IT Spending Down, Productivity Up

A report on worldwide IT trends from META Group found the first-ever sharp decrease for IT spending, but more productivity from IT employees.

Cost-cutting should come as no surprise. According to Forrester Research, many of the problems being experienced by the IT industry is a result of overspending in 2000 and in preparation for Y2K. Now it’s time to keep that spending in check.

“IT organizations are rebalancing their budgets by cutting into their discretionary spending, while keeping the ‘run the business’ portion of budgets intact,” said Howard Rubin, META Group executive vice president and research fellow. “We’re seeing a majority of IT budgets going toward core spending such as infrastructure development, data centers and operations, with a continual focus on cost reduction.”

META Group projects that U.S. businesses will decrease total IT spending by 2 to 5 percent in 2002, compared to an estimated 8 percent increase in 2001. META Group also projects that total IT spending among non-U.S. businesses will likely be flat in 2002, compared with a 6 percent increase in 2001. META Group has found that 50 percent of CIOs have already reduced their budgets to adjust for the current economic climate. However, findings show that CIOs are still spending on Web-based technologies (e.g., CRM, e-commerce projects), emphasizing data centers, operations and infrastructure development.

Productivity among IT workers is up, and according to META Group this may be due in part to the increased popularity of more simple programming languages such as HTML, JavaScript and Visual Basic. But C++ and Java are still the programming languages of choice. Worldwide, the IT work year (measured in total hours) has decreased. The average IT professional in the United States works 2,080 hours per year, while the average IT professional outside the United States averages 1,992 hours per year. In addition, the average U.S. company supports 50,000 lines of code per professional (vs. 42,000 last year).

“Many companies have been forced to reduce their workforce in the last year, leading to increased workloads and responsibilities among the remaining employees. This realignment of responsibilities may explain the remarkable increase in workforce productivity,” Rubin said. “IT organizations must be aware that reduced staffs cannot indefinitely be overburdened.”

Productivity for non-U.S. companies is 78,000 lines of code per professional, down from 109,000 last year. Meanwhile, investment in training worldwide has risen, with companies averaging 9.05 training days per year, up from 8.44 in 2000. And for the first time, META Group found the United States is staffed with higher academic levels than the rest of the world (more than 52 percent have at least a bachelor’s degree).

IT staff turnover rates have decreased both in the United States and worldwide. Among the most difficult jobs to fill worldwide were systems analysts and designers. Database analysts and support programmers were comparatively easier to recruit. Although metrics usage is down, the study found that metrics specialists were in high demand for the first time in 2001. Outside the United States, the use of metrics has become a top IT priority.

IT compensation in the United States is up 9 percent in 2001, compared to 6.6 percent in 2000, with the greatest pay increase for project leaders, business analysts and metric specialists, according to META Group.

The 2001 Compensation Survey by the Information Technology Association of America (ITAA) found a mixed picture for IT compensation. According to the ITAA survey, which was conducted by William H. Mercer, Inc., median total cash compensation (base salary plus annual incentive) for a number of executive positions declined from 2000 to 2001. The decreases are more likely to result from smaller incentives than decreases in base pay.

Many non-executive employees, however, saw moderate to strong increases in both base pay and total cash compensation, the ITAA survey found. These increases may be the result of shortages in specific talent categories driving pay upward for some positions. Pay was relatively flat or slightly down for a number of more common IT positions, such as senior project manager and senior software engineer.

“The technology industry is adapting its competitive practices to a changing, but still promising, business climate,” said David Van De Voort, a Mercer consultant. “We’re still seeing a general upward movement in pay and the use of incentive pay, but the tremendous upside pay potential of the past few years has been reined in to more closely link pay to actual company performance.”

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