IT budgets frozen, but growth expected in three years

Two-thirds of European firms will cut or hold IT spending this year, but expect future increases, according to Forrester Research.

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By  Neil Denslow Published  June 13, 2002

Two-thirds of European firms will cut or hold IT spending this year, according to Forrester Research. However, these companies believe that their IT budgets will rise by 13% within three years, the analyst house adds.

Forrester’s survey revealed that most companies had shrunken or held steady their IT budgets in the first three months of the year and CIOs did not expect this change soon. Seventy-two percent said they had met new and specific pressure to cut IT costs. This had led to one in four delaying projects and one in five cancelling projects.

Of those who had had their budgets reduced, the top two reasons given were the wider economic turndown and weak company performance. Only 14% said that e-business was less important to them than a year ago. Indeed, IT still seems to be fuelling growth with 75% expecting increased IT budgets by 2005 and nearly half expect greater headcount.

“Significantly for vendors, European firms plan to grow IT spending faster than IT headcount, wringing more productivity out of fewer, higher-skilled people,” says Matthew M. Nordan, research director at Forrester.

The research also showed that the average respondent would employ only 5 percent more IT staff in three years’ time but will pay these employees 20 percent more.

“Executives plan to jettison low-level IT administrators from the corporate payroll,” explains Nordan.

“As they do so, they’ll expect IT products to require less maintenance and support. Vendors can answer the call by delivering self-management solutions that proactively monitor, tune, and reconfigure systems to pre-empt problems before they occur,” he adds.

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