Corporations spending more on IT – but not on personnel

Fueled by positive economic growth within organizations, corporate IT spending - expressed as a percentage of revenue - has reached its highest level in nine years, a new study of 184 senior IT workers has found.

North American median corporate IT spending across all verticals in 2006 made up 2 percent of revenue, up from 1.7 percent in 2005 and 1.9 percent in 2004, according to the 17th annual Computer Economics IT Spending and Staffing study. This year's figure represents the highest percentage of revenue since reaching 2.2 percent in 1997, when companies prepared for Y2K fears.

But little of the additional spending is for toward hiring new IT workers, as many companies are choosing instead to outsource roles, the study revealed. Among large organizations, which earn annual revenue of $750 million or more, the median increase in IT staff was zero, with more than one quarter cutting staff.

Companies may be reluctant to make new hires because only recently, following Y2K and the dot-com bubble burst, many jobs were lost, the study said.

"Companies simply have more money to spend this year," said Frank Scavo, president of Computer Economics. "But we see most of the new spending going toward hardware, software and outsourcing, with not as much toward adding to the IT staff."

Demand for IT staff, meanwhile, seems to be exceeding supply, according to the study. Many senior employees were laid off recently and their replacements are too inexperienced to take over all their responsibilities.

This would correspond to a recent Spherion report that 48 percent of IT workers are likely to leave their jobs in the next year as employers more actively recruit skilled IT professionals.

IT spending growth is strongest in business services, followed by healthcare, retail and banking and finance organizations, the study showed. The smallest growth was found in the manufacturing, energy and distribution sectors.

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