Slowdown blues: US, Europe firms cut IT spend

Over 40 per cent of large businesses have cut their IT budgets this year due to the global economic slowdown, according to a survey by Forrester Research.

IT divisions of North American firms have been affected more than their European counterparts, says the report.

With 49 per cent of North American firms having cut their IT budget compared with 31 per cent of respondents in Europe. The survey is based on 950 senior IT managers across North America and Europe.

While 43 per cent firms have already cut their overall IT budget in 2008, 24 per cent have put discretionary spending on hold. The report further notes that 70 per cent of the respondents said they might negotiate lower rates with suppliers.

On a positive note, the report also stated that demand for services hold steady. With 45 per cent firms planning to increase their use of applications outsourcing, and about 43 per cent saying they will increase the use of infrastructure outsourcing. This is important for Indian IT services provider for whom over 60 per cent of the revenues come from North America.

“With regard to the services sector, the slowdown has firms renegotiating rates, being more selective in selecting vendors and examining spending plans more thoroughly, but they are still expecting to pay more for services.The demand for enterprise IT services has not dropped significantly,” said John C McCarthy, vice president and principal analyst, Forrester Research.