IT Spending Projections Rebound Slightly In February

FRAMINGHAM, MA – MARCH 1, 2005 – The CIO Magazine Tech Poll™ results for February, show a slight rebound in projected information technology (IT) spending after recording declines over the previous three months. Chief information officers (CIOs) predict spending growth of 5.9% over the next 12 months, up from 5.4% reported during January. Most of the categories show an increase in this month’s poll, with telecom equipment and infrastructure software posting the largest number of CIOs who predict increases. This month’s special question asks CIOs to identify the greatest IT obstacle facing their organizations’ business. Almost half of poll respondents (47%) report internal issues as the greatest IT obstacle, followed by, government regulations (14.8%) and Sarbanes-Oxley (6.1%).

“The February results are somewhat reassuring” says Gary Beach, Group Publisher of CXO Media, the company that publishes CIO magazine. “After three straight monthly declines, it is a good sign we are seeing some leveling off. CIOs are now facing a more constrained environment and must make hard choices between infrastructure maintenance and system upgrades. I believe in the coming months we will see a slow but steady rate of growth. However, unless the CEO and CFO loosen the purse strings, we will not see explosive growth.”

“Following two months of weakness, I was encouraged to see a more positive outlook for tech spending in the February poll,” says Dr. Ed Yardeni, Chief Investment Strategist for Oak Associates. “World markets are becoming more competitive every day and the need to use technology to boost productivity is likely to increase in the next several years.”

“Although IT spending projections improved modestly from January levels, CIO spending expectations have declined noticeably from last fall,” says Chris Whitmore, Director IT Hardware Research for Deutsche Bank Securities. “The upswing this month in the telecom and infrastructure software markets is one highlight in the data. However, it remains to be seen if this is the beginning of a trend.”

The CIO Magazine Tech Poll 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. 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 February’s poll, conducted from February 3-10, are detailed below.


The CIO Magazine Tech Poll results are used to construct the CIO Magazine Tech Future Growth Index (TFGI), which projects the IT activity over the next 12 months. In February, the TFGI was 2.4, up from 2.1 in January. (Attached below are Tables 1 through 3, providing historical data and selected charts.)


During February, the CIO Magazine Tech Poll panel projects IT budgets will grow by 5.9% over the next 12 months, versus 5.4% in January’s poll. CIOs also report that IT budgets increased by an average of 5.7% over the last 12 months, down from 5.8% last month.


When asked about spending on eight specific IT categories, the average number of panelists who plan to increase spending over the next 12 months was 42.5% in February, up from 40.5% in January3. Those who plan to decrease spending rose to 14.2%, up from 13.5% last month. Security software continues to be the strongest sector in the poll, with 58.0% of respondents predicting increases in spending, up from 56.6% last month. Storage also continues to be a priority, with 53.9% of respondents planning to increase spending in this category, up from 50.4% in January.

Computer Hardware: February results indicate that 48.9% of panelists plan to increase spending on computer hardware (up from 43.3% in January), while 21.6% intend to decrease spending (versus 17.3% in January).

Compensation Costs and Labor Market Conditions: IT compensation costs (including salaries, benefits, and bonuses excluding stock options) increased an average of 5.4% in the 12 months ending February, up from 4.6% in January. Of respondents, 19% report that IT professionals are plentiful, while 11.7% report that IT professionals are hard to find.


Internet Revenues: Overall, panelists expect to generate 11.8% of their revenue from Internet activity (B2B2C) over the next 12 months, compared to 10.1% during the previous 12 months. This is down from last month's levels of 12.9% and 10.2%, respectively.

Internet Purchases: On average, during the next 12 months, panelists expect to purchase 24% of their materials, supplies and parts over the Internet, up from 22.1% over the past 12 months.


In February, CIOs were asked to comment on the greatest IT obstacle to their organization’s business. Almost half of CIOs reported internal issues (47%) as the greatest obstacle, while 14.8% viewed government regulations as a major concern. CIOs also cited Sarbanes-Oxley requirements (6.1%) and IT mergers (2.6%) as obstacles. Of the respondents, 29.6% cited “none of the above.”


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 was opened on Thursday, February 3rd, and closed on Thursday, February 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: In the February poll, there were 231 responses with very large firms (over 5,000 employees) representing 15.6% of the results. A broad cross-section of industries is represented, including finance (15%), technology services (13%), non-computer/communications related manufacturing (11%), health care (10%), education (9%) and state or local government (8%).


The complete February CIO Magazine Tech Poll can be found at Previous poll results can be found at

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 in January 2002, security software has been added to the group of IT sectors surveyed in the poll.