Under the Budget Microscope

IT budgets still vital, but companies want results

Louisville, KY  May 11, 2001  After a recent vacation spent doing as little as possible in beautiful Charleston, SC, I returned home to find that my Internet provider had also taken a vacation, leaving me Net-less. As it turned out, my modem came back from flatline territory in an hour or two, but in that frightening time of no Internet I was irked beyond belief. Vacation or not, I still need my information, even if that information only concerns offseason football news or concert dates. (Robert Earl Keen is coming back to Nashville, for instance.)

Just as your intrepid reporter needs his information fix, businesses have to keep the dataflow running efficiently and smoothly  a truism that is validated in the findings of a recent study by TechRepublic, a Web-based resource that provides information to information technology (IT) pros. According to the study, companies are still spending money on IT in 2001, however they're also spending smarter. Although many experts predicted IT spending would be down drastically this year, a recent survey of IT pros by TechRepublic found that 70 percent of respondents said they plan to spend the same or more this year as opposed to last. But their priorities have changed.

TechRepublic surveyed 470 IT professionals about their companies' IT spending plans for 2001 and found that budgets are the same or moderately higher this year compared to last year. Eleven percent of respondents planned no change in budget from last year to this year; 26 percent planned to spend 1 percent to 10 percent more; 17 percent planned to spend 11 percent to 25 percent more; 7 percent planned to spend 26 percent to 50 percent more; and 9 percent planned to spend more than 50 percent more.

Respondents disclosed, however, that spending priorities have changed. Companies are re-evaluating how they spend, and they are now looking for a better return on investment (ROI). Thirty-seven percent expect a better ROI in 2001, and 30 percent want more value without spending more. The survey showed that some respondents have had to revise their 2001 IT budgets.

Although 40 percent report the slowing economy has not changed their budget plans, 45 percent reported a decrease in the original IT budget for 2001, and 16 percent reported an increase.

The survey also found that if the economy worsens and companies are forced to cut back in certain areas, the most aggressive spending reductions would be in consulting services (42 percent). Asked what they were least likely to cut, respondents said personnel expenses, including training (23 percent); network equipment (17 percent); and server equipment (15 percent).

Plans were mixed for spending on enterprise resource planning (ERP) products like customer relationship management (CRM) and supply chain management (SCM) solutions. Eight percent of respondents said they were least likely to make budget cuts in this category, while 11 percent reported they were most likely to aggressively cut ERP spending if they had to cut something.

"Although companies may not be spending less money, they are spending their money differently," said Tom Cottingham, founder and CEO of TechRepublic. "Companies are shifting their priorities and investing in core equipment, like networks and servers, and areas that offer more direct return on investment. When money is tighter, IT investments are still critical  they can help drive new efficiencies and productivity  but they must show return more quickly."

Full results on the IT spending survey are available from TechRepublic.