CIOs expect to squeeze IT budgets further in 2003

Companies across Europe and the US are continuing to reduce their IT budgets, according to a survey of chief information officers...

Companies across Europe and the US are continuing to reduce their IT budgets, according to a survey of chief information officers conducted by the research department of investment bank Merrill Lynch.

The companies surveyed now devote around 5% of their total revenue to IT spending, and 62% of them are trying to shrink that figure, "which suggests a lid to spending improvement in 2003", the survey said. Seventy-five CIOs in the US and 25 in Europe were surveyed - only 22% of respondents said their companies wanted to increase their IT spending-to-revenue ratio, while 16% reported no change was in the works.

Among the 58% of respondents which had finalised their 2003 IT budgets, the average budget will be up just 1.3% compared with 2002, with US CIOs expecting an average increase of 2% and their European counterparts expecting their budget to remain flat on average.

If their budget plan changed, 55%of respondents said the budget would be likely to shrink, rather than grow. Seventy per cent said improving profits, as opposed to revenue growth, would be more important to getting an IT budget increase at their companies.

Storage ranked as the IT segment poised to experience the most growth in spending, followed by services, servers and software. Little growth is expected for PCs and networking equipment.

CIOs ranked their top IT challenge for 2003 as maintaining operations with a lower budget, followed by cutting costs.

Respondents overwhelmingly agreed that a vendor's support of standards is extremely important to them, because this allows IT departments to integrate products and avoid getting locked into one vendor's products.

IBM received mixed reviews in the area of standards support, ranking first among vendors that most understand the importance of standards, but also third among vendors that do not. Dell, viewed as agnostic by most respondents in this area, ranked as the second vendor that most understands the importance of standards, followed by Hewlett-Packard.

On the flip side, Microsoft and Computer Associates headed the list of vendors that do not understand the importance of standards.

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