IDG’s CIO Magazine Tech Poll(TM) Shows Renewed Caution
FRAMINGHAM, MA – JANUARY 2, 2002 – December's CIO Magazine Tech Poll(TM) in partnership with yardeni.com found that the modest rebound in IT spending plans during October and November stalled in December. "This suggests that year-end 2001 budget reviews did not go well for tech spending in 2002," according to Dr. Edward Yardeni, Chief Investment Strategist of Deutsche Banc Alex. Brown.
"Chief information officers continue to cautiously manage IT spending on a quarter to quarter basis. Only projects with clear returns on investment are being funded by corporations," 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 December's Poll, which was conducted from December 6-13, 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 December, the TFGI was 1.5, compared to 2.1 in November. It was the second lowest reading of the year, with the TGIF down to 1.4 during September, when terrorists attacked the World Trade Center and the Pentagon. (Table 1 providing historical data and selected charts is located at http://www.yardeni.com/polls/ciodec2001table1.pdf and http://www.yardeni.com/polls/ciodec2001charts.pdf respectively.)
OVERALL IT BUDGET AND COSTS
During December 2001, the CIO Magazine Tech Poll panel projected IT budgets will grow by 3.7% over the next 12 months, down from November's 5.3%, — and down from 17% last December. Similarly, the panel reports IT budgets grew an average 1.9% over the previous 12 months, down from the November estimate of 5.8%, and off sharply from 16% last December.(2) "This unusually steep decline in December could be an aberration, but it certainly suggests that there was no year-end IT spending spree," notes Dr. Yardeni.
When asked about spending in seven specific IT categories, the average number of panelists planning to increase spending was steady at 39.8%, but those planning to decrease spending fell to 23.7% from 25.5% in November.
Infrastructure Software. Infrastructure Software emerged as the strongest sector in the survey after showing a third consecutive month of improvement in the results. The percent of panelists expecting to increase spending on Infrastructure Software increased to 44.0% from 42.0% in the previous month, while those planning on decreasing spending fell to 17.2% from 20.2%.
Storage Systems. Storage Systems continued to deteriorate in December, but it remained a relatively strong sector in the survey. The percent of panelists expecting to increase spending in this sector fell to 41.6% from 45.7% in the previous month, and those expecting to cut spending increased slightly to 20.2% from 19.8% in November.
Outsourced IT Services. Outsourced IT spending plans improved for the second straight month in December. Among the panelists, 33.5% expect to increase spending compared to 31.1% in November, and 27.0% plan to cut spending, down from 31.5% a month ago. (Table1 — http://www.yardeni.com/polls/ciodec2001table1.pdf).
Compensation Costs and Labor Market Conditions. IT compensation costs (including salaries, benefits, and bonuses excluding stock options) reportedly rose by an average 5.1% in the 12 months ending in December, up from 3.8% reported in November, and down from 11% a year ago. Labor market conditions for IT professions stabilized with 9.7% reporting IT professionals were hard to find and retain in December, almost unchanged from 9.3% last month but down from 58% a year ago.
INTERNET BUDGETS AND BUSINESS
Internet Budget Plans. CIO Magazine Tech Poll panelists report they expect to spend 18.9% of their IT budgets on developing business over the Internet (B2B2C) during the next 12 months. This is up slightly from 17.5% reported for the previous 12 months, and down sharply from projections of 24%- plus made last year. On the other hand, 40.8% of the panelists plan to increase spending on eBusiness Software during the next 12 months versus only 18.5% who plan to cut back
Internet Revenues. Overall, panelists expect to generate 14.9% of their revenues from Internet activity (B2B2C) over the next 12 months, compared to 11.0% during the previous 12 months.
Internet Purchases. On average, panelists expect to purchase 23.3% of their materials, supplies and parts over the Internet, up from an estimated 18.2% 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, 78.8% said it would be the same or weaker. The remaining 21.2% said spending in the fourth quarter would be higher or significantly higher. (Table 2 at http://www.yardeni.com/polls/ciodec2001table2.pdf presents the results of the Special Questions).
Pickup in IT Spending. Among panelists, 22.5% claim their IT spending will increase in the first quarter of 2002 while 41.5% predict spending will increase during or beyond the second quarter. Interestingly, 21.6% of the panelists claim that IT spending never slowed and 10.2% say it has already improved this year.
Spending Factors. Weak profits continue to have an adverse impact on tech spending. This was cited by 37.7% of the panelists as the primary factor affecting IT spending plans in 2001. However, this is down slightly from last month's reading of 40.1%. Another 31.4% see "tight financial conditions" as the primary factor adversely affecting IT spending plans — up from 28.8% in November. At the same time, 20.3% said that spending might be weak because there is sufficient IT capacity.
State of Current Application Backlog. When asked how they would characterize their application backlog, 87.3% reported having an applications backlog though 74.6% claimed it was either not important or was being delayed by budget constraints. However, 12.7% did claim their backlog was significant and would be addressed with increased spending.
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, December 6, and closed on Thursday, December 13. An invitation to respond to the poll was distributed via e-mail to a panel of more than 2000 CIOs and 3,000 randomly selected CIO readers who match the job function criteria "CIO."
Demographics. In the December poll, there were 236 responses with 95% from North America. CIOs comprise 86% of the total, with CEOs, COOs and presidents accounting for 8% and "other" titles accounting for 7%. Very large firms with over 5,000 employees represent 17% of the results. A broad cross- section of industries is represented, including manufacturing (15%), finance (11%), technology services (20%), health care (11%), and distribution (3%). The complete December CIO Magazine Tech Poll can be found at http://www.yardeni.com/polls/results/cio/120601.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%. MAKE YOUR OPINION COUNT – Click Here http://tbutton.prnewswire.com/prn/11690X43823629