IT Budgets Will Go Up Or Stay Flat For Most Companies In 2009 - InformationWeek

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IT Budgets Will Go Up Or Stay Flat For Most Companies In 2009

Survey of IT leaders predicts that IT budgets, hiring, salaries, and outsourcing will rise next year.

Maybe things aren't so bad after all. Despite the economic gloom, most IT organizations expect their budgets for 2009 to exceed their 2008 IT budgets, or at least remain flat, according to a new survey of CIOs and IT executives at 230 companies.

Forty-four percent of IT leaders expect their 2009 IT budgets to be higher than 2008 levels, 37% say IT spending will be flat, and only 19% expect their 2009 IT budgets to be lower than 2008 levels, according to the newly released Society for Information Management annual survey for 2008.

Although the survey was conducted in June, before the recent low points of Wall Street's meltdown, "I don't think the numbers would've been that different had the poll been done before we were up to our eyeballs with the economy," said Jerry Luftman, VP of academic community affairs for SIM and professor at Stevens Institute of Technology.

"IT is seen differently today than it was compared with previous downturns," said Luftman. "IT is imperative to keeping companies running, improving productivity -- it's the place to invest to reel in costs ... I'm optimistic that this is the end of the economic crisis, that the outlook next year will be better."

In 2008, 46% of respondents increased IT spending over 2007 levels, 28% had flat budgets, and 26% reduced their IT budgets, according to the survey. The average IT budget in 2008 was 3.82% of revenue, versus 3.5% in 2007.

Looking ahead, respondents seem to have a cautiously optimistic attitude toward IT investments in 2009 as well, he said. Hiring will be one area that's being beefed up at many IT organizations. IT head count in 2009 is projected to increase at 43% of companies, while 42% expect their staff size to remain flat. Only 15% expect IT head count to be lower than in 2008.

In 2008, 40% of respondents said their IT head count increased over 2007 levels, while 36% said their staffing remained flat. About 24% said their organizations' IT head count in 2008 was smaller than 2007 levels.

While about four in 10 IT organizations expect to add staff in 2009, projected budgets also reflect plans to ramp up the use of offshore outsourcing. On average, survey respondents said 5.6% of their projected 2009 IT budgets are earmarked for offshore outsourcing, compared to only 3.2% in 2008.

The use of domestic outsourcing is also expected to rise in 2009, with respondents projecting to spend 6.2% of their IT budgets on those services next year, compared with 5.2% of 2008 IT budgets being allocated to that.

The projected rise in outsourcing is related to companies looking to rein in costs, as well as to fill "skills gaps," Luftman said.

When it comes to pay, 75% of respondents expect IT salaries in 2009 to be higher than those in 2008, while 22% expect pay to remain flat, and only 3% predict IT pay to be less next year versus 2008.

If SIM's poll accurately reflects IT organizations' spending plans moving forward in 2009, the optimism would surely be welcome by vendors like Microsoft and SAP, which are among tech companies reporting in recent weeks that they've felt the sting of the weak economy.

Finally, the survey also revealed some good news for chief information officers about pecking orders. In 2008, 43.5% of CIOs reported to their companies' CEOs, compared with only 31.4% who reported to their companies' CEOs in 2007. Last year was the only decline in the percentage of CIOs reporting to CEOs since 2005, when SIM began asking a survey question about executive reporting. This leads Luftman to believe that last year's result was "just a blip," he said, rather than the beginning of a trend.

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