CIO survey gloomy on IT upturn prospects

There is not even a glimmer of hope that IT budgets will grow next year, latest research from Merrill Lynch & Co Inc has confirmed, with two-thirds of European business CIOs polled in a survey of technology spending forecasts expecting their budgets to be flat or down in 2003 compared with 2002.

Half of all the 300 companies surveyed by the investment bank expected IT budgets to be flat next year, with 14% slated to spend less next year than this. The outlook of CIOs in the financial services sector appears to be the most conservative, with 65% of respondents marking future spending levels as flat or down in 2003.

CIOs in France were found to be more optimistic than their peers in Germany or the UK. No one working in the telecommunications sector saw any signs of an upturn.

An assessment of current spending levels for the remainder of the year showed that manufacturing sectors appear to be the most robust, with only 18% of respondents saying that anticipated spending levels would be down on last year.

Some mixed messages for enterprise software vendors were detected in terms of anticipated future investment areas. Although the level of penetration is still relatively low for customer relationship management (CRM) systems, IT investments ear-marked for CRM projects remains low. Only 36% or respondents reported an installed CRM system, but 83% of those sites without CRM said they would not plan to buy a system in the next 12 months.

The trend towards consolidation of enterprise resources planning (ERP) systems, such as suites from SAP, PeopleSoft, Oracle or JD Edwards, also seems to be slowing. At least 30% of all respondents in France, Germany and Sweden reported they were running more than one ERP system, but some 83% did not expect to see them consolidated any time soon.

The survey shows considerable degradation in the market since July, when Merrill reported that some 70% of European CIOs then had budgets to fund additional IT initiatives, which the investment bank saw as demonstrating the strategic importance of enterprise software, despite what it referred to as the "sour economic environment."

The outlook for hardware suppliers is less bleak. Although just over half of all firms polled felt they had sufficient hardware resources, 44% will be needing to replace systems or buy additional hardware this coming year.

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