CIO Magazine Tech Poll Reports Strong IT Growth Projections In April
FRAMINGHAM, MA – MAY 2, 2005 – The CIO Magazine Tech Poll™ results for April, show strong signs of growth in projected information technology (IT) spending. For the third consecutive month, chief information officers (CIOs) predict increasing spending projections. In this month’s poll, respondents predict spending growth of 7.9% during the next 12 months, compared with last month’s 6.4%. Respondents also predict growth in spending for security software, application software, infrastructure software, telecom equipment and data networking equipment. In the April poll’s special question, a majority of CIOs (61.2 %) report they consider their own IT infrastructure to be solid and a strong differentiator. Slightly more than 18% (18.1%) rate their infrastructure as average, meaning they are just getting by. The remaining respondents view their IT infrastructure as both brittle and a potential corporate risk (9.6%), or outdated and a significant corporate risk (4.8%)
"The continued projected growth of IT spending, is a positive sign that technology spending continues on a solid growth path,” says Gary Beach, Group Publisher of CXO Media, the company that publishes CIO magazine. “The fact that so many CIOs see their networks and systems as being solid indicates that, in the short term, we can expect upgrades to be the norm. However, with the large application backlogs reported last month, we may be near the tipping point where an extensive investment in technology is required.”
“IT budgets are starting to bloom along with the tulips,” says Dr. Ed Yardeni, Chief Investment Strategist for Oak Associates. “April's poll results suggest business may be warming up to more technology spending in the spring.”
“While overall projections from CIOs are more positive this month, spending projections for computer hardware fell slightly and storage was flat,” says Chris Whitmore, Director, IT Hardware Research for Deutsche Bank Securities. “We continue to expect most areas of hardware to experience slower growth in 2005 versus 2004. We believe the combination of rising interest rates, slowing economic growth and an aging replacement cycle will all dampen hardware growth this year.”
The CIO Magazine Tech Poll provides technology and business executives, economists, and policymakers with a tool to gauge technology growth trends to assess the impact on the overall economy. Poll panelists are asked to answer questions on overall current and projected IT budgets on a monthly basis. Future spending plans for IT hardware, software, services and Internet initiatives are also covered. The results of the April’s poll, conducted from April 7-14, are detailed below.
CIO MAGAZINE TECHNOLOGY GROWTH INDICATORS
The CIO Magazine Tech Poll results are used to construct the CIO Magazine Tech Future Growth Index (TFGI), which projects IT activity over the next 12 months . In April, the TFGI was 3.2, up from 2.6 in March (Attached below are Tables 1 through 3 providing historical data and selected charts).
OVERALL IT BUDGET AND COSTS
During April, the CIO Magazine Tech Poll panel projects IT budgets to grow by 7.9% during the next 12 months, versus 6.4% in March’s poll. CIOs also report that IT budgets increased by an average of 5.9% during the last 12 months, down from 6.7% last month.
When asked about spending on eight specific IT categories, the average number of panelists who plan to increase spending during the next 12 months is 43.3% in April, up from 42.4% in March.3 Those who plan to decrease spending are 14.0%, up from 12.2% last month. Security software continues to be the strongest sector in the poll, with 58.7% of respondents predicting increases, up from 57.5% last month. Storage also continues to be a priority, with 50.0% of respondents planning to increase spending in this category, the same as the March Poll.
Computer Hardware: April results indicate that 49.2% of panelists plan to increase spending on computer hardware (down from 51.6% in March), while 18.7% intend to decrease spending (up from 14.4% in March).
Compensation Costs and Labor Market Conditions: IT compensation costs (including salaries, benefits and bonuses excluding stock options) rose an average of 5.0% in the 12 months ending April, up from 4.6% in March. Of the respondents, 16.9% report that IT professionals are plentiful (up from 10.7% in March), while 13.2% report that IT professionals are hard to find.
INTERNET BUDGETS AND BUSINESS
Internet Revenues: Overall, panelists expect to generate 13.6% of their revenue from Internet activity (B2B&B2C) over the next 12 months, compared to 12.1% during the previous 12 months. This is an increase from last month's levels of 12.5% and 10.8%, respectively.
Internet Purchases: On average, during the next 12 months, panelists expect to purchase 25.0% of their materials, supplies and parts over the Internet, up from 21.8% over the past 12 months.
The April poll asks CIOs to comment on two special questions. The first question asks panelists their views on the stability of their existing IT infrastructure. Of respondents, the majority view their IT infrastructure as solid, with 61.2% of panelists reporting that it was a significant corporate differentiator. Just over 18% (18.1%) of respondents viewed their IT infrastructure as average, just enough to get by, while the remaining 14.4% view their infrastructure as either a potential risk (9.6%) or a significant corporate liability (4.8%).
The second question focuses on the importance of Internet Protocol (IP) for corporate networks and equipment over the next 5 years. Nearly 77% (76.8%) of respondents predict that IP will be very important (37.6%) or important (39.2%) during the next five years and these panelists expect to make changes to their networks or equipment. Slightly more than sixteen percent (16.4%) of panelists say that IP will be somewhat important and will make minor changes to their networks or equipment. A small percentage (3.2%), say that IP is not important and will have no impact on their network and equipment during the next five years
CIO MAGAZINE TECH POLL
The CIO Magazine Tech Poll was created by CIO magazine in August 2000 in association with well-known economist Dr. Ed Yardeni, Chief Investment Strategist, Oak Associates. The poll is proving to be an accurate indicator of technology spending trends. The latest poll opened on Thursday, April 7th, and closed on Thursday, April 14th. An invitation to respond to the poll was distributed via e-mail to a panel of more than 2,000 chief information officers and 3,000 randomly selected CIO readers who match the job function criteria “CIO.”
Demographics: In the April poll, there were 189 responses with very large firms (over 5,000 employees) representing 19% of the results. The poll represents a broad cross-section of industries, including finance (16%), technology services (13%), non-computer/communications related manufacturing (12%), health care (12%), education (7%) and state or local government (5%).
The complete March CIO Magazine Tech Poll can be found at http://peoplepolls.com/results/CIO/040705.asp?user=CIO
Previous poll results can be found at http://www.cio.com/info/releases.
1. The TFGI is calculated by multiplying the projected growth rate of future IT budgets by the average percentage of respondents saying they plan to increase spending on eight unique categories: computer hardware, data networking equipment, telecom equipment, storage systems, outsourced IT services, infrastructure software, and eBusiness software.
2. Averages exclude responses over 100%.
3. Starting January 2002, security software has been added to the group of IT sectors surveyed in the poll.