CIOs Eyeing Big Tech Purchases Again

Results from Morgan stanley's latest CIO survey are in. And there's an upside: CIOs seem more upbeat about the current economy and plan to loosen their IT budgets. The stock market is holding steady so far this year, Alan Greenspan is being cautiously optimistic, and CIOs are once again eyeing big-ticket technology projects. Morgan stanley reported findings today from its survey of 225 CIOs, and the results are much more optimistic than previous surveys. The survey, conducted in February, showed 41 percent of respondents indicated that the slowing economy made them re-evaluate their IT budgets in January. This is actually good news, considering late last year this figure topped out at 66 percent. Moreover, 66 percent of CIOs said they have a positive or slightly positive outlook on the U.S. economy, up from 44 percent in November. What does this mean? Expect more IT projects to get the green light this year. Eighty percent of respondents plan to begin new application projects. And here are the projects, in order of priority: 1. Application integration
2. Connecting customers over the Internet
3. Windows 2000 upgrade - server
4. Security software
5. Building out network capacity
6. Windows 2000/XP upgrade - desktop
7. Connecting to suppliers over the Internet
Application integration tops the list because many companies over-bought in the past couple of years, and thus need to get these applications up-and-running and working together. Other e-business projects making Morgan stanley's top 20 list include business intelligence tools (ranked 9th); ERP software (10th); CRM software (13th); SCM software (15th); and procurement software. Many CIOs said they're spending at normal levels or will return to normal spending by the end of this year. Morgan stanley though, warns that 'normal' might be very different from the heady days that led to the dot-com crash of 2000. Expect the pace of funding for new projects, for instance, to build modestly throughout the year, the report advises. And new application projects will likely be smaller in size and scope. Also, IT spending continues to look back-end loaded -- that is, heavier spending in Q3 and Q4 than in Q2. This, of course, is in line with how CIOs see the greater economic recovery: Only 11 percent of CIOs expect an economic recovery in Q2; 53 percent expect the economy to show sign of improvement in Q3; and an additional 20 percent expect a recovery in Q4. But Morgan stanley says this survey shows that the worst is over. The report concludes: "2002 should be a year of gradual and modest improvement, with further improvement in 2003, but overall tech spending should lag the pace of the recovery because of the lingering effects of over buying in the past." Tom Kaneshige also writes for Line56.com