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IT spending update: 2011 budgets intact

A new report from Wells Fargo Securities suggests that IT spending is stable and will rise a bit in 2012.

Despite the threat of another recessionary period, Wells Fargo Securities senior analyst Jason Maynard believes that IT budgets will hold up through 2011 and that the summer spending spottiness hasn't translated into meaningful expense cutting.

In today's e-mail newsletter, Maynard and team make the case for a positive call on IT spending despite the global macroeconomic fear permeating the market. This is based on first-hand qualitative feedback the team aggregated from CIOs and the 100 largest enterprise hardware and software vendors.

Obviously there is still a scenario where we have a repeat of the dramatic spending cutback of 2008, but the Wells team believes most CIOs are in a wait-and-see mode, and most forecasts call for a 4-5 percent spending growth.

Total Technology Revenue Growth
Total Technology Revenue Growth (year-over-year) Wells Fargo Securities,FactSet

One of the primary factors driving the positive thought process is that IT has become a strategic asset for most, if not all organizations, to achieve business objectives. According to Maynard, the pace of change is putting pressure on businesses to move faster and leverage their information technology.

Accordingly, key project initiatives included social business, continued focus on analytics, the consumerization of IT via mobile devices, refreshing existing applications, and the ongoing remaking of the data center, including virtualization.

Some supporting points from the report:

  • IT budgets are still fairly lean and don't have a lot of fat to cut
  • There are many mission-critical projects that are deemed "must have" in order to maintain competitiveness
  • There is a tremendous amount of technological change, perhaps the most in 20 years, and business doesn't want to miss the social, mobile, and cloud waves
  • Most businesses weren't assuming much GDP growth in their own internal forecast, so the economic weakness isn't causing panic

The big question is what IT budgets will look like in 2012. Most analysts are confident that there will be growth in IT spending, but macroeconomic events could have a major impact.