Multi-Year IT Programmes To Make Cost Cutting Difficult

Global economic problems are impacting IT budgets, however, the IT industry will not see the dramatic reductions that were seen during the dot.com bust, according to Gartner. At that time, budgets were slashed from mid double-digit growth to low single-digit growth.

“In a worst case scenario, our research indicates an IT spending increase of 2.3 percent in 2009, down from our earlier projection of 5.8 percent,” said Peter Sondergaard, senior vice president at Gartner and global head of Research. “Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat.”

Gartner said the events of the past two weeks will have an impact on IT budgets in the fourth quarter, but it will not change 2008 substantially. The IT industry went through more dramatic reductions during, and after, the recession of 2001. Sondergaard said many lessons were learned then.

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“We learned that in tumultuous times, CEOs want their executives and managers to be advisors and counselors, not just great implementers of directions given to them,” he said. “What they want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion at the same time.”

Organisations now view IT as a way to transform their businesses and adopt operating models that are much leaner. Other reasons that IT will not see more severe reductions include the fact that IT is embedded in running all aspects of the business; the shift to multi-year IT programmes aligned with business, which makes it difficult to cut costs immediately; and the general tendency as per which IT spending decreases lag the economy by at least two quarters.