IT budgets under pressure as CIOs lose control

IT spend is continuing to fall in European companies as the recession hits home, with CIOs finding themselves outgunned by business managers keen to wrest complete control of corporate finances.

According to Ariel Bauer, an analyst at Merrill Lynch, IT spend is set to increase by a mere three per cent in 2002 compared to last year's 4.7 per cent rise.

He said: "IT remains strategically critical which is why CEOs and CFOs make the decision at board level. A large number of CIOs are still not on the board of directors."

According to Bauer's research, CIOs revised their budgets on average three times during 2001 with consulting and staffing taking the biggest hit, according to his survey.

"The hardest hit segment is consultants because that's the easiest thing to cut. You can cut consultants without cutting into the muscle of the company - software and hardware are critical investments," Bauer added.

Frank Coyle, CIO of Menzies Distribution, believes that IT departments need to take responsibility for reducing costs.

"There is no question that budgets are very tight - a lot tighter than last year in fact. But I think it is reasonable that the IT department should show restraint in the same manner that operational departments do," he said

Nevertheless, companies are continuing to invest in security, CRM and ERP. In the post September 11 days, disaster recovery has become an increasingly important part of security.

Merrill Lynch's Bauer said: "The terrorist attacks in the US underlined the trend towards security and made companies even more aware of the importance of disaster recovery. CRM is becoming a critical add-on to existing ERP systems - it's an upgrade without replacing the system."

But Coyle disagreed. "CRM does not give value for money at all. Many studies have shown it's difficult and it's very much a flavour of the month issue. Security, however, comes in highest on our list. We've just had approval of the board to increase capital spend on security as it is something we dare not gamble with."

Bauer surveyed 50 companies throughout Europe.