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Gartner Slashes IT Spending Forecasts for 2007  :  Published December 2006 All Rights Reserved


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Gartner Slashes IT Spending Forecasts for 2007

The Gartner Consulting Group of Stamford, CT, slashed IT spending forecasts for those companies with more than $1 billion in revenue ahead of 2007. Earlier in 2006, Gartner projected an increase in IT spending at a healthy 6 percent for 2007, but as corporations continue to reach for double-digit profit growth to please stockholders,  it was no longer possible to upgrade IT and please Wall Street without drastic reductions in spending. Gartner revised its forecast increase to 2.8 percent according to Gartner Consulting’s Worldwide IT Benchmarking Group. The new results undoubtedly will impact IT industry hiring in 2007.

“A number of factors have combined to force enterprises to lower their IT spending forecasts from the first half of 2006,” said Jed Rubin, director of Gartner Consulting. “Looking back at the distribution of spending in 2006, enterprises spent more to support core business operations. This includes spending to support increasingly complex infrastructure and applications requirements, rising energy costs, regulatory requirements and other non-discretionary spending to keep the business running. This increased ‘run the business’ spending has consumed budget resources that were originally earmarked for more strategic and transformational investment. IT leaders are now planning to optimize their spending in these areas in the year to come.”

According to the report, growth and transformation remain the top priorities for enterprises in 2007, but any new investments need to be funded by a significant reduction in existing ‘run-the-business’ spending. To support these priorities, IT organizations will subsequently need to reduce their ‘run the business’ budgets by nearly 5 percent in 2007.

The new 2007 version of the Gartner Consulting Worldwide IT Benchmark Service and the Worldwide IT Benchmark report includes five volumes of comprehensive IT spending and performance data across 20 industries. The report highlights comprehensive IT spending plans of more than 1,500 companies with more than $1 billion in revenue, combined with historical spending and performance data on more than 10,000 companies worldwide. This allows companies to look at key cost and performance indicators by IT domain to gauge and manage organizational effectiveness and performance optimization.

In 2007, the most significant difference in IT spending growth will be in the Media industry, up to nearly 7 percent from 4 percent in 2006. The consumer products industry will see the biggest decline in IT spending in 2007, as spending is expected to decline by nearly 6 percent, down from an 8 percent increase in 2006.

Food and beverage processing and the insurance industry will remain flat in 2007. Spending on IT will gain across the pharmaceuticals industry, healthcare, travel, retail, engineering, and banking.
 

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