CXO

IT budget fightback: Europe will lead the way

UK tech chiefs not entirely convinced...

After a dreadful 2009, IT spending will rebound again in 2010, analysts have predicted - but UK CIOs remain far more cautious about prospects for budget growth this year.

Analyst house Forrester Research forecast the spending uptick in a report published last week, which estimated that global IT spending will grow 8.1 per cent in 2010 to reach more than $1tr, after a fall of 8.9 per cent during 2009.

The company's VP and principal analyst, Andrew Bartels, said the technology downturn of 2008 and 2009 is "unofficially over" and all the pieces are in place "for a 2010 tech spending rebound".

Forrester predicts that global purchases of computer equipment will be up 8.2 per cent in 2010, communications equipment buying will rise by 7.6 per cent, software spending will increase by 9.7 per cent, purchases of IT consulting and systems integration services will grow by 6.8 per cent, and IT outsourcing services will be 7.1 per cent higher.

Europe will be the strongest performing region, Forrester found, with the largest spending growth in Western and Central Europe.

The region's tech buying will rise by 11.2 per cent, boosted by the dollar's decline against the euro.

Budgets across the pond will rise too, albeit at a slower rate: spending on IT in the US will grow 6.6 per cent in 2010 to $568bn after declining 8.2 per cent in 2009.

Members of silicon.com's CIO Jury are far less bullish about IT budgets for 2010, however: when asked if IT budgets were to rise this year, the CIO Jury voted no by a margin of eight to four.

While some members of the CIO Jury are predicting increases - Alan Bawden, IT and operations director at the JM Group, said he expects to see IT budgets rising across the board for this year, adding: "We are already seeing these rise in a lot of our financial services clients where demand is steadily increasing" - few are expecting a UK IT spending bonanza.

"It's a difficult call to make generically. There will be some segments of the economy which will rise out of the recession first. Historically this has been the financial sector but given that this area has been worst hit, it may not be the one to pull out initially. Consequently budgets will probably evolve in line with tentative business recovery rather than be set confidently in advance," said Mark Foulsham, CIO at esure.

Alastair Behenna, CIO at Harvey Nash, predicted IT budgets will only begin to grow once businesses can tangibly feel the recovery.

"I think it's unlikely [budgets] will rise appreciably this year until businesses see how they are tracking in 2010, which may give us all a supply and service bottleneck in 2011 if the economy does get back on track to any real extent."

The nature of budget allocation is also likely to change this year, according to the IT chiefs. Gavin Whatrup, group IT director at Creston, believes budgets will be "much more tightly aligned to measurable benefits than before, and over a shorter timeline".

'Business as usual' expenses will be scrutinised heavily this year, with budgets for such activities likely to be reduced or remain flat, according to Richard Hodkinson, group IT and operations director at Irwin Mitchell. However, Hodkinson believes capital schemes are likely to increase.

Of course, different sectors are likely to experience different conditions - in particular the public sector is widely expected to suffer from significant cuts to all budgets this year.

Budget recovery "will depend on the sector", said Paul Day, head of information services at Southwark Council. "The public sector is certainly expecting cuts across the board. The pious hope that, since IT can contribute to greater efficiency, we would therefore expect IT budgets to rise while others fall, rarely comes to pass."

About Steve Ranger

Steve Ranger is the UK editor of TechRepublic, and has been writing about the impact of technology on people, business and culture for more than a decade. Before joining TechRepublic he was the editor of silicon.com.

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