Are You Feeling Shell-Shocked by the Economy?

The Internet craze. The Internet bust. The slowing economy. A new administration in the White House. September 11th. The Enron, Tyco and WorldCom fiascos. And as we go to press, the threat of a war with Iraq.

Are you feeling shell-shocked? John Gantz, chief research officer of IDC, thinks you are. (IDC is a sister company to CIO’s publisher.)

Gantz offers a story told to him by noted economist Lester Thurow. It goes like this: A coyote is chasing a jackrabbit. The rabbit outruns the coyote and jumps in his burrow, scared to death. The coyote lurks outside the hole for about 30 seconds and then heads off in search of other prey. But the rabbit, fearful the coyote is still there, stays in the burrow for a week.

According to Gantz, too many CIOs are acting like the frightened jackrabbit. Yes, it has been a wrenching two years to be a CIO, with lots of coyotes circling. But one thing all downturns share is this: They are always followed by an upside. Need proof? IDC predicts that the global IT market will grow by 9 percent in 2003 taking it to $1 trillion for the first time in our industry’s history.

Think about that for a moment. Our collective industry is on the doorstep of a historic level never seen before. Sure doesn’t feel like it, does it?

IDC’s numbers are born out by the monthly results of the CIO magazine Tech Poll. Since August 2000, the Tech Poll has gauged the 12-month forward-planned spending increases of CIOs. In August 2000, CIOs pegged future growth at slightly over 18 percent; 26 months later it is about 5 percent.

OK, that’s a steep drop-off, but the key thing is that IT budgets?at least from reviewing thousands of interviews collected in the Tech Poll?are still growing. The pain users and vendors felt was the pain of being caught in budgets built on double-digit growth.

With 60 percent or more of your budget in fixed costs, such as salaries, a 5 percent increase is a misnomer. Budgets have to increase at least 3 percent to 5 percent on top of that 5 percent to get things jump-started again. And they will. It’s just a matter of time. When, you ask? Most point to improvement in corporate profits. Others, and I am in this camp, look to lower unemployment rates as the lever to ignite the next wave of IT spending.

Many readers will be finalizing 2003 IT budgets in several weeks. Is John Gantz right?are you a shell-shocked CIO? Or do you plan to come out of your burrow to address your growing application backlog? Drop me a note at gbeach@cio.com.