Historic Collapse in IT Spending

By Paul Carton and Jean Crumrine

ChangeWave's latest corporate IT purchasing survey shows an accelerating collapse in U.S. business spending that has reached historic proportions, with record pullbacks occurring in the current quarter and going forward.

In one of the survey's few upbeat findings, the corporate smartphone market continues to show growth, with Research In Motion (RIMM) maintaining its huge lead, but Apple (AAPL) continuing to make inroads in small- to medium-sized businesses.

The survey was conducted Nov. 6-12, and 1,926 respondents involved with IT spending in their organization participated.

IT Spending Breakdown

The IT spending projections for first quarter of 2009 are abysmal -- the worst ever for a ChangeWave survey dating back to 2001.

An unprecedented 45% of respondents said their company's IT spending will decrease or there will be no spending at all in the first quarter -- 16 points worse than our previous survey.



Only 10% said spending will increase -- a three-point drop from the previous survey.

Most disturbingly, spending is plunging at a time of year when we normally see seasonal increases. This becomes immediately apparent when you look at the change from each November, beginning with November 2003, in the projected IT spending chart above.

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We also asked respondents if their IT spending was on track thus far in the current quarter. By a wide margin, these results are also the worst on record.



Thirty-nine percent said they've spent less than planned so far this quarter -- nine points worse than in our previous survey. Just 8% said they have spent more than planned -- a four-point drop from previously.

Moreover, in the aftermath of the U.S. presidential election, respondents do not see any immediate improvement occurring in their company's IT spending. In fact, 48% said they now believe IT spending won't pick up for their company until the third quarter of 2009 or later -- a two-fold increase since our August survey.

Corporate Smartphones

In the same survey, we also looked at the corporate smartphone market and found it's actually showing growth. Thirty-five percent of respondents reported that their company plans to buy smartphones next quarter -- up one point from August.

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Research In Motion (down one point to 78%) continues to garner the dominant share of planned corporate smartphone buying, but the Apple iPhone (up five points to 22%) shows considerable momentum going forward.



We note that RIM's corporate share is heavily concentrated among larger companies (more than 1,000 employees), while three-quarters of Apple's share is among small- to medium-sized companies (less than 1,000 employees).

Further confirming that the 3G iPhone is having a positive impact on the corporate market, 18% of respondents said the release of the 3G model has made their company more likely to purchase Apple products in the future.

Bottom Line

U.S. corporate IT spending is in the midst of a huge nose-dive, the likes of which hasn't been seen before in ChangeWave surveys dating back to 2001.

In short, the current ChangeWave survey findings virtually guarantee that we'll see the technology sector get hammered with pre-announcements before the January earnings season gets under way.

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Paul Carton is the Director of Research for the ChangeWave Alliance Research Network. Jean Crumrine is an Associate Director of Research. The Research Network is a group of 20,000 highly qualified business, technology and medical professionals -- as well as early adopter consumers -- who work in leading companies of select industries. ChangeWave surveys its network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

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