CIO poll: Attacks shrink IT budgets

The Sept. 11 terrorist attacks have led IT managers to cut their projected budgets for IT purchases over the next 12 months, according to the September CIO Magazine/Yardeni.com poll of CIOs (chief information officers) and other high-level managers (CIO is owned by the same parent company as the IDG News Service, International Data Group Inc.).

Respondents said that they expect their IT budgets to grow by 3.7 percent over the next 12 months. Previous polls had indicated a revitalization of technology spending, with most figures trending up. The drop in projected IT spending seen in September is the result of the attacks, and the resulting impact on confidence in the economy, said Ed Yardeni, chief investment strategist at Deutsche Banc Alex. Brown Inc., in a statement.

In August, the poll -- taken monthly -- showed that respondents expected IT budgets to grow by 7.2 percent over the subsequent 12-month period. In the September 2000 poll, the figure was 18 percent.

Additionally, over the past 12 months, IT budgets grew only 3.5 percent, the September poll found. The August poll found that IT budgets had increased 7.2 percent in the prior 12 months; the November 2000 poll found the figure to be 22 percent.

The poll received 198 responses from the over 4,600 CIOs and managers surveyed, and was taken between Sept. 13 and Sept. 20.

Though the poll "didn't ask CIOs if the attacks changed their perceptions," it seems quite likely that was the case, Yardeni said. This may be an emotional reaction that will correct itself in next month's poll, Yardeni said. Given that the survey was sent only two days after the attack, it's unlikely that companies had time to change their plans, he said. Yardeni said he doubts next month's poll will include any special section about the attacks.

The poll also tracks spending in six individual categories of IT equipment and services -- infrastructure software, outsourced IT services, storage systems, hardware, networking equipment and telecommunication equipment -- and found that only 37.5 percent of those polled expected any increase in spending on these categories, down from 42.4 percent in August.

Storage systems tallied the most expected spending, with 49 percent of respondents saying that they expected to increase spending, the same as in August. Outsourced IT services moved up slightly, with 30 percent of those polled expecting to increase their spending, up from 27 percent in August. Computer hardware and telecommunication equipment both dropped off sharply, with hardware dropping 12 percent as only 30 percent of those polled expected to increase spending and telecommunication equipment spending increases pegged at 34 percent, down from 43 percent in August.

Poll respondents did not provide much hope for the immediate future, with only 12 percent saying they expect IT spending to increase in the second half of 2001, though 54 percent foresee increases in 2002. Related to this, 48 percent said they are now replacing a significant number of PCs, or are planning to do so in the next six months.

In more bad news, Yardeni expects that the October poll will show that the September attacks have derailed the recovery previous polls had predicted. This will be assessed by the poll, but he expects that when CIOs "look at the economy, they'll conclude that the shock is worse (than they had expected)."

Income related to Internet commerce did rise, however, with expected revenue from Internet commerce over the next 12 months hitting 13 percent, up from 10 percent in the previous year. Also, respondents expect to purchase 20 percent of their business materials, supplies and parts online in the next year, up from 14 percent in the last year.

Compensation costs, excluding stock options, rose by 6 percent over the 12 months ending in Sept., the poll found. However, that number is unchanged since August and down from 14 percent in Oct. 2000, according to the poll.

Ninety-seven percent of those who returned their surveys were based in North America. Very large firms, those employing 5,000 or more people, comprised 20 percent of respondents.

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