New ChangeWave survey confirms U.S. business spending has entered a recession

By Paul Carton
February 25, 2008

ChangeWave's latest corporate IT spending survey points to a negative growth rate for 2nd Quarter 2008 – and the findings confirm that U.S. business spending has already entered into a recession.

The survey found nearly one-in-four respondents (23%) report their company’s IT spending will decrease (or there will be no spending at all) in the 2nd Quarter, 3-pts worse than ChangeWave’s previous survey in November 2007. Only 15% say spending will increase – an unprecedented 9-pt drop from previously.

A total of 2,013 respondents involved with IT spending in their organization participated in the February 11-15 survey.

A Picture of Negative Growth

As seen in the chart below, the percentage of respondents projecting decreased IT spending for 2nd Quarter 2008 is far greater than the percentage projecting an increase.

To put these findings in context, you have to go all the way back to August 2001 to find the last time a ChangeWave corporate IT spending survey projected negative spending growth.
Importantly, the survey found that the projected decrease is taking place in companies of all sizes, indicating the slowdown is not just an isolated phenomenon.

Green Light vs. Yellow/Red Light Spending

We also asked respondents to rate the current willingness of their company to spend money on IT products and services. Only 43% say their company is now giving a “Green Light” to IT spending (i.e., spending is normal) – a 9-pt drop from the previous quarter to the lowest level seen in more than four years.

The chart above shows the combined “Yellow Light/Red Light” percentage (53%) is now higher than the “Green Light” percentage for the first time in more than four years.

Current Quarter Results

Only 10% of respondents said they’ve spent “More than Planned” in the 1st Quarter – down 7-pts from previously. Another 27% say they’ve spent “Less than Planned” – 3-pts worse than previously.

In terms of specific IT segments hit hardest, Storage (Change in Net Difference Score = -6) is registering the biggest 1st Quarter slowdown. Software Enterprise Applications (-4), Servers (-4) and Security (-3) are also looking significantly weaker.

A Few Upbeat Findings

Despite the overall downtrend, a few areas are managing to gain ground.

• Corporate Smart Phones: Looking ahead to the 2nd Quarter, Research-in-Motion (RIMM; 77%) overwhelmingly dominates planned corporate smart phone buying – having jumped 3-pts since our previous survey in November 2007. (See first article above.)
• Corporate GPS Devices: Garmin (GRMN; 56%) is also showing considerable 2nd Quarter momentum in terms of corporate GPS buying – surging 10-pts since the previous ChangeWave survey. We note, however, that this is occurring in a slightly tighter corporate GPS market.

Both these areas will be the subject of upcoming ChangeWave reports. But putting such upbeat examples aside, there’s no disguising that the latest survey results clearly point to a negative IT spending growth rate.

As we head towards the 2nd Quarter, they confirm that U.S. business spending has already entered into a recession.

Jim Woods co-wrote this article.


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