THE STATE OF THE CIO – IT Spending: Sticking to Core Projects

After years of important investments, slowed spending on information technology means important changes for CIOs.

“The State of the CIO” survey shows that IT heads are retrenching during the economic downturn. Asked to identify their top five IT spending priorities, CIOs identified core areas that provide clear payback and pain relief. Launching new systems did not top the agenda here; instead, systems integration projects were cited by the most respondents (36 percent). One quarter of the survey respondents said IT staffing?retaining, hiring and training people?is a spending priority while 24 percent said they would focus on customer service and CRM projects, and 22 percent said simply lowering IT spending was a top concern. There was one notable exception: 26 percent of CIOs said investments in new technologies such as wireless was a priority.

Interestingly, e-commerce and ERP, subjects that got a lot of attention a year ago, barely rated in our survey. (In “Top IT Decisions for 2001,” a CIO survey of 224 IT executives in February 2001, 18 percent of respondents cited CRM and e-business infrastructure as the most pressing technology decisions facing their organization. Sixteen percent said ERP was the top technology decision.)

It’s worth noting that indicators such as CIO’s Tech Poll, a monthly survey of senior technology executives, show that IT spending is still rising. Compared with the start of 2001, when executives said they expected double-digit IT spending increases, the expectations in December of a 3.7 percent budget increase are modest. (Modest indeed, considering inflation last year was around 3 percent.)

The Tech Poll’s monthly results over the course of 2001 show respondents slowing down. When the year began, 61 percent of IT executives said they expected to increase spending on data networking equipment, and 58 percent said they expected e-business software spending to rise. By December, 42 percent of IT executives expected to see spending increases in those areas and for computer hardware.

Peter Royers, director of IT at aerospace company Hydro-Aire in Burbank, Calif., has cut spending. The maker of airline brake systems saw budget pressures spike after Sept. 11.

IT dollars will go to support bids the company has won rather than IT-led initiatives, Royers says. And he urges staff to take local training courses rather than travel. “It’s not that we’re no longer interested in CRM or ERP, but we have a more realistic view,” he says. “Now management is really looking for a return on investment from IT.”