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Corporates slash IT spending plans

UK businesses have downgraded their IT expenditure plans for 2007, but huge differences exist between sectors
Written by Richard Thurston, Contributor

Corporates are downgrading their IT spending plans for 2007, largely driven by cautious forecasts for the global economy.

A survey released on Friday found that large businesses worldwide expect to spend an average of just 2.8 percent more on IT next year. This is a significant drop on predictions made earlier this year, when the average increase was forecast to be six percent.

In the UK, corporates are planning even less of an increase — just 0.9 percent.

But there are huge differences between vertical sectors. Media, pharmaceutical and healthcare companies are planning to increase their spending on IT next year by an average of 6.9 percent, 6.4 percent and 5.6 percent respectively. But manufacturers of consumer products are planning to cut their expenditure by 5.6 percent.

"A number of factors have combined to force enterprises to lower their IT spending forecasts from the first half of 2006," said Jed Rubin, a director at Gartner Consulting, which carried out the research.

Rubin said that businesses had spent more in the past year on what he called "'run the business" expenditure than they had planned. This would lead to IT departments focusing on "managing business demand better and improving operations internally," Rubin said.

Healthcare companies are spending more because of ageing populations, while the penetration of IT in media companies had grown tremendously due to their complex models for delivering content.

Rubin also identified already high levels of IT expenditure in the finance sector, at 12 percent of total operational costs.

Expenditure will vary widely according to technology, Gartner reported. Growth areas next year are expected to be wireless services, web services, network security and storage. Areas at the foot of corporates' spending agendas include proprietary Unix, mainframes and voice services.

Insurance, media and finance companies are the most likely to run large IT departments, with an average of at least one in 10 employees working in IT. Gartner said that corporate IT jobs were divided as follows:

  • Data centre — 22 percent
  • Applications development — 20 percent
  • Applications support — 16 percent
  • Desktop — 13 percent
  • Data network — 10 percent
  • Voice — 7 percent
  • Finance, management and administration — 7 percent
  • Helpdesk — 5 percent
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