CIOs, IT Spending, And 'Pressure On Growth' - InformationWeek

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IT Leadership // CIO Insights & Innovation
Commentary
10/22/2007
05:47 PM
John Soat
John Soat
Commentary
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CIOs, IT Spending, And 'Pressure On Growth'

What's your IT budget looking like for next year -- increase, decrease, or stand pat? And what does that say about an organization's commitment to IT as an innovation engine?

What's your IT budget looking like for next year -- increase, decrease, or stand pat? And what does that say about an organization's commitment to IT as an innovation engine?This morning, as part of their regular report on the software industry, Credit Suisse analysts Jason Maynard and Bryan McGrath sent out this:

Most large corporations are in the middle of their 2008 budget-setting process. We have interviewed a number of U.S.-based CIOs over the past few weeks and the preliminary feedback is that 2008 IT budgets are being tempered, especially in the financial services sector. The uncertainty surrounding the macro economy seems to be causing some pressure on growth for new capital expenditures. Most industry analysts are forecasting mid-single-digit growth for IT spending, with software expected to do a few points better. At the very least we think that spending will be second-half weighted, as companies play wait-and-see with the economy in the new year.

Does that sound familiar? Is anxiety from the housing crash and credit crunch affecting your organization's IT spending plans? What other factors are bringing weight to bear for or against spending on technology next year: the surging (or falling) stock market, the presidential election, the fear of inflation (or recession), the war in Iraq, the increasing price of oil?

Federal Computer Week reported last week that the growth in IT spending at federal agencies is expected to slow considerably over the next several years, based on a new study:

The study, released this week by the Government Electronics and Information Technology Association (GEIA), predicts that federal IT budgets will increase by an average of 1.4% per year from fiscal 2008 through fiscal 2013 -- down from a compound annual growth rate of 5.7% during the last five years.

The reason? The upcoming change in administration.

Growth will be slowed by changes in spending priorities and Iraq policy following the 2008 presidential election, according to the study, which is based on interviews with government officials, procurement data, agency reports and GEIA's forecast database.

It's easy to understand why federal agencies would try to anticipate the changes to be wrought by a national election, but does that extend to the private sector? Do politics play a part in your organization's spending plans? If so, how?

I hate to load up on the interrogatories, but here's a more macro question concerning the IT budget: Does more money mean greater commitment? Most IT chiefs have sat through several years of "Do more with less," so any increase is welcome. But a low single-digit increase is basically a wash. Can you innovate with the same or less funds? And does a hard line on IT spending necessarily indicate that technology is a lower priority at your company? Or can upper management be committed to innovation and change through the use of technology and still be frugal with IT dollars?

Finally, what's your involvement in the IT budget process: Active participant, outside voice, or silent partner?

Let us know, and share your thoughts.

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