Global IT spending flat as economic freeze continues

31 Mar 2010

There has been little change in sentiment in the past 12 months and most companies feel they have been negatively impacted by the recession. External spending on IT will be flat compared with 2009.

The RONIN study of 1,500 companies across 12 countries found that 87pc of companies have been negatively impacted, with 48pc being “strongly” or “extremely” negatively impacted.

The study appears at odds by forecasts by analysts like IDC, which predict a return in spending on IT, particularly among SMBs.

The study has focused on the IT function in companies and shows that they, too, are as affected negatively by the economic climate as was the case during 2009.

This has resulted in an expectation that external spending on computers, software and related services will be flat compared with 2009 (which was 5.3pc lower than the 2008 levels).

Firms’ reaction to recession

Two other major themes emerged from the study. The first relates to the way companies as a whole are reacting to the recession.

The study shows that there is a significant split between companies which are taking short-term actions concentrating on cost cutting and leaving strategic aspects until they emerge from the recession (‘short termers’), and companies which are taking advantage of the recession to re-think their business models and develop strategies which will allow them to emerge stronger (‘strategics’).

It is clear from the study that the ‘strategics’ have embraced technology more and are implementing initiatives to expand the systems and infrastructure to help them emerge with competitive advantage over the ‘short termers.’ They believe they will emerge stronger, whereas the ‘short termers’ believe they will not.

The study also reveals that there will be a recessional re-alignment – behaviours post-recession will be different rather than reverting to the pre-recession approaches.

The five aspects of change

There are five major aspects of change – the first is the increased customer power that buyers have had during the recession, which seeunlikely to be relinquished in the slow emergence from the recession and afterwards.

Coupled with this is the belief that the “recession pricing” that many vendors adopted during the recession to make some (albeit lower) margins rather than none will be insisted on going forward.

The third aspect is the insistence on flexibility and variability – fixed-cost structures are being replaced by variable-cost structures. The fourth, and related, change is the shortening of cycle times for planning, budgets and projects.

The five-year plan is a thing of the past. The complex, integrated, five-year project with payback only after that time has given way to a series of short phases with interim payback as each phase is completed. And the final change will be increased risk avoidance, which will encourage companies to buy mainstream or advanced rather than “bleeding edge” technology.

“The recession is far from over in its impact on companies and IT worldwide and that as these companies emerge they will be behaving differently than in the pre-recession environment,” said Harry Bunn, president and CEO of RONIN.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years