According to January's CIO Magazine Tech Poll, CIOs, on average, plan to increase spending +8.2 percent (up from 6.0 percent last month) over the next twelve months. CIOs from large companies (those with 1000 or more employees) plan to increase spending +4.5 percent (up from 2.2 percent last month). "While we are encouraged by the poll's overall outlook, we are still awaiting more consistency from large corporate CIOs whose outlook is somewhat more subdued," says George Elling, managing director, Enterprise and PC Hardware Research for Deutsche Bank Securities.
"Although CIOs at large firms continue to express uncertainty, this month's poll suggests the tipping point for broad based participation by this key sector will occur during the first half of 2004," says Gary Beach, group publisher of CIO magazine.
"After a three-year recession, our poll started off the new year with a much more optimistic outlook for tech spending, which I share," says Dr. Ed Yardeni, chief investment strategist for Prudential Equity Group, Inc.
During January 2004, the CIO Magazine Tech Poll panel projected IT budgets to grow by 8.2 percent over the next 12 months, up significantly from the 6.0 percent level in December. In addition, the panel reports IT budgets increased by an average of 4.4 percent over the previous 12 months, an increase from the 3.2 percent increase reported in the December poll.(2)
When asked about spending in eight specific IT categories, the average number of panelists planning to increase spending increased to 42.1 percent in January (from 38.4 percent in December). Those planning to decrease spending declined modestly to 13.9 percent (from 14.0 percent in December). Security software continues to be the strongest sector in the poll with roughly 59.7 percent of respondents planning to increase spending (an increase from 58.2 percent in December) while only 2.9 percent plan to decrease spending (versus roughly 4.4 percent in December).
Computer Hardware. The outlook for Computer Hardware spending improved month-to-month. Among the panelists, 51.3 percent plan to spend more, up notably from 41.8 percent in December, while 14.3 percent plan to cut spending, down from the 17.0 percent level in December.
Infrastructure Software. The percentage of CIOs planning to increase spending on infrastructure software was 36.9 percent in January, up from 33.7 percent in December. Those planning to decrease spending fell to 11.9 percent in January from 13.3 percent in December.
,/p>Compensation Costs and Labor Market Conditions. IT compensation costs (including salaries, benefits, and bonuses excluding stock options) reportedly rose by an average of 4.2 percent in the 12 months ending in January, up from 3.4 percent in December and a year ago. Five percent (5.0 percent) of respondents report IT professionals were hard to find and retain, up from 3.9 percent last month and from 4.9 percent a year ago. Pickup in IT Spending. Among panelists, 42.2 percent report IT spending either never slowed or has already picked up (vs. 38.1 percent in December), with 21.1 percent claiming to have already seen a spending pickup (vs. 19.6 percent in December). In addition, 11.3 percent expect to see a pickup in 1Q04, 14.2 percent expect to see a pickup in 2Q04, 10.3 percent expect to see a pickup in 3Q04, and 5.0 percent expect to see a pickup in 4Q04
Spending Factors. Weak profits continue to have an adverse impact on tech spending. This was cited by 33.8 percent of the panelists as the primary factor affecting IT spending plans over the next 12 months. Another 28.0 percent see "tight financial conditions" as the primary factor adversely affecting IT spending plans, and 25.6 percent said that spending might be weak because there is sufficient IT capacity.
Visibility on Technology Spending for the Next Three Months. When asked how they would characterize their visibility on technology spending for the next three months, 16.9 percent of the panelists indicated that they saw no pick up in sight (versus 21.7 percent in December). Another 44.9 percent of the panelists reported that they see a modest pick up ahead (versus 46.2 percent in December), while 12.9 percent indicated a cloudy outlook due to heightened political and financial risk (versus 10.3 percent in December). Encouragingly, 22.4 percent of the panelists still indicated that the future looks bright (versus 20.1 percent in December).
The complete January CIO Magazine Tech Poll can be found at http://www.cio.com/info/releases/0104techpoll_results.html.
1) The TFGI is calculated by multiplying the projected growth rate of future IT budgets by the average percentage of respondents saying they plan to increase spending on eight unique categories: computer hardware, data networking equipment, telecom equipment, storage systems, outsourced IT services, infrastructure software, and eBusiness software.
2) Averages exclude responses over 100 percent.
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