IT budgets as percent of revenue at highest level since 1997

After six months of work at Computer Economics, we've now released our 17th annual IT spending and staffing study, and the findings are quite interesting.

We found that median corporate IT spending across all industry sectors in the U.S. and Canada has now reached 2% of sales, the highest level this metric has shown since 1997, during the build-up to Y2K, when it hit 2.2%.

The 2% ratio this year is an increase from 1.7% in 2005, as shown in Figure 1.

Effectively, the growth in IT spending as a percent of revenue means that IT budgets are increasing faster than corporate sales. This is confirmed by the study, which shows that the median growth in IT spending on a dollar basis across all respondents this year is 4.1%, outpacing the 2005 U.S. GDP growth rate of 3.5% in 2005.

So what are companies spending all this money on? Our study finds IT staff is not at the top of the list. Although there are more companies adding IT staff than cutting headcount, the median increase in IT staff this year is only 2.0%, about half the rate of the increase in IT spending.

The study found that IT spending growth is strongest in business services, where it shows a 9.7% increase over last year, followed by healthcare, pharmaceuticals and medical devices, retail, and banking and finance organizations. Weakest growth, though still positive, is seen in the process manufacturing, utilities/energy, and wholesale distribution sectors.

The Computer Economics IT Spending, Staffing, and Technology Trends study, now in its 17th year of publication, provides dozens of additional ratios and other metrics for the composite sample, by organization size, and by industry sector. Statistics include benchmarks for IT operational budgets, IT capital budgets, IT staffing, technology adoption rates, ROI and TCO, and outsourcing utilization.

The study is available for purchase from the Computer Economics website.

A FREE 34 page executive summary is available upon request.