CIO Magazine Tech Poll Shows Continuing Incremental Growth

FRAMINGHAM, MA – APRIL 1, 2005 – The CIO Magazine Tech Poll™ results for March show a second consecutive month of improvement in information technology (IT) spending expectations after three straight months of declines. In the monthly poll, chief information officers (CIOs) predict spending will grow 6.4% during the next 12 months, up from February’s 5.9% number. Computer hardware continues to gain momentum surpassing storage as the number two spending priority of poll respondents. In the March poll, a large majority of CIOs (85%), report an application backlog. Of this number, 36.4% report their backlog is significant, however, budget constraints prevent a remedy. Also 15.4% of respondents disclose a significant backlog and they plan to increase spending to deal with it. Also, nearly one third, 33.2% of respondents report that while there is a backlog, it does not significantly impact their operations and 15% claim no backlog at all.

“It is reassuring that for a second straight month we are seeing an upward momentum in IT spending projections,” says Gary Beach, Group Publisher of CXO Media, the company that publishes CIO magazine. “Given the large infrastructure backlog reported this month, it stands to reason technology spending will continue to grow. At some point, the CEOs and CFOs are going to need to loosen the constraints on the CIO and then I expect we will see a larger rate of spending growth.”

“The slow, but steady, improvement in our poll during the past two months is likely to continue over the rest of the year as CIOs find their budgets expanding along with corporate profits,” says Dr. Ed Yardeni, Chief Investment Strategist for Oak Associates.

“Spending expectations for computer hardware continue an upward trend this month, following moderate increases in IT spending forecasts,” says Chris Whitmore, Director, IT Hardware Research for Deutsche Bank Securities. “Although these results are incrementally positive, spending expectations of 6.4% are still below the 7.8% average in 2004. This data is consistent with our forecasts for decelerating IT spending in 2005.”

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. Also covered are future spending plans for IT hardware, software, services and Internet initiatives. The results of the March poll, conducted from March 3-10, 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 March, the TFGI was 2.6, up from 2.4 in February (Attached below are Tables 1 through 3, providing historical data and selected charts).

OVERALL IT BUDGET AND COSTS

The CIO Magazine Tech Poll panel predicts IT budgets to grow by 6.4% over the next 12 months, versus 5.9% in February’s poll. CIOs also report IT budgets increased by an average of 6.7% over the last 12 months, up from 5.7% last month.

IT SECTORS

When asked about spending on eight specific IT categories, the average number of panelists who plan to increase spending over the next 12 months is 42.4%, slightly down from 42.5% in February3. The percentage of respondents who plan to decrease spending are 12.2%, down from 14.2% last month. Security software still continues as the strongest sector in the poll, with 57.5% of respondents predicting increases in spending down from 58.0% last month. Computer hardware surpasses storage to become the number two priority of panelists.

Computer Hardware: Results indicate 51.6% of panelists plan to increase spending on computer hardware (up from 48.9% in February), while 14.4% intend to decrease spending (versus 21.6% in February).

Compensation Costs and Labor Market Conditions: IT compensation costs (including salaries, benefits, and bonuses excluding stock options) increases an average of 4.6% for the past 12 months ending March, down from 5.4% in February. Of the respondents, 10.7% report IT professionals are plentiful (down from 19.0% in February), while 13.0% report IT professionals are hard to find.

INTERNET BUDGETS AND BUSINESS

Internet Revenues: Overall, panelists expect to generate 12.5% of their revenue from Internet activity (B2B2C) during the next 12 months, compared to 10.8% during the previous 12 months. This is up from last month's levels of 11.8% and 10.1%, respectively.

Internet Purchases: On average, during the next 12 months, panelists expect to purchase 26.2% of their materials, supplies and parts over the Internet, up from 22.9% during the past 12 months.

SPECIAL QUESTIONS

The March poll asks CIOs to comment on two special questions. The first question asks panelists to characterize their present application backlog. Eighty-five percent (85.0%) of respondents report they are currently experiencing a backlog. Of those, 36.4% consider the backlog to be significant but budget constraints are more important, while 15.4% plan to increase spending in 2005 in order to address it. The remaining 33.2% of respondents with an identified backlog do not believe it will be critical to their planning process.

The second question focuses on the likelihood of CIOs to use Solaris on x86. Of the responses, 64.7% report they do not use Solaris, while an additional 17.2% respond “don’t know” or “not applicable”. Of the 18.1% of panelists who use Solaris, 8.8% are considering using Solaris on x86, 3.3% already implemented Solaris on x86 machines, and 6.0% are switching to Linux or Windows platforms.

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, March 3rd, and closed on Thursday, March 10th. 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: The March poll consisted of 215 responses with very large firms (over 5,000 employees) representing 16% of the results. A broad cross-section of industries includes finance (16%), technology services (13%), non-computer/communications related manufacturing (9%), health care (8%), education (8%) and state or local government (7%).

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The complete March CIO Magazine Tech Poll can be found at http://peoplepolls.com/results/CIO/030305.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.