Sometimes good news needs to be taken with a grain of salt. That's the general message from independent research firm Ovum, part of the Datamonitor group, which today released its report, "IT Spending will Rise, yet 2010 will be a Year of Reckoning for CIOs."

Based on responses from CIOs spanning a number of industries—including insurers, which comprised 7% of the respondents—Ovum found that global IT expenditure is expected to rise slightly this year for the first time since the onset of the global financial crisis. However, respondents felt that despite the positive trend in spending, any increases—as well as decreases—will be slight, likely between 1% and 5%. IT decision-makers also revealed that 33% expect their budgets will increase in 2010. Their optimism, however, is tempered, since signs indicate that CIOs still don't see IT as an engine for growth, and that 2010 will mostly be a year of reckoning.

“The survey data, while promising, does not translate into an IT spending recovery," said Rhonda Ascierto, senior analyst, Ovum. “Realistically, the numbers more likely reflect the effect of previously deep budget cuts, during 2008 and the first half of 2009, which left many IT departments operating at ‘bare-bones’ capacity.”

The firm also found that while CIO attitudes toward IT spending varies by country and industry, several trends emerged:

  • The rising sentiment that the global economy is starting to show signs of recovery is having a positive impact on planned IT budgets in 2010
  • The perception gap between forecast and actual changes in IT expenditure has widened
  • IT spending trends vary wildly by region, yet all vertical industries have suffered from lower IT spending compared to pre-recessionary levels

Ovum's data also shows that the proportion of CIOs who forecast slight decreases and significant increases in IT budgets remained unchanged from last year. Combined with the high percentage of respondents that will leave their IT budgets unchanged in 2010, which rose slightly to 42%, it shows that many enterprises remain vulnerable and are uncertain about near-term business prospects.
Another telling factor, according to the research firm, is that CIOs, while typically adept at divining IT spending trends, are now struggling to accurately forecast budget changes, as the gap between perception and reality widened considerably last year.

“Clearly, the negative effects of the economic downturn were greater than expected and businesses were not prepared,” said Ascierto. “Many businesses made short-term cost savings by reducing their operational costs. The extent to which IT budgetary expectations were miscued in 2009 is likely to mar the collective psyche of IT decision-makers today. The confidence of CIOs in their ability to predict IT spending with a reasonable level of accuracy has been splintered, if not shattered. Consequently, Ovum believes that 2010 will be a year of reckoning for IT expenditure.”

Ovum summarizes that the IT projects most likely to be green-lighted are those that do not require a forklift upgrade of existing IT systems and business processes.

This article can also be found at InsuranceNetworking.com.

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