IT Spending Collapse

November 21, 2008

Not long ago, a flashy consultant offered an opinion that corporate spending on information technology would slow. My recollection is that I thought this assertion was either stupid, ill advised, or crazy. The information I had been gathering suggested that corporations would take multiple actions to get information technology costs under control. The long accepted practice of “hiding” certain IT costs was drawing to a close. When a server failed, the costs of overtime, consultants, and fixes would be pigeon holed in another budget line. The enterprise applications that don’t work two thirds of the time had eroded credibility but most senior managers were reluctant to confront the tech staff. The economic downturn would, I thought, change these behaviors. No one could argue that companies had to husband their resources. Waste and careless accounting had to be rectified. When I mentioned this coming shift at a conference in October 2008, no one in the audience cared. One person wrote me and said I was, “Too negative.” Yep, right.

Take a look at ChangeWave’s Hot Wire Blog here. The author of “A Historic Collapse in US Corporate IT Spending”, Paul Carlton, wrote:

in the aftermath of the U.S. presidential election, respondents do not see any immediate improvement occurring in their company’s IT spending. In fact, nearly half (48%) now believe IT spending won’t pick up for their company until the 3rd Quarter of 2009 or later – a two-fold increase since our August survey.

If anything, Mr. Carlton provides current data that provide a timely look into what will be a tough time for enterprise software vendors. In my opinion, the search sector will be hit quite hard.

Stephen Arnold, November 21, 2008

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