IT Spending Squeeze is Over, says New Study

The decline in IT spending that hit a low in the third quarter of 2009 has officially ended, at least according to a new study from Maven Wave Partners.

Released along with the debut of the MIT (News - Alert) Index, the “Maven Wave Partners IT Spending & Investment Study” found that spending on hardware and software is back on track in 2011, supported by solid first-quarter earnings from the likes of IBM, Intel (News - Alert), Microsoft, and Oracle.

The recession had forced businesses to cut back sharply on spending for hardware and software as well as spending on headcount, though headcount didn’t suffer as much, according to the study. Typically, spending declines hit both areas pretty evenly. But the study uncovered a gap of 7.1 percent between spending on IT tools and spending on IT headcount in the second quarter of 2010, a ten-year high.

The good news? By the fourth quarter of 2010, that gap in spending had closed quite nicely.

As evidence, March 2009 signaled a bottom for return on investment in spending on IT professionals. At that point, companies earned only $12.67 for every $1 spent on IT headcount. But looking into its crystal ball to the end of 2012, Maven Wave Partners is eyeing a six-year high of $21.80 earned for every $1 spent on IT headcount.

As a barometer of IT spending by enterprises, the MIT Index is expected to grow by 16.9 percent to an all-time high by the end of next year.

Overall, the study paints a promising picture for IT workers, as described by Maven Wave. In a sluggish market, the earnings generated by each IT worker are weaker because overall earnings fall faster than headcount. But in a more robust market, IT skills become less common and there’s greater opportunity to boost earnings through technology. As a result, Maven Wave says that “big earnings gains are available for companies that invest wisely.”

And in another positive sign, IT spending by small and mid-sized business in particular has been growing. Despite some challenges, IT spending among SMBs has been rebounding more quickly than expected from its lows in 2009 when the recession “officially” ended, according to a new study from IDC.

Access to credit is still sluggish, and many smaller companies remain reticent to hire more people, says IDC (News - Alert). But the almost 8 million SMBs in the U.S. are still expected to spend more than $125 billion on advanced technology this year, boosted in part by a greater need for notebooks, servers, and virtualization products.

The $125 billion projected to be spent on technology in 2011 marks a gain from $120 billion last year. Together, both years show a welcome recovery from 2009 when IT spending by SMBs dropped by 4.2%. Responding differently than their bigger enterprise cousins, small and mid-sized businesses are accounting for a greater chunk of corporate IT spending.

Notebooks will outshine desktops among SMBs as the preferred form factor. In 2015, almost 4.7 million small and mid-sized businesses will be using notebook computers. Local area networks will also show growth over the next few years, with the number of LANs in use by SMBs surpassing 4.5 million.

Finally, the lower prices of entry-level hardware will prompt many SMBs to purchase more servers, while the growing demand for virtualization will encourage many to consolidate their technology infrastructures.

In a nutshell, all of this projected spending should open the door for more jobs and greater opportunities for IT professionals than we’ve certainly seen over the past couple of years.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2011, taking place Sept. 13-15, 2011, in Austin, Texas. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. To register, click here.