Confidence Up--Just Not For I.T. Budget Hikes

Business-technology executives are showing more confidence about the direction the economy and their businesses are heading, but that optimism won't necessarily translate into bigger IT budgets.

InformationWeek's IT Confidence Index, based on a quarterly survey of 300 executives, shot up 19.3%, reaching its highest level in a year. The Confidence Index measures business-technology executives' outlook on the economy, their companies, and their IT budgets. Most of the recent gain came from the fact that 69% of respondents have a positive outlook on their companies' business prospects, up from 57% in June. But their outlook regarding their companies' near-term IT spending plans remains about the same--35% positive, half neutral, and the rest negative.

The caution comes from a sense that it wouldn't take much to knock this nascent recovery off track. "The economy is starting to pick back up, but a recovery is very vulnerable to events, including cyberterrorism," FedEx Corp. CIO Rob Carter said at InformationWeek's Fall Conference last week. FedEx considers its business something of a barometer of the economy--if it's moving more product, someone's probably doing more buying.

Still, executives' optimistic perspectives are significant. "When you get an improvement in thinking in the prospect of one's own business, it's a bottom-up confirmation that the economy is doing better than most people think," says economist Irving Leveson, president of economic consulting firm ForecastCenter.com.

There are factors besides caution pushing against a technology-buying binge: a capacity hangover from the late '90s spree, efficiency efforts such as server and application consolidation, and companies getting better at squeezing value out of legacy systems. Near-term IT spending will be incremental, not massive. "Given the investment we had with Y2K, E-business, and ERP, [IT execs] are looking to pull back and take a relatively conservative position when it comes to IT spending," says Craig Watson, CEO of electronics-payment service Opti-Pay Technologies LLC. "Incremental investments will be made in IT to build on those infrastructures and leverage continued productivity," says Watson, former CIO at chemical company FMC Corp.

That's the story at Chester County Hospital, which is implementing the Soarian clinical-care-management system from Siemens Medical Solutions Health Services Corp. It uses the Internet to integrate existing systems in radiology, emergency rooms, and labs. "The Soarian system is designed to leverage past IT investments rather than scrap them," says Ray Hess, the hospital's VP of information management.

Some business-technology execs think keeping a tight fist on IT dollars could prove a big mistake. Altria Group Inc., the parent company of Kraft Foods and Philip Morris, believes it buys and implements technology efficiently and benchmarks its IT spending to guard against rivals pulling ahead. Says CIO and VP Jim Noble, "If we were spending much less than the median of the consumer-goods industry, I'd wonder quite frankly if I'd be doing enough to help the business."