Recession a Factor in CIO Budget Plans?

Are chief information officers worried about the slowing economy and the impact a recession could bring to IT budgets?

The answer, based on a survey of CIOs Gartner conducted between February and March might best be summarized as “not very much.”

On a global basis Gartner said a majority of CIOs (62 percent) reported no changes were planned since finalizing their 2008 budgets. About 23 percent indicated their budgets had declined, while 15 percent said they’d increased their budget.

Overall, enterprise IT budget growth remained unchanged on a worldwide basis at 3.3 percent based on the survey of 1,011 CIOs.

However, among U.S.-based CIOs in the survey, the results are more negative starting with a slower growth rate of 2.3 percent. Also, one in four U.S. CIOs indicated that their IT budgets were reduced in the first quarter (ten percent said their IT budget had increased).

“We believe CIOs are being cautious with IT spending rather than making wholesale cuts,” Mark McDonald, head of research for Gartner’s Executive Programs, said in a conference call discussing the results. He noted the average decrease in U.S. IT budgets was ten percent, which is consistent with the kind of across the board cuts company’s make under difficult economic conditions.

In the past, McDonald said IT spending was often a “target rich environment” for budget cutters, but that’s changed. “IT is now being managed more professionally,” McDonald said, and CIOs are being more proactive in making sure technology initiatives are given high priority. Plus, more IT budgets are being allowed to grow over the course of a year based on business need than in the past, he added.

Among those looking to make cuts in the U.S., only about a third of those CIOs said job cuts were likely and only a small fraction of those (five percent) were looking at outsourcing.

What’s the plan?

While McDonald was reasonably bullish that the results indicate strength in IT spending going forward, he said too many companies seem ill-prepared for an economic downturn. “Only about a third of the CIOs said they had a contingency plan” said McDonald.

“The simple fact that two thirds don’t have a contingency plan is an area CIOs must address in the next 90 days” he said.

CIOs also have to consider the impact of new technology. A separate Gartner study, just released yesterday, said that virtualization will be the highest-impact trend changing infrastructure and operations through 2012. Virtualization can reduce the number of physical servers a data center requires by consolidating “virtual” servers in one host system.

“Virtualization will transform how IT is managed, what is bought, how it is deployed, how companies plan and how they are charged,” a summary of the report said.

According to Gartner, the leading edge of this change is server virtualization, which promises to unlock much of the underutilized capacity of existing server architectures.

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