Aberdeen Says CIOs Are Less Optimistic About IT Spending Outlook

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March 10, 2003 (11:35 AM EST)

Aberdeen Says CIOs Are Less Optimistic About IT Spending Outlook

CIOs and other IT executives appear less optimistic about their overall technology budgets.

The most recent quarterly survey by Aberdeen Group found that enterprises expect to increase their technology budgets by an average of 2.7 percent over the next six to 12 months. The market researcher conducted the survey in January.

Last September, Aberdeen found enterprises predicting their overall IT budgets would increase on average of 3.7 percent. The reasons for the less optimistic spending forecast include rising oil prices and the economic uncertainties caused by the pending war with Iraq.

"Capital budgets have been cutback a little bit, and I believe it's because of concern with the overall economic and world political environment," Aberdeen analyst Hugh Bishop said. "That's clearly hanging over people's heads."

In addition, Fortune 1000 companies still have a "fair amount" of unused software purchased during the buying binge of the dot-com bubble, Bishop said. However, small and mid-sized businesses are more anxious to buy, because they believe they need to invest in technology to catch up with the operational efficiencies reaped by larger companies.

"We do see a better outlook for smaller and mid-sized organizations in terms of technology spending than larger firms," Bishop said. In addition, sales forces are getting more aggressive within the mid-market as "they try and scrounge for any deal that's out there."

In the most recent report, CIOs and IT executives stated their "intent to purchase" and "priority of purchase" for business applications, technology infrastructure, hardware and services. Out of 35 application categories, the five that got the biggest nod from respondents were content-document management, query-reporting-analysis applications, project management, web management and web analytics.

Aberdeen found that more CIOs and executives were looking at applications for purchase than in the September survey. "There are more people out there in the initial stages of looking at applications," Bishop said. "They're at least kicking the tires a little bit more than they were a few months back."

The top three technology infrastructure categories in terms of executives' intent to purchase were application development tools, security gateways and services and enterprise application integration software.

With the exception of mainframes, CIOs planned to increase spending in all hardware categories, with servers getting the most optimistic forecast. Among services, IT outsourcing led the pack with a 1.8 percent expected growth.

In a report released late last year, Aberdeen predicted worldwide IT spending would increase by 4 percent this year, following an anemic 0.9 percent in 2002. From 2003 to 2006, spending is expected to increase an annual rate of 4 percent to 5 percent.