Morgan Stanley CIO Survey: Slowing IT Budget Growth

2005 IT spending growth slips
Our May, 2005 CIO Survey forecasts 4.6% cash IT budget growth this year, down from 5.1% in March. IT budget revisions are now almost as likely to be down as up, as CIOs become more guarded in their outlook for the US economy.


Most parts of tech stack to sustain decelerating spending growth
2005 cash spending on hardware expected to slow to 2.6%, down from 3.2% forecasted in March, 2005, growth in software spending to slip to 3.5% from 3.8%, while IT personnel gains could fall to 3.6% from 4.4%. Bucking the trend are network equipment, up 30 basis points to 3.4%, and outsourced services, which could grow 2.8%, up from 2.4% estimated in March, 2005.

Largest increases and declines in CIO spending priorities
Optical transport and business process outsourcing posted the strongest gain, while the largest declines were registered by gigabit Ethernet, printers, consulting and systems integration, portal software, application server software, infrastructure outsourcing, and Layer-3 switching.

Companion IT services report points to flat 2005 demand and pricing
CIOs are turning more cautious on IT services spending and pricing. Consulting and systems integration show the strongest demand within the context of flat IT services spending. For CIOs, price is the most important IT services vendor selection criteria. We see continued earnings risk for the consulting firms given operating margin pressure driven by 3% forecasted wage inflation yet only 1% billing rate increases.

Morgan Stanley CIO Survey Series (12 pages)