IT Strategy

Global IT Spending Growth for 2008 Remains Stable

April 4, 2008 by Raj Sheelvant

Gartner First Quarter Worldwide CIO Survey shows IT Budget Growth remains broadly stable. Despite economic concerns, global enterprise IT budget growth remains unchanged at 3.3 percent in 2008, according to a worldwide survey of 1,011 CIOs conducted in the first quarter of 2008 by Gartner, Inc., as reported by CNBC. Gartner, Inc. is the world’s leading information technology research and advisory company.

The article also states that “the study conduced from February 12, 2008 to March 12, 2008, sought to gauge the potential impact of macroeconomic concerns on IT budgets. CIOs responding to the study report that IT budgets are still growing, even in the U.S., but growth rates are muted slightly. Historically, the revised numbers are in keeping with the past four years where IT budget increases have averaged 2.4 percent.”

This survey shows an interesting divergence in Corporate IT spending since last economic slowdown. In all the previous slowdown, the IT spending was also curtailed. I think this divergence is due to 2 factors

1. The Impact of Globalization: The global surveys in the past mainly focused on Europe, Japan and US. Emerging countries had little impact. The Global Economy was tightly coupled. If the US Economy contracted then it created Global Recession. But this time around emerging countries in Asia/Pacific seem not to be affected by the slowdown in US economy (Asia/Pacific IT Budget forecast of about 6% growth according to survey). This is a clear indication of emergence of decoupling in the Global market (especially in the field of IT investment). While the US companies are in belt tightening mode, the other regions are growing (Even Europe is forecasting 4% growth in IT budget)
2. Rising Importance in the Role of IT in an Organization: If IT is seen through the cost lens (as it was done in the past downturns), it always makes to curtail IT spending. No wonder all past downturn forced IT department to cut cost. The fact that “IT budgets are not the ‘target rich’ environment for cost cutting they have been in the past” according to the CNBC article is a subtle indication that the Business Executives, now believe that IT has an important role to play in creating and sustaining competitive advantage. They are willing to look beyond this current slump and continue investing in IT projects that have strategic impact.

I believe this contraction in the business cycle is an inflection point where corporate reaction to IT has changed. IT has gained prominence in the creating strategic value to the businesses around the world and dips in IT Budget growth will be smaller in future contraction in business cycle.

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