Spending 2003: How Bad is the Bite in Your Budget? - ' The Findings ' (
Page 2 of 3 )
The Findings
The results, including charts and figures, are available in Adobe Acrobat PDF format (free Adobe Acrobat Reader plug-in).
Finding One: Growth in IT spending will decline in 2003. Even though companies of all sizes are looking for quite healthy revenue and earnings growth this year, the era of tightened budgets will not be over soon. Thanks mostly to the trials and tribulations of larger companies—which are anticipating a contraction in both capital expenses and operating expenses this year—IT spending will be down 0.2 percent in 2003, and then rise somewhat in 2004. Software will take the biggest hit, suggesting that IT departments expect to begin fewer projects this year.
Finding Two: A significant number of technology categories and initiatives will be reduced in the 2003 IT budget. Infrastructure was hit particularly hard in this year's budgets, with communications and networking hardware down by double digits. But things are looking up for several technologies that haven't yet reached the saturation point, among them wireless networking, open source and packaged e-business apps. Meanwhile, few companies are willing to stick their IT necks out on new spending initiatives. Among the decliners for 2003: disaster recovery and security, no doubt because investment was so strong in 2002. Yet the continued investment in CRM initiatives suggests the bottom-line value of pinpointed customer-focused strategies.
Finding Three: Interest in new technologies is down, but not out. Despite the tough spending environment, corporate users remain committed to several emerging technologies. Interest in blade servers has doubled, while many of the more popular technologies, such as network intrusion software, storage area networks and XML, continue relatively strong, perhaps because of their potential security, productivity and cost benefits. Interest in more experimental technologies, such as grid computing and peer-to-peer computing, is much weaker.
Finding Four: Poor financial results are the primary cause of budget cutbacks. This is particularly true of large companies, perhaps because they are more likely to have public shareholders to answer to. "Changes in business priorities" was a relatively distant second last year, but its influence on budgetary issues is growing—an indication that companies are looking to better align their business and IT efforts.
Finding Five: Successful companies are linking IT spending more closely to strategic business goals. While all companies agree that demonstrating value is critical in a tough environment, companies that do well at meeting strategic goals are—perhaps inevitably—less obsessed with cost, and more concerned with business value. They are less likely to look to outsourcers for help and to require approval from higher layers of management, and somewhat more likely to worry about productivity and customer satisfaction. Is it the chicken or the egg?
Finding Six: Corporate budgeting processes have improved, but little more than half of our respondents believe it results in an accurate assessment of needs. And while no cutting-edge technique is used by more than half of our respondents, some work better than others. The top three: collaborating forecasting, rolling forecasting and the balanced scorecard, with performance-based budgeting not far behind. The upshot: It's time to break out of old budgeting habits and speed up the process on all fronts.
