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Flat Chance

As companies keep IT spending in check, executives have to make some hard choices about what they can live without.

As IT director of NYK Business Systems Americas (a unit of Tokyo-based NYK, a global container-shipping company), Kurt Schubert has a list of things he’d like to do, and a list of things he needs to do.

He may have to forgo both.

Even essential projects, such as shoring up the redundancy and availability of NYK’s custom applications, or developing a new disaster-recovery plan, now look like extravagances. The executive management of parent company NYK is asking for cuts across the board in next year’s IT budget. Schubert is in a tough spot: instead of allowing the IT director to improve system availability, the 2010 budget could actually worsen it if the budget forces him to cut support staff for key applications.

Many CFOs and CIOs face similarly difficult scenarios and constraints as they look ahead to 2010. After nearly two decades of continuous increases, IT budgets have finally proved that they aren’t immune to market forces. According to research firm Computer Economics, 2009 will mark a holding pattern for IT capital budgets, which will match 2008 levels, and for IT budgets as a percent of revenue, which will remain at an average of 1.5%. A report from Goldman Sachs is more grim: it says U.S. IT spending will fall by more than 10% this year.

Those figures may represent a bottoming out. Or maybe not. Goldman Sachs projects IT spending to rise 2% globally in 2010, but estimates that U.S.-based buying will contract by nearly 1%. Forrester Research is more optimistic, seeing an 8% increase in 2010 IT spending, a level reminiscent of the glory days of the dot-com boom.

As they finalized their budgets in October, however, CFOs and IT executives sang a different tune. IT spending will be flat to down for 2010, they say. And capital investment in IT will be almost nonexistent — only the most necessary of projects are winning approval for next year from executive management and boards of directors.

“We don’t have any major needs to expand our network or do any big software projects; we have completed most of our major infrastructure projects over the last three years,” says Brad Buss, CFO of Cypress Semiconductor. “And we expect to hold head count relatively flat over the next year.”

Unkindest Cuts

Capital investment is on the back burner at companies of all sizes. At Baptist General Convention of Texas, a religious organization that supports the ministry work of churches, universities, and hospitals, the IT budget for 2010 has been cut by 10%. Director of IT Dave Lyons supports 280 PC users. He has changed a couple of staffers from full-time to part-time and plans to refresh fewer PCs next year than scheduled.

But those savings are offset by having to buy seven or eight new servers and paying more for software contracts. “Since the ministry has to run lean, I want to be there with them. But at the same time we can’t go below a certain level and provide the services we have to provide,” he says. Lyons would love to buy an e-mail marketing server because the current service he uses is not integrated, but that’s out of the question.

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