CIO Confidence In 2006 Plummets

According to Forrester Research's quarterly CIO Confidence Poll, a survey of 140 chief information officers at North American firms, doubt about the future is starting to show.

"They don't think that everything's gone to hell in a hand basket," said Andrew Bartels, Forrester research director and primary author of the poll's report, "but there are a number of doubts about the strengths of the economy. It's not everywhere, but a growing number of companies are thinking that the future may be gloomy."

Forrester's "Climate Index," a score that shows how CIOs believe the business climate for their industry will be in three quarters, plunged by 10 points in the second quarter of 2005, falling to its lowest level since the survey debuted in the first quarter of 2004. That decrease is on the heels of a 5-point drop in the first quarter. Together, they more than erased the gains made in 2004.

"What will be the impact of oil prices?" said Bartels. "Or higher interest rates, or the falling dollar, or trade deficits? There are a number of questions and concerns at the CEO level, and those then seep over to the CIO side."

So far, the worries about the future haven't impinged on IT spending, real or planned, for 2005, added Bartels. By an overwhelming margin, CIO reported that their spending has increased this year, with 77 percent claiming some increase and 36 percent saying that they're spending is more than 5 percent greater than 2004's.

It's the spending plans for 2006 that are beginning to soften, said Bartels. "CIOs still feel good about 2005; most of their concerns are about 2006." At the moment, 65 percent of the CIOs polled expect that they'll be spending more in 2006 than this year.

"It's a slowing of growth that we're starting to see," said Bartels.

The fall-off shouldn't come as a big shock, added Bartels, since technically the current recovery has been going on since 2001 and 2002, and the up-and-down economic cycle is "close to the time when a downturn could be expected."

One surprise in the survey, said Bartels -- and a possible telling piece of data -- is that the dampening of confidence is especially prominent among small- and mid-sized businesses (SMBs).

"SMBs have actually had higher spending for the last year and a half than enterprises," Bartels noted. "They've been carrying the tech sector. And now they're looking even more cautious than large firms. That's a significant development."

Of course, the poll is just that, Bartels said. "It's only a measure of sentiment. What we've found in our own forecasting is that spending plans and actual behavior do deviate. But over time they converge.

"Bottom line is that the expectation for this year is [still] looking good, but next year IT will come into it cautious of what budget plans will be."