively sanguine and able to maintain a perspective on the market's zigs and zags. Even with the market significantly below its July 17 high, it would take another major drop--more than 20%--before it would affect IT spending at a majority of organizations surveyed.
Does the stock market's turmoil affect your company's IT budget? Let us know at the address below.
John Eckhouse
Senior Editor/Research
jeckhous@cmp.com
This week in Behind The Numbers:
| Year 2000: Still A Priority | Full Speed Ahead | Revenue Will Grow | |
| Optimism For 1999 | Web Buying Power | Objects On The Rise | ERP Pays Off |
Year 2000: Still A Priority
Economics takes a back seat to technology for most IT executives. While the sharp plunge in U.S. stock indexes in recent months seems to be causing panic among many investors, only 7% of IT executives say it will have a significant impact on their IT spending for the rest of the year.
More than half of the IT executives surveyed say the biggest factor affecting IT spending this fall is the urgent need for year 2000 compliance work. It was mentioned twice as often as the economic crisis in Asia and four times as often as a possible U.S. economic slowdown.
Full Speed Ahead
Sure, the world may be going to hell in a handbasket all around your IT shop, but you've still got to finish that year 2000 remediation work or risk losing your job. It's no wonder that most IT executives say their organizations have increased IT spending for the rest of 1998. If you're far more worried about the lights going out on Jan. 1, 2000 than what impact the current stock market decline, economic uncertainty in Asia, or political crisis in Russia might have on your company, then it's clearly time to raise--not lower--the IT budget.
Revenue Will Grow
So what if the stock market can't seem to get past where it was on Jan. 1? Who cares if neither Asian consumers, industrial companies, nor banks have much money to spend or lend? Certainly not IT executives. With the U.S. economy continuing to hum along at a nice pace, things still look hunky-dory over here.
That's why more than eight out of 10 IT executives predict that their organizations' revenue will increase next year. Only 10% say revenue growth will decline in 1998. With that kind of bullish optimism firmly entrenched, it's no wonder that so many IT organizations plan to increase IT spending in the coming year.
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