IT Spending Shows Continued Strength in August According to CIO Magazine Tech Poll

FRAMINGHAM, MA – September 1, 2005 – Information technology (IT) spending predictions for the next 12 months fell off the previous poll's four year high but still remain strong, according to the current CIO Magazine Tech Poll™. Chief information officers (CIOs) continue to express optimism and expect to increase IT budgets by 7.1%. While predicted growth declined from the July's* all time high of 10.1%, the rate is up from January's 5.4%. All spending categories showed month-over-month declines, from last month's* record results. However, when compared with June's results, current spending expectations increased for computer hardware, data networking equipment, storage and outsourced IT services.

The special question this month asked CIOs what the number one barrier to effectiveness is in their roles. The largest number of respondents, 25.7%, cited an application and project backlog. This situation arises when there are necessary IT projects that remain uncompleted. Coming in second was inadequate budget (15.5%) with a shortage of time for planning and strategy (13.1%), rounding out the top three.

"This month's forecast continues to point to signs of the solid growth expected in technology spending," says Gary Beach, Group Publisher, CXO Media Inc., the company that publishes CIO magazine. "With such a large number of CIOs facing a severe application backlog, I expect solid growth numbers to be the norm. Tech spending will remain robust through the end of the year."

"July was hot, August was not," says Dr. Ed Yardeni, Chief Investment Strategist for Oak Associates. "Our panelists curbed their enthusiasm for IT spending in the latest poll. The good news is that they still project solid single-digit growth, which may be more sustainable in the long run."

"Although spending expectations moderated this month after unusually optimistic predictions in July, we believe August results suggest a healthy IT spending environment for hardware and storage," says Chris Whitmore, Director, IT Hardware Research for Deutsche Bank Securities. "Nonetheless, spending expectations did moderate on the margin and larger enterprises remain conservative."

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 answer questions on overall current and projected IT budgets on a monthly basis. The poll measures future spending plans for IT hardware, software, services and Internet initiatives. The results of the poll, conducted from August 11-18, are detailed below.


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.1 In August, the TFGI was 2.6, down from 4.1 in July (Attached below are Tables 1 through 3, providing historical data and selected charts).


During August, the CIO Magazine Tech Poll panel projects IT budgets will grow by 7.1% during the next 12 months, versus 10.1% in July's poll. CIOs further report that IT budgets grew by an average of 5.0% during the last 12 months, down from 9.0% 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 was 38.6% in August, down from 42.9% in July.2 Panelists who plan to decrease spending fell to 12.4%, from 13.0% last month. Security software remains the strongest sector in the poll, with 51.7% of respondents predicting increases in, down from 58.3% last month. Storage remains second, with 51.2% of respondents planning to increase spending in this category, down from 52.5% in the July Poll.

Computer Hardware: August results indicate that 42.3% of panelists plan to increase spending on computer hardware (down from 48.3% in July), while 18.8% intend to decrease spending (versus 14.0% in July).

Compensation Costs and Labor Market Conditions: IT compensation costs (including salaries, benefits, and bonuses excluding stock options) increased an average of 6.4% in the 12 months ending August, down from 6.8% in July. Of the respondents, 9.1% report that IT professionals are plentiful, while 17.8% report that IT professionals are hard to find.


Internet Revenues: Overall, panelists expect to generate 10.3% of their revenue from Internet activity (B2B2C) during the next 12 months, compared to 8.2% during the previous 12 months.

Internet Purchases: On average, during the next 12 months, panelists expect to purchase 22.7% of their materials, supplies and parts over the Internet, up from 19.9% over the past 12 months.


This month's poll featured one special question.

Q) What is the number one hurdle or barrier to effectiveness in your role at this time?

A) The largest number (25.7 %) cited the overwhelming backlog of requests/projects as the biggest hurdle, while 15.5% answered inadequate budgets. This was followed by 13.1% of panelists who cited a shortage of time for strategic thinking/planning, while 9.7% cited unrealistic expectations from business colleagues. Other panelists cited the following hurdles:

• Risk and uncertainty due to volatile economic conditions (6.3%)

• Lack of technical skill sets within IT (5.8%)

• Difficulty proving the value of IT (4.9%)

• Lack of alignment between business goals and IT efforts (4.4%)

• Overwhelming pace of technology change (4.4%)

• Unknown expectations from the business (3.4%)

• Lack of business knowledge in IT dept (0.5%)

• other (6.3 %).


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, August 11th, and closed on Thursday, August 18th. An invitation to participate in the poll is 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 August poll, there were 207 responses with very large firms (over 5,000 employees) representing almost 21% of the results. The poll represents a broad cross section of industries, including technology services (12%), finance (11%), health care (11%), state or local government (10%) education (8%), and non-computer/communications related manufacturing (13%).

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Previous poll results can be found at

* Refers to data from poll conducted July 7-14, 2005

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%.