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Gartner Executive Programs Midyear Survey Shows CIOs are Paying for Capital Expenditure Upgrades Through Cutting Operating Budgets

In the first half of 2010, CIOs reported that their IT spending remained consistent with their IT budget plans from the end of 2009, according to a global survey of more than 500 CIOs conducted by Gartner Executive Programs.
From June to August, Gartner Executive Programs CIOs reported that on a weighted global average, IT spending will grow 1.1 per cent in 2010. This projection remains consistent with Gartner-s survey of nearly 1,600 CIOs in the fourth quarter of 2009 when CIOs reported IT budgets would increase, on average, by 1.3 per cent. Both spending projection follows a weighted global average reduction in IT budgets of 8.1 per cent for 2009.
“Economic conditions are changing CIO spending priorities as the need to upgrade infrastructure is being appropriated from reduced operating budgets,” said Mark McDonald, group vice president and head of research at Gartner Executive Programs. “Commercial and public sector CIOs plan to increase capital expenditures (CAPEX) by 3 per cent this year and pay for that increase with a 1.3 per cent cut in operating budgets. CIOs felt they could no longer delay infrastructure upgrades and other capital investments and they funded them at the expense of operating budgets.”
Mr McDonald said IT organisations, particularly larger ones, are not increasing the budgets assigned to IT; instead, CIOs are swapping one set of budget items for another. This indicates potential upside limits on current corporate and government purchases of equipment.
“Size certainly matters in terms of IT budget outlook,” said Mr McDonald. “Smaller organisations report significantly stronger IT budget growth percentages than their larger counterparts. The larger the organisation, the tighter it is managing its IT budget in general, and IT operating expense in particular. This continues a trend we have observed since 2008 as larger IT organisations started reducing their resource requirements through consolidation, waste elimination and other measures. CIOs of the largest organisations indicate that opportunities in these areas remain.”
CIOs- views on the future have improved since the start of the year, with more than 40 per cent seeing some form of economic recovery. However, the survey, which questioned CIOs about their economic outlook, changes in spending plans and spending priorities, found that 60 per cent of all respondents continued to see economic challenges.
The survey found that industries hardest hit by the global financial crisis in 2008 and 2009 showed signs of rebounding in the first half of 2010. Consumer/retail, financial services and manufacturing CIOs responding to the survey indicated modest growth in IT budgets during the first half of the year. Industries such as utilities and healthcare are going through deep structural change and continue to invest in IT regardless of economic outlook. Government and education industry CIOs reported budget declines in the face of tight economic conditions.
Regardless of size, geography or industry, the traditional view of an IT budget as planned administrative expense is showing signs of weakness in this economic environment. Companies in the past have finalised their IT budgets in the last quarter of the fiscal year. While 49 per cent of CIOs reported their budgets followed this pattern, many did not with 26 per cent of organisations finalising their IT budget in the first quarter of 2010, and 11 per cent of CIOs reporting that their IT budget have not been finalised at all. This indicates that IT spending is expected to be more fluid and respond to changing business conditions.
Mr McDonald will provide more detailed analysis on the CIO Agenda at Gartner Symposium/ITxpo 2010, being held 8-11 November in Cannes, France. Additional information about the event is available at www.europe.gartner/eu/symposium.
About Gartner Symposium/ITxpo
Celebrating its 20th anniversary, Gartner Symposium/ITxpo 2010 is the world-s most important gathering of CIOs and senior IT executives. This event delivers independent and objective content with the authority and weight of the world-s leading IT research and advisory organisation, and provides access to the latest solutions from key technology providers. Gartner-s annual Symposium/ITxpo events are key components of attendees- annual planning efforts. IT executives rely on Gartner Symposium/ITxpo to gain insight into how their organisations can use IT to address business challenges and improve operational efficiency.
Members of the media can register for the event by contacting Laurence Goasduff at laurence.goasduff@gartner.com. Additional information from the event will be shared on Twitter at http://twitter.com/Gartner_inc and using #GartnerSym.

Gartner, Inc. (NYSE: IT) is the world-s leading information technology research and advisory company. Gartner delivers the technologyrelated insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in hightech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to 60,000 clients in 10,800 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,300 associates, including 1,200 research analysts and consultants, and clients in 80 countries. For more information, visit gartner.com.