IDG’s CIO Magazine Tech Poll(TM) Shows Rebound Underway
FRAMINGHAM, MA – DECEMBER 3, 2001 – November's CIO Magazine Tech Poll(TM) in partnership with yardeni.com "shows a modest rebound in technology spending may be underway even though September's terrorist attacks clearly delayed the recovery in technology spending by businesses," according to Dr. Edward Yardeni, Chief Investment Strategist of Deutsche Banc Alex. Brown.
"Moreover, the foundation for a more robust increase in information technology spending may be in place with more than half of CIOs planning to increase spending over the next nine months," said Gary Beach, Group Publisher CIO Magazine.
The CIO Magazine Tech Poll, created by Dr. Ed Yardeni and CIO magazine, provides technology and business executives, economists, and policymakers with a tool to gauge technology growth trends and to assess their impact on the overall economy. The 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 November's Poll, which was conducted from November 8-15, 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 information technology activity over the next 12-months.(1) In November, the TFGI was 2.1, compared to 1.7 in October. An additional useful indicator-the Future/Current Growth Ratio-was at 0.9 in November, up slightly from last month's 0.7 reading. (Table 1 providing historical data can be viewed at http://www.yardeni.com/polls/cionov2001table1.pdf and selected charts at http://www.yardeni.com/polls/cionov2001charts.pdf.)
OVERALL IT BUDGET AND COSTS
During November 2001, the CIO Magazine Tech Poll panel projected IT budgets will grow by 5.3% over the next 12 months, up from October's 4.7%, — and down from 19% last November. Similarly, the panel reports IT budgets grew an average 5.8% over the previous 12 months, down from the October estimate of 7.2%, and off sharply from 22% last November.(2)
When asked about spending in seven specific IT categories, the average number of panelists planning to increase spending rose to 39.9%, up from 35.2% the previous month, but those planning to decrease spending also increased to 25.5% from 23.4% in October.
Storage Systems. The percent of panelists expecting to increase spending on Storage Systems rose slightly to 45.7% from 44.3% in the previous month, and it continues to be the strongest category of projected IT spending.
Computer Hardware. The Computer Hardware sector showed further improvement this month, with 41.7% of panelists expecting to increase spending, up from 37.8% last month. The latest reading remains significantly below the 50%-plus readings earlier this year.
Infrastructure and eBusiness Software. These sectors posted the largest month-over-month improvements, with panelists expecting to increase spending on Infrastructure Software rising to 42.0% from 33.9% in the previous month, and in the case of eBusiness Software, rising to 41.9% from 33.0% in October.
Outsourced IT Services. This sector bounced off last month's low with 31.1% of panelists expecting to increase spending compared to 26.0% in October.
(Table 1 http://www.yardeni.com/polls/cionov2001table1.pdf).
Compensation Costs and Labor Market Conditions. IT compensation costs (including salaries, benefits, and bonuses excluding stock options) reportedly rose by an average 3.8% in the 12 months ending in November, down sharply from 5.1% reported in October, and down from 12% a year ago. Labor market conditions for IT professions eased with 9.3% reporting IT professionals were hard to find and retain in November, down from 10.4% last month and 68% a year ago.
INTERNET BUDGETS AND BUSINESS
Internet Budget Plans. CIO Magazine Tech Poll panelists report they expect to spend 17.2% of their IT budgets on developing business over the Internet (B2B2C) during the next 12 months. This is up slightly from 15.8% reported for the previous 12 months, and down sharply from projections of 25%- plus made last fall. On the other hand, 41.9% of the panelists plan to increase spending on eBusiness Software during the next 12 months versus only 18.6% who plan to cut back.
Internet Revenues. Overall, panelists expect to generate 13.2% of their revenues from Internet activity (B2B2C) over the next 12 months, compared to 9.4% during the previous 12 months.
Internet Purchases. On average, panelists expect to purchase 21.7% of their materials, supplies and parts over the Internet, up from an estimated 16.8% over the past 12 months.
Third and Fourth Quarter Comparison. When asked to compare IT spending during the fourth quarter of 2001 to the third, adjusting as best as possible for seasonality, 74.2% said it would be the same or weaker. The remaining 25.8% said spending in the fourth quarter would be higher or significantly higher. (Table 2 at http://www.yardeni.com/polls/cionov2001table2.pdf presents the results of the Special Questions).
Pickup in IT Spending. Among the panelists, 20.1% say their IT spending will pick up in the first quarter of 2002, while 21.6% predict it will not pick up until the second quarter of 2002 or after. Interestingly, 23.2% of the panelists claim that IT spending never slowed and 11.6% say it has already improved this year.
Spending Factors. Weak profits continue to have an adverse impact on tech spending. This was cited by 40.1% of the panelists as the primary factor affecting IT spending plans in 2001. However, this is down slightly from last month's reading of 43.9%. Another 28.8% see "tight financial conditions" as the primary factor adversely affecting IT spending plans — up from 25% in October. At the same time, 21.0% said that spending might be weak because there is sufficient IT capacity.
Spending on building systems and web-based applications. When asked how much of their 2002 budget they plan on allocating to building systems or applications that are based on web services environments, 45.6% have no planned allocation, while 36.8% plan to allocate between 2% and 10% of their IT budget. The remaining 10.4% expect to allocate more than 10% of their IT budget.
CIO MAGAZINE TECH POLL
The CIO Magazine Tech Poll was created by Dr. Ed Yardeni, Chief Investment Strategist of Deutsche Banc Alex. Brown, and CIO magazine. Started in August 2000, the poll is proving to be an accurate survey of technology spending trends. The latest poll was opened on Thursday, November 8, and closed on Thursday, November 15. An invitation to respond to the poll was distributed via e-mail to a panel of more than 1600 CIOs and 3,000 randomly selected CIO readers who match the job function criteria "CIO."
Demographics. In the November poll, there were 259 responses with 96% from North America. CIOs comprise 88% of the total, with CEOs, COOs and presidents accounting for 7% and "other" titles accounting for 5%. Very large firms with over 5,000 employees represent 18% of the results. A broad cross- section of industries is represented, including manufacturing (17%), finance (10%), technology services (16%), health care (9%), and distribution (4%).
The complete November CIO Magazine Tech Poll can be found at http://www.yardeni.com/polls/results/cio/110801.asp?user=cio. Previous polls can be found at www.yardeni.com/polls. (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 seven 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%.