IT departments strapped for cash

Companies are beginning to spend on IT again, but CIOs still cannot get the funding for urgent upgrades, according to IDC
Written by Matthew Broersma, Contributor

Chief information officers are still having to fight for every penny of IT funding, and are planning to focus their spending on badly-needed infrastructure upgrades for the near term, according to a new study.

An IDC survey of 500 North American companies found that IT departments are restricted in their spending by economic worries, a focus on the short term and general pessimism.

The survey shows that while companies may have begun gradually increasing their IT spending, growth is likely to remain low for the foreseeable future. For example, less than one-third of IT departments surveyed said they expected to receive the necessary funding to complete critical and strategic objectives during the next year, said IDC.

Corporate spending has increased somewhat this year, alongside stronger growth in consumer and public sector spending, but IDC suggested that this growth reflects infrastructure upgrades that can't be put off any longer, rather than a return of optimism. 
"The mood of cost-control and caution persists, but alongside a realisation of the urgent need for infrastructure upgrades," said Stephen Minton, IDC's director of Worldwide IT Markets, in a statement.

Those surveyed said keeping their infrastructure up-to-date was their most pressing concern, ahead of cost-cutting, integration and security. PCs and servers were identified as the most critical infrastructure segments needing urgent funding. However, they expected getting that funding to be a difficult matter: an improving economy was the main factor they expected to drive increases in IT spending, followed by infrastructure failure, IDC said.

These gloomy sentiments contrast with the rebound that the PC market overall has been experiencing this year. IDC said last week that it expects 2003 PC shipments -- which include desktops, notebooks and servers priced at less than $25,000 -- to grow by 8.4 percent globally and by 7.2 percent in the US, up from an earlier prediction of 6.3 percent globally and 5.3 percent for the US.

Last month, Gartner boosted its previous forecasts and now predicts that global shipments for PCs will grow by 8 percent from 148.1 million units in 2002, to 161.3 million in 2003. Gartner's figures are higher than IDC's because the two companies differ in the way they track PC shipments.

The sentiments of the end-users driving that growth are a reminder that spending growth is still far below the double-digit increases seen in the late 1990s, and is likely to remain low for the foreseeable future.

"More than one third of respondents said that two things are keeping them awake at nights -- the thought of losing their jobs, and the thought of more budget cuts," Minton stated.

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