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Recession Will Keep It Spending Flat in 2010, Study Says

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The recession is battering most companies and will keep IT spending flat in 2010, according to a study released Tuesday (March 30) by RONIN Corp.

RONIN polled nearly 1,500 companies in 12 countries on the recession's impact and found little change in sentiment in the past 12 months. Throughout the period, 87 percent of companies have been negatively impacted, with 48 percent being "strongly" or "extremely" negatively impacted.

The study has focused on IT operations at companies and shows that they too are as negatively affected by the economic climate in 2010 as was the case during 2009. This has resulted in an expectation that external spending on computers, software and related services will be flat compared with 2009, when IT spending was  5.3 percent lower than in 2008.

Two other major themes emerged from the study.

The first relates to the way companies are reacting to the recession. The study shows that there is a significant bifurcation between companies which are taking short-term actions concentrating on cost cutting and leaving strategic aspects until they emerge from the recession ("short termers"), and companies which are re-thinking their business models and developing strategies which will allow them to emerge from the recession stronger ("strategics"). It is clear from the study that the "strategics" have embraced technology more and are implementing initiatives to expand the systems and infrastructure to help them emerge with competitive advantage over the "short termers." They believe they will emerge stronger, whereas the "short termers" believe they will not.

The study also reveals that there will be a recessional re-alignment—behaviors post-recession will be different rather than reverting to the pre-recession approaches.

There are five major aspects of change. The first is the increased customer power that buyers have had during the recession, which seems unlikely to be relinquished in the slow emergence from the recession and afterwards. Coupled with this is the belief that the "recession pricing" that many vendors adopted during the recession to make some (albeit lower) margins rather than none will be insisted on going forward. The third aspect is customer insistence on flexibility and variability—fixed-cost structures are being replaced by variable-cost structures. The fourth, and related, change is the shortening of cycle times for planning, budgets and projects. The five-year plan is a thing of the past. The complex, integrated, five-year project with payback only after that time has given way to a series of short phases with interim payback as each phase is completed. And the final change will be increased risk avoidance, which will encourage companies to buy mainstream or advanced rather than "bleeding edge" technology.

"The recession is far from over in its impact on companies and IT worldwide and that as these companies emerge they will be behaving differently than in the pre-recession environment," says RONIN President and CEO Harry Bunn.

RONIN conducted this fourth phase of the ongoing program in late February 2010. Over 6,300 surveys were completed over the four waves across 12 countries—the United States, Canada, Mexico, Brazil, Germany, United Kingdom, France, Italy, Spain, China, Japan, and Australia. Respondents were members of RONIN global IT Decision-Maker Panel.



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