Communications and Technology Industry Research

More than 40 percent of large businesses have cut their IT budgets this year due to the global economic slowdown, according to a new survey by Forrester (News - Alert) Research titled "The State Of IT Services: 2008."

 

The Forrester Business Data Services report surveyed nearly 950 senior IT managers across North America and Europe regarding their IT services spending and overall services strategies and priorities, finding that "43 percent of firms have already cut their overall IT budgets in 2008 in reaction to the slow down in the global economy, while 24 percent of firms have put discretionary spending on hold."

 

Twenty-eight percent of respondents said the economy has had no impact on their IT budgets.

 

Asked how the economy will affect IT services spending, 70 percent of respondents told Forrester they will likely negotiate lower rates with suppliers, and 16 percent said they have already cut their IT services spending.

 

IT departments in the financial services industry were hit hardest, the study found: 49 percent of IT shops in the financial services sector have cut their budgets. At the other end of the spectrum is the media, entertainment, and leisure industry, where only 39 percent of respondents said they have had to reduce spending.

 

The study found that whereas 49 percent of North American firms have cut their IT budgets, 31 percent of respondents in Europe have — "although it should be noted that the Forrester survey was fielded in Q2 2008 prior to the deteriorating economic conditions in Europe," the study's authors say.

 

"This is not an across-the-board spending slowdown; the impact of the economy on IT budgets varies widely by industry and geography," said Forrester Research (News - Alert) vice president and principal analyst John C. McCarthy. "The demand for enterprise IT services has not dropped significantly."

 

The demand for services holds steady, Forrester officials say: "Forty-five percent of firms plan to increase their use of applications outsourcing, while 43 percent of firms are increasing their use of infrastructure outsourcing. Forty-three percent of respondents said they are moving more work offshore."

 

In fact, the study found, "satisfaction with outsourcing remains low. While overall firms are satisfied with their decision to use a third party, 52 percent say their biggest challenge with existing IT services and outsourcing relationships is that cost savings are lower than expected. Other noteworthy challenges include inconsistent or poor service quality (40 percent) and the inability of the vendor or contract structure to respond rapidly to changing business needs (35 percent)."

 

Earlier this year a study by Britain's DMC Software Solutions found that over 40 percent of businesses in the high technology, aerospace and retail sectors across the US and Europe have invested in CRM software, as well as two thirds of telecom operators and over half of financial services, pharmaceuticals and transport.

 

The recent survey highlighted some of the main problems with CRM software, which company officials found "mainly stemmed from choosing the right CRM software, dealing with the right software supplier to help them get the most out of their software and issues with integrating their CRM data with their other software systems."

 

In fact, 67 percent said "finding time to chose and evaluate their CRM software" was a major issue, 51 percent said "synchronizing data" was a major issue and 43 percent said they were using "less than half" of their CRM systems functionality.