Slight dip in spending plans leaves them well up on last year

Chief information officers expect their budgets to grow by 7.4% in the next year - a slight fall on the 8.9% they anticipated...

Chief information officers expect their budgets to grow by 7.4% in the next year - a slight fall on the 8.9% they anticipated when polled in August.

US magazine CIO surveyed about 250 chief information officers in September for its monthly Tech Pol. Although the month-on-month figures show a slight fall, the forecast is still 25% stronger than CIOs projected in the same period last year. 

"What's driving [this] is that 62% of CIOs are telling us that their firms have a significant application backlog," said Gary Beach, group publisher at CIO magazine.

When asked about spending in eight specific IT sectors, the average number of CIOs surveyed who planned to increase spending fell to 43.7% in September, down from 46.7% in August. 

However, spending in some sectors, such as security and storage, remained hot, Beach said. 

In fact, 65.1% of the CIOs surveyed plan to increase spending on security, up from 61.3% in August; 53.4% plan to spend more on storage systems, up just slightly from 53.1% in August. 

Other sectors did not fare as well. "The first stop on the spending train [is] data networking and telecommunications," Beach said. 

According to the survey, 42% of respondents plan to increase spending on data networking equipment, down from 49.4% who said that in August. And only 38.6% said they plan to increase spending on telecoms equipment, down from 42.8% in August. 

"Software applications and software infrastructure will lag [behind] other product categories in the next 12 to 18 months because businesses are going to be more interested in focusing on building and enhancing and upgrading their network infrastructure - that's going to be job one," Beach said. 

He expressed surprise at the slowdown in the computer hardware sector in September. "Computer hardware has been having a pretty good run, and for whatever reason, this month it cooled off compared to the other seven product categories."

He suggested that because many businesses have already upgraded to Windows XP, and Microsoft is not expected to release Longhorn until at least sometime in 2006, CIOs may not feel they need to upgrade their hardware. 

"Perhaps the Y2K refresh cycle is seeing its waning day. But we'll have to wait and see - it's just one month," Beach said. 

The survey indicates that the internet is coming into its own as a business tool. "[It] is no longer a science project for CEOs," Beach said. "The age of e-commerce might be just about to dawn.

"If you look at our data, we estimate about 18% of all business, according to our poll respondents, is going to be driven by the internet next year in terms of driving sales or driving procurement. So this is not an experiment any more - it's becoming a really serious business tool." 

Each month, CIO magazine surveys a panel of IT executives on current and future IT spending and other IT issues. The survey is done in partnership with Ed Yardeni, chief investment strategist at Oak Associates and Deutsche Bank Securities. 

The latest poll was conducted between 9 and 16 September: 253 IT executives responded to the survey, 19% of the responses came from executives at companies with more than 5,000 employees.

Linda Rosencrance writes for Computerworld

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