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US tech spending cut by up to 50%

NetScribes/Ganesh Ramamoorthy

Never mind what the Indian IT captains have to say about the state of the industry, the truth is out there. Indian software companies are in for longer, harsher days ahead, as a recent survey indicates a drastic rollback in IT spending by US companies, the largest market by far for Indian software companies.

Data collected from 336 US companies by Techrepublic.com, a Gartner Group affiliate, shows that IT spending plans have been slashed by up to 50 per cent due to economic uncertainty.

As many as 45 per cent of the companies are set to decrease their spending compared to their original budgets in 2001-02.

"It is a significant increase from 13 per cent of respondents stating a decrease in 2000-01," said K Potter, Gartner analyst, in the research note.

About 11 per cent of the companies are cutting IT spending by 50 per cent and more, and about 13 per cent of the companies are cutting their IT budgets by about 25 per cent, and 21 per cent are crunching their budgets by up to 10 per cent.

When survey respondents were asked to identify the area where the cuts would be the most aggressive (if they had to make cuts), consulting services topped the list at 41 per cent, followed by personnel expenses (including training) at 18 per cent, and desktop/laptop equipment at 15 per cent of the respondents.

However, about 23 per cent of the respondents also said that they were least likely to cut on personnel expenses (including training).

"Although personnel expenses is at the top of the list, the surprise is that 77 per cent of enterprises didn't place personnel costs in protected status," Potter said.

"The possible cuts in consulting services and PC equipment also mirror findings from our 2000 IT spending and staffing survey, that showed a flat gross budget line growth for enterprise service providers (including consultants) and hardware in 2001," he added.

Following personnel expenses, the next highest ranked area where cost are least likely to be cut include network equipment at 17 per cent, server equipment at 15 per cent, and desktop/laptop equipment at 14 per cent.

The only silver lining in the survey seemed to be that 41 per cent of the companies said that they would not change their IT spending, while 14 per cent said they would increase their spending this year - 6 per cent said they would increase by up to 10 per cent, 3 per cent by up to 25 per cent, and 5 per cent by 50 per cent and more.

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