IT Spending to Inch Back Up
CIOs will cautiously open their wallets in 2002.
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When Guy Chiarello speaks, CIOs listen.

CIOs paid close attention to IT spending metrics from Chiarello, managing director and CTO at Morgan stanley, at the annual Morgan stanley CIO Outlook conference. Chiarello's comments at the December event in New York touched on the company's IT spending habits and plans to exploit more opportunities using enterprise applications, CRM, and a move toward a computing utility model.

After a year of depleted earnings, missed revenue targets, and layoffs, which caused Fortune 1000 companies to dramatically scale back their IT spending, some top CIOs are preparing to modestly raise their IT spending levels after Q1 of 2002, Chiarello and conference attendees say.

In fact, according to Morgan stanley's monthly CIO survey, global IT budgets are estimated to rise at least 2 percent this year, says Ryan Rathman, who tracks some enterprise software companies for Morgan stanley. That is more in-line with historic
levels, such as the 3 percent growth in IT budgets in 1999 before the dramatic 12 percent increase in 2000 during the Internet craze, he says.

In particular, CIOs are planning to invest in e-commerce initiatives, security software, application integration, storage hardware, and enterprise resource planning software, according to the monthly survey. E-commerce was the overall leading category with 37 percent of respondents claiming it is as an IT spending priority, Rathman says.

For its part, Morgan stanley's IT spending budget will be flat, with spending falling between $2.5 billion and $2.6 billion in 2002, just about the same spent last year, Chiarello says. But the company will be more assertive with its CRM initiatives, looking to consulting organizations to help the company reinvent business processes.

Also, Morgan stanley intends to increase the overall percentage of infrastructure that is under managed services, Chiarello says. Currently, 14 percent of the company's infrastructure is managed by IBM Global Services.

However, Chiarello warns that growing numbers of CIOs will be out of a job if they continue to hold back on IT spending in order to cut costs. "In 2003 more CIOs will be fired. Cutting costs by deferring IT spending is the worst evil," he says, adding that by doing so, companies stand to fall behind in a competitive market where technology offers the edge.

From a computing standpoint, Chiarello says that the overarching idea at Morgan stanley is to gradually transform the company's IT architecture into that of a total utility computing model, so information can be accessed from any location.

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