Many large companies, especially those in the financial services, utilities and telecommunications industries, have cut their technology budgets this year because of the economic slowdown.
In a report that was scheduled for release yesterday, Forrester Research Inc found that 43 percent of large US and European businesses it surveyed had cut their overall forecast spending on technology products and services this year.
Some companies, meanwhile, had also put discretionary spending on hold, while others were planning to negotiate lower rates for information-technology (IT) services.
The research firm did not change its annual technology spending forecast, but said it was reviewing it.
In its most recent forecast, in February, Forrester had said it expected tech spending to grow 2.8 percent this year. That marked a significant downward revision from the forecast it made in December of 4.6 percent growth.
Forrester vice president and principal analyst John McCarthy said that yesterday’s report was “really just a snapshot” of companies’ spending sentiments.
In general, corporate technology buyers were less optimistic than they were in the last such survey, in October last year, just before the credit market tightened and the housing market “really fell apart,” McCarthy said.
Forrester’s survey found that the effects of the economic downturn varied by geography and by sector. US companies were more likely to cut their budgets than those in Europe, for example. And while companies in finance, utilities and telecom are tightening their belts considerably, those in media and entertainment are spending more.
McCarthy said such companies are going through a “fundamental upheaval” that requires they spend on technology regardless of how the economy is doing.
In the survey, taken in late May and early June of nearly 950 IT managers at companies in North America and Europe, nearly half of the US respondents said they had already cut their IT spending budgets, compared with 38 percent of those in Canada and 28 percent of companies in Germany. And 70 percent of respondents said they expected to negotiate lower rates with IT service suppliers.
“Clearly we are entering a period of very judicious IT spending,” McCarthy said.
But, he added, this isn’t the “outright slash and burn” of technology budgets seen in 2002. Last time around, the fallout was from the a bust in the tech sector itself, while this time it’s the financial, real estate and auto industries that are leading the downturn.
“We see continued growth in service spending overall,” McCarthy said.
Last month, research firm Gartner Inc said it expected worldwide IT spending to exceed US$3.4 trillion this year, an 8 percent increase from last year. But much of this growth, analysts said, was based on the decline of the US dollar. Otherwise, Gartner forecast IT spending to grow about 4.5 percent.
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