Forrester Takes Pulse of IT Executive Budgets

IT executives are responding to the sluggish economy with mixed plans for IT spending, according to the latest Enterprise IT Services Survey conducted by market research firm Forrester Inc.

Forresters’s new survey confirms the results of a recent report predicting worldwide IT spending to decline 5.2% in 2009. A majority of organizations are cutting IT budgets. Regionally, Europe has the most significant decreases, with 63% of respondents saying that they will have to reduce IT budgets and only 6% saying that they will increase spending, according to the report (“The State Of Enterprise IT Services: 2009”). Similarly, 59% of U.S. respondents are reducing their IT budgets, and only 13% are increasing.

Firms plan to make the deepest cuts in three variable-spend areas: IT contactors, IT consulting and systems integration, according to the report.

Contractors and consultants are likely to see the largest decreases, with 41% of respondents reducing spending on contractors and 34% decreasing consultant spending.

Systems integration services will see mixed investment over the next 12 months, according to the report, with some IT executives planning decreases and others increasing spending. Twenty-six percent of surveyed executives are planning to reduce their budgets. That said, survey results indicate that the same services will have the highest increase with another 30% of respondents increasing or planning to increase spending in the next year.

Increases are also expected in applications management and infrastructure management and outsourcing services. Of those surveyed, 26% plan increases in application outsourcing and 25% expect to increase infrastructure outsourcing spending, according to the report.

John McCarthy, VP and principal analyst at Forrester, was quoted in the release to say that the pressure to reduce IT spending as a result of the economic downturn is expected to continue well in to 2010. “The data shows no quick turnaround—it's going to be a tough year for services firms as clients increasingly ask them to justify the ROI for IT projects and provide more value for a lower price," he said.

As IT executives prioritize for 2010, convergent telecommunication/network management services and data center management services are at the top of the list for infrastructure and outsourcing. Managed hosting services leads the list of application outsourcing priorities, with 50% of respondents currently outsourcing or planning to in the next 12 months, Forrester reported.

Systems integration priorities for executives in the next year are installing or upgrading packaged applications, with 42% of respondents saying they already have a project under way or will hire a consultant. Custom application design and development follows, with 38% of firms executing a project or hiring a consultant.

Survey results demonstrated that security assessment is the primary consulting priority—43% of respondents have a project underway or plan to start in the next year. Infrastructure virtualization and automation programs follow, with 32% of respondents working on a project or with plans to start in the next year.

The business data services study polled more than 900 IT executives and technology decision-makers, of which 17% of respondents were from financial services and insurance companies, about IT services and outsourcing trends across North America and Europe.

This story was reprinted with permission from Information Management.