Nov 22, 2008

Chief information officers simply can't revise spending fast enough

Chief information officers and other executives who control the purse strings for corporate tech purchases have made clear they're slashing outlays in the fourth quarter and most of 2009 as the global economy slows.

A severe decline in tech spending, exacerbated by a stronger dollar, is likely to lead to multiple quarters of negative revenue growth.

IT budgets estimates in the USA are still too high, given this gloomy outlook. Maybe that's because some analysts (Gartner, Forrester and IDC) haven't gotten the memo yet. Tech revenue is likely to fall for the next two or three quarters, at least. The decline in the current quarter could be as much as 5% compared with the same period last year, if the dollar keeps flexing its muscle.

IT'S NOT AS CIOs haven't been trying. They simply can't revise spending fast enough to keep up with the precipitous decline in the economy. In the latest quarter, an unprecedented 80% of Israeli computer services and products companies lowered their earnings forecasts, so expectations have been tempered, but probably not enough. Projections for Israeli tech companies' 2009 sales have been reduced by only about 8 % from a year ago. Net-margin forecasts have come down 10%.

STKI surveyed over 100 CIOs, and the execs said they don't expect to increase their tech spending by a single sheqel in 2009. That compares with increases of double-digit growth in the last couple of years (not counting 2008). We predict as much as a 10% decrease in tech spending in 2009.

Intentions to spend on enterprise tech were down across all categories except storage, which has been in consistent demand because of increased regulatory pressure to save, store and back up data. CIOs plan to spend less on personal computers, printers and mainframes next year while virtualization -- software that increases computer efficiency without additional servers -- remains hot. At least somebody has a reason to look forward to 2009

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