Recession Forces IT Budgets Down By 4 Percent

Businesses big and small are paring their IT budgets in 2009 as they look to ride out the global recession, according to analyst company Forrester Research.

In dual reports, Forrester analysts Andrew Bartels and Heidi Lo found that enterprises and small and midsize businesses in North America and Europe are cutting IT operating and capital budgets, cutting back on technology initiatives, and looking to improve both IT efficiency and business processes.

According to the analysts, North American enterprises—those companies with 1,000 or more employees—are expected to reduce their IT operating and capital budgets each by 3 percent. In Europe, these larger companies are looking to cut operating budgets by 2 percent and capital budgets by 1 percent.

In both markets, SMBs are expected to cut IT operating budgets by 4 percent and capital budgets by 2 to 3 percent.

Much of the focus of IT spending will be on operating and maintaining the IT infrastructure these businesses have rather than funding new IT initiatives, Forrester found.

IT officials of both SMBs and enterprises said they expected 2009 to be a financially difficult year.

“When this 2009 budget survey was fielded between February and May of 2009, SMBs revealed a glum business outlook for 2009: 49 [percent] believed that 2009 would be a somewhat challenging year, with an additional 34 [percent] foreseeing an extremely challenging year,” Bartels and Lo said in their SMB report. “As a result, SMBs are planning to prune their IT operating and capital budgets for 2009.”

The percentages were similar for enterprises, according to Forrester.

A slightly larger percentage of surveyed enterprises and SMBs in North America than in Europe said they were lowering their IT operating and capital budgets, and all said they were cutting back on hardware and software spending. Responses on spending on services and outsourcing were mixed, Forrester said.

For SMBs, software spending would focus most on security, while server and networking would be the top focus in hardware spending. For enterprises, information management would be the top priority in software spending, while networking equipment—which is getting a lot of attention as vendors like Cisco Systems, Hewlett-Packard and IBM look to offer more holistic data center solutions—would be the focus in hardware.

Bartels and Lo said they expected enterprises to be more willing to cut IT jobs than SMBs, while salaries were expected to remain level.

In addition, more enterprises and SMBs said they were more carefully tracking IT energy costs and expected to find ways to lower them in 2009.