Over 40% of US, European firms cutting IT budgets: Forrester

The global economic slowdown has pushed more than 40% of large businesses in North America and Europe to cut their IT budgets this year, a survey by Forrester Research said.

Of the respondents considered in the survey, only 28% said that there had been no impact of the economy on their IT budgets. Asked how the economy will affect IT services spending, some 70% of respondents said they would be negotiating lower rates with suppliers, while 16% said they had already cut their IT services spending.

The report surveyed nearly 950 senior IT managers across North America and Europe regarding their IT services spending and overall services strategies and priorities.

The survey showed that 49% of North American firms have cut their IT budgets compared with 31% in Europe. But Forrester noted its survey was fielded in Q2 2008, "prior to the deteriorating economic conditions in Europe".

As per the report, IT departments in the financial services industry were hit hardest - 49% of IT shops in the financial services sector have cut their budgets. At the other end of the spectrum is the media, entertainment, and leisure industry, where only 39% of respondents said they have had to reduce spending. In the services sector, the slowdown has firms renegotiating rates, being more selective in choosing vendors and examining, but still expecting to pay more for services.

On the other hand, the demand for enterprise IT services has not dropped significantly. Infrastructure outsourcing is expected to grow - convergent telecommunications and network management wsa identified as a hot area of growth, as 20% of firms will outsource this service in 2008, the report noted.

As a major trend the survey suggested that satisfaction with outsourcing still remained low.