Computer Economics spend survey suggests optimism

Profile picture for user gonzodaddy By Den Howlett June 18, 2014
Summary:
Survey results for IT spending and budgeting are encouraging but you have to look at the detail to get an industry by industry sense of emerging patterns. One thing that stands out - growth in capital expenditure is at a standstill.

median growth
Computer Economics 25th annual IT Spending and Staffing Benchmarks survey is now available. From the key findings:

We find many things to be optimistic about in the IT spending plans for the current budget cycle. Among our key findings is that the majority of IT organizations plan to increase IT staff headcount for the first time since the beginning of the recession. This job growth remains concentrated within larger organizations, but it is nevertheless more broadly based than it has been over the past several years. IT organizations should see a tightening labor market and IT workers a more robust jobs market than has been the case.

Another sign of strength is that midsize organizations plan to grow IT operational budgets by 3.6%, which is a faster rate than even large organizations. This too, shows that the recovery is broadening its base in a significant way. Up until now, midsize and small organizations have lagged behind large enterprises. Small organizations remain tentative about their spending plans and the recovery is still not quite lifting all boats. It is, however, lifting more boats.

It is when you get into the detail though that things get interesting. so for example, 54% of IT executives believe their spending is either somewhat or very inadequate. The authors postulate this is an indicator of demand pressure. However, as we have consistently seen from other surveys, IT budgets are under constant scrutiny and squeezed at every opportunity. The survey says:

The median IT budget as a percentage of revenue declined from 2.4% to 2.2% for the composite sample...This is only a decline relative to the sharp bounce in 2013. Over the five-year period, this metric has remained mostly stable, which means IT budgets have for the most part closely tracked revenue growth.

Even so, the report is quick to point out that spend patterns vary between industries. So where are the big pockets of operational budget and where are those lagging? The following graph tells the story:

industry spend

There should be no surprise in the finding that capital budgets have ground to a halt from 4% increase in 2013.  The authors speculate that this might be as a result of digesting past budget allocations and/or the impact of budget trending towards renting rather than buying infrastructure. If the latter is true then you might have expected the increase in operational budgets to have been higher. On the other hand, the authors are careful to note that even if there is no growth this year, it could easily bonce back in the future.

Perhaps the most interesting finding centers around where spend is being prioritized. According to this survey, companies are concentrating efforts on developing or building new systems.  Again, this should not surprise. In the applications arena we have seen solid growth by vendors serving the analytics space in particular. In the background, we also know there are considerable investment volumes going into open source related areas. That could in turn mean that IT is getting a much better bang for the buck than it was in the past.

finally, the survey suggests that hiring is on the upswing. That should not surprise given the changes the survey sees in investment patterns around new solutions and, more broadly, interest in projects that add value to the business rather than keeping the lights on.

Regardless of how you view survey results, Computer Economics has been doing this long enough to be certain in its findings. The fact they are mostly optimistic may be a little ambitious given the overall changes they see but the detail certainly provides plenty of color.

Disclosure: Computer Economics is an affiliate partner although we have no direct commercial relationship.

Images: all from the survey