CIO’s IT Budget Survey Results: July Jitters Turn to October Fear

The results of CIO’s most recent survey on IT budgets, fielded between October 17 and 22, couldn’t be more striking compared to results from our two surveys done earlier in 2008.

As unfavorable economic conditions continue, more CIOs say they must shave IT budgets, according to our exclusive October survey of 243 IT executives.

Three quarters of IT heads surveyed say their IT budget will stay the same or decrease in the coming year. Notably, forty percent of CIOs plan to decrease their IT budget, up from 17 percent and 26 percent, in similar surveys conducted earlier this year.

34 percent say their IT budget will remain the same, up from 20 percent in March and 26 percent in July. The number of respondents in mid-size and large companies reporting plans to cut IT budgets rose sharply from 4 months ago.

Overall, respondents report average expenditures of -3%, down from +3% in July and +7% in March. More than one-third of CIOs say they expect to decrease spending for software (37 percent), hardware (36 percent) and outsourced IT services (33 percent).

CIOs Put Discretionary IT Projects on Hold, Freeze IT Hiring

Seventy-two percent of IT heads surveyed have postponed (49 percent) or are planning to postpone (23 percent) discretionary IT projects.

Forty-six percent, respectively, have renegotiated IT vendor contracts and instituted an IT hiring freeze in the past 6 months, while 45 percent have begun restricting IT travel and 44 percent have cut spending on IT contractors and consultants.

Large company IT chiefs have taken more action to contain costs than their mid-market counterparts. The survey finds a higher percentage of large company IT heads reducing spending on IT contractors and consultants (63 percent), postponing discretionary IT projects (59 percent) and restricting IT travel (56 percent), as compared to survey respondents on the whole.

As for salaries and staffing, nearly one in five CIOs (18 percent) report that their IT compensation costs will decrease in the coming months. Forty-six percent of CIOs have put a freeze on IT hiring in response to tough economic conditions, while 23 percent have begun to reduce IT headcount in the past 6 months.

More than three quarters of CIOs (77 percent) have a contingency plan in place or are planning to implement one in the event of IT budget cuts; that’s up from 68 percent in July. Among CIOs with a contingency plan, 35 percent are currently implementing it while 17 percent plan to implement in the next 6 months.

Unfavorable Financing Climate Delays Purchases

Nearly one quarter of IT heads (23 percent) have delayed and 35 percent plan to delay technology purchases as a result of unfavorable financing terms or conditions from a vendor or lending institution. Fourteen percent have cancelled technology purchases while 10 percent plan to cancel purchases as a result of poor lending conditions.

More than one-third of CIOs (35 percent) believe current economic conditions will cause IT purchase decisions to be pushed higher within their IT organization.

For more on what CIOs have to say in their own words about the budget situation, see our related story, “IT Slashes Budgets, Starts Layoffs,” by CIO’s Kim S. Nash.

Methodology

The CIO IT Budget & Staffing survey was conducted online between October 17 and October 22, 2008 with the objective of gauging how current economic conditions are impacting IT spending plans. An email invitation containing a link to the survey was served on CIO.com and sent to a sample from the CIO customer database. All findings reported in this document are based on 243 respondents who indicated they are the top IT executive at their company or business unit. A broad range of industries are represented including education (10 percent), manufacturing (8 percent), finance (7 percent), wholesaler/retailer/distributor (6 percent) and healthcare (6 percent) and government (5 percent). Company size distribution is as follows: