IT execs to hold tight on spending

EXTREME CAUTION IS likely to pervade the corporate budgeting process for much of 2002 as executives weigh what is needed to bring enterprises out of the economic slump.

Many CIOs and CTOs are looking “to understand where the leverage is and where to invest to accelerate out of the downturn,” observed Jon Ricker, CIO of The Limited Technology Services, the IT arm of clothing giant The Limited in Columbus, Ohio.

A recent CIO poll undertaken by Wall Street analysis firm Morgan Stanley backs the notion that an era of second-guessing is about to ensue.

Predicting a modest 2 percent growth overall in IT budgets, Morgan Stanley noted a significant spike in the number of CIOs who said they were re-evaluating spending.

In November, 67 percent of CIOs polled said they were rethinking their IT outlays, up from 52 percent in October. “Budgets should stabilize next year; however, the planning process has become more dynamic,” Morgan Stanley concluded.

Enterprise officials are expected each quarter to take a hard look at their planned IT investments. In so doing, they will favor “smaller, more focused projects” at the expense of “boil-the-ocean” overhauls of systems, according to the poll.

But the situation has at least improved to the point where decision makers feel safe making IT projections, said Carol Bartz, CEO of San Rafael, Calif.-based Autodesk, a CAD tools provider.

“I think we now have a feeling for the bottom, and what that means is that [executives] feel comfortable forecasting budgets,” Bartz said.

Bartz predicted that corporate R&D budgets would hold their own.

“How many times have we read that companies cutting 5 [percent] to 10 percent of their work force are not touching R&D?” she said.

E-commerce, security, and EAI (enterprise application integration) topped Morgan Stanley’s list of likely enterprise priorities, as well as storage hardware and ERP.

New InfoWorld research pointed to a pragmatic CTO interest in maintenance and steady expansion of infrastructure. Also cited was a desire to “retire systems and vendors which overcomplicate our business operation,” offered one CTO anecdotally.

Contrary to recent polls and surveys, The Limited is overseeing a “holistic” investment in IT to enhance the “customer experience.” CIO Ricker cautioned IT officials against being overly conservative.

“I think there will be those that will pull in their horns,” Ricker said. “But that’s a big mistake, because there will be others in all industries that, like us, will be positioning for the next cycle.”