December 15, 2006 5:47 AM PST

British businesses slash IT budgets

British companies are downgrading their IT spending plans for 2007, largely driven by cautious forecasts for the global economy.

A survey released on Friday found that large businesses worldwide expect to spend an average of just 2.8 percent more on IT next year. This is a significant drop on predictions made earlier this year, when the average increase was forecast to be 6 percent.

In the United Kingdom, companies are planning even less of an increase--just 0.9 percent.

But there are huge differences between vertical sectors. Media, pharmaceutical and health care companies are planning to increase their spending on IT next year by an average of 6.9 percent, 6.4 percent and 5.6 percent, respectively, while manufacturers of consumer products are planning to cut their spending by 5.6 percent.

"A number of factors have combined to force enterprises to lower their IT-spending forecasts from the first half of 2006," said Jed Rubin, a director at Gartner, which carried out the research.

Rubin said businesses had spent more in the past year on what he called "run the business" costs than they had planned. This would lead to IT departments focusing on "managing business demand better and improving operations internally," Rubin said.

Health care companies are spending more because of aging populations, while the penetration of IT in media companies had grown tremendously due to their complex models for delivering content.

Rubin also identified already high levels of IT expenditure in the finance sector, at 12 percent of total operational costs.

Spending will vary widely according to technology, Gartner reported. Growth areas next year are expected to be wireless services, Web services, network security and storage. Areas at the foot of companies' spending agendas include proprietary Unix, mainframes and voice services.

Insurance, media and finance companies are the most likely to run large IT departments, with an average of at least 1 in 10 employees working in IT. Gartner said corporate IT jobs were divided as follows: 22 percent for data centers; 20 percent for application development; 13 percent for desktops; 10 percent for data networks; 7 percent for voice; 7 percent for finance, management and administration; and 5 percent for help desks.

Richard Thurston of ZDNet UK reported from London.

See more CNET content tagged:
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Bad Headline
This is a very bad headline. One would think that IT budgets would be slashed next year. Instead they are growing only 2.8%. Yes, this is off early year estimates but the estimates taken six months ago were only estimates, before budgets were actually made.

In a time of outsourcing, the headline should have read: IT BUDGETS TO GROW NEARLY 3% IN 2007
Posted by rhug505456 (1 comment )
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RTFA
If you'd read it, you would know that the headline might read: "UK IT budgets grow only 0.9% for 2007" with an emphasis on "only."

It's pretty common practice politicians to describe lowering the rate of increase of a particular budget as a "budget cut" and for their opponents to decry that as incorrect just as you have. I suppose it depends on what side of the story you're on as to whether you want to call it a budget cut or not.
Posted by MrNougat (78 comments )
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So....
... how did this "Gartner" Report address the issues with regards to the release of Microsoft's Vista and the potential impact on the global economy when earlier reports have projected an increase in IT jobs in Europe and the USA (suggesting an obvious increase in global IT spending). Additionally, this report appears incomplete as it does not appear to have addresses projected IT spending by Small and Medium businesses around the world then speaks about a global economy as if the spending on IT products and services by Small and Medium businesses (other industries - airline travel, hotels, development banking...) do not count!
Posted by Commander_Spock (3123 comments )
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Now, Why The Gartner Report Partly "Sucks"!
Now, the world knows the the "Brits" are fierce CRICKET lovers (unless they have changed over the years) and 2007 is the year of International Cricket; so, is this report going to discount a potential "spike" in IT resources during these games that will be held in the Caribbean and will be brought on by would-be internet viewers! So, how will this projected "spike" be addressed by way of IT spending (+/-) in the UK (and most likely the USA?
Posted by Commander_Spock (3123 comments )
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