IT Departments Cut First Quarter Budgets

    June 9, 2009

In the first quarter of 2009, 42 percent of CIOs decreased their IT budgets with an average cut of 4.7 percent, according to a new survey by Gartner.

CIOs were expecting a minor budget increase of 0.16 percent in the first quarter, but due to the economy were forced to cut costs. More than 90 percent of firms changing their budgets made a reduction in the first quarter, with the average being 7.2 percent. Forty-four percent of respondents reported no change in their IT budgets, with just 4 percent reporting an increase in their IT budget.

Mark McDonald
Mark McDonald

"CIOs reported that renegotiating vendor contracts and head count reductions were the primary focus areas for accommodating budget reductions," said Mark McDonald, group vice president and head of research for Gartner EXP. "CIOs report shifting more work to in-house resources and delaying capital expenditures more than reducing IT project investments."

The report is based on a survey of 900 CIOs from around the world, comprising $77 billion in IT spending. The survey was carried out in March and April and compared to a similar survey of 1,500 CIOs conducted from September to December.

First quarter 2009 IT budget reductions were reported across the board based on both size and geography of the organization. CIOs in the healthcare industry reported an average budget increase of 2.2 percent, but CIOs in all other major industries reported a decline. The largest decline was in professional services at -10 percent, followed by telecommunications and high tech at -10 percent, manufacturing at -8 percent, utilities and financial services both at -4 percent.

Many CIOs say further cuts in 2009 are unlikely and they expect the economy to recover between the first and third quarter of 2010.

"Executives making plans in the fourth quarter of 2008 faced an uncertain future as the global financial crisis unfolded," Mr. McDonald said.

"Based on CIO contingency plans, they are now better prepared for future economic challenges. However, most CIOs do not see immediately implementing those plans. This supports a position that the first quarter budget adjustments reflect firm plans for the remainder of 2009."