IT services and hardware spending to suffer in downturn

Researchers have confirmed that IT spending is likely to be hit during current global economic uncertainty.

The 41st monthly spending survey of 100 large enterprise IT managers by Goldman Sachs has revealed that budget growth expectations remain down significantly on a year-over-year basis.

As a result, it said new IT spend would decelerate to five per cent of overall technology capital spending in 2008 from seven per cent in 2007.

Many chief information officers (CIOs) reported limiting their purchases to projects with a high and fast return on investment (ROI), where demand for discretionary project funding fell to its lowest point in the survey’s history.

The report said this caution was beginning to spread to the offshore providers and potentially affecting the 2009 outlook for companies like CSC, Infosys and Accenture and the IT contractors that often benefit from outsourced project work.

“CIOs will most likely look to cut their resources first from lower-value augmented IT staff, with nearly 48 per cent looking to cut temporary staff first,” the report found.

It also said on-site, third-party service providers providing application-related development or maintenance work were next on the list for potential cuts with 30 per cent of respondents.

And economic challenges to business stability and growth “continues to suppress PC demand and delay mainstream Vista adoption,” it added.

Perhaps not surprisingly then – particularly reinforced by other recent research – the drive for increased efficiency put virtualisation, server consolidation and voice over internet protocol (VoIP) higher up the list of IT sending priorities overall in this latest study. These adoption trends would be seen as “positives for VMware, Citrix and Cisco,” it said.

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