Report: Attacks Shrink CIO Hopes For ReboundReport: Attacks Shrink CIO Hopes For Rebound

Terrorist attacks made Sept. 11 a watershed day for many, and IT execs are no exception. CIOs' expectations for IT budgets and an overall tech rebound have diminished significantly, according to a report released Wednesday by Merrill Lynch. The company's previous survey of 50 U.S. and 15 European CIOs, released Sept. 10, showed respondents expected IT budgets to increase 4.6% next year, on average. That figure has dropped to 2.2% in the company's current report, its first since the attacks.

CIOs' outlook for an overall IT spending recovery was also less sanguine this time around. In the Sept. 10 survey, most IT execs expected a turnaround in the second quarter of next year, but not one expected it to drag into 2003. The current survey shows that 17% of CIO respondents don't expect a significant spending increase until 2003.

Those results reflect spending attitudes at Orbis, an Oconomowoc, Wis., manufacturer of reusable packaging. "Prior to Sept. 11, our business outlook just kept getting better, and it looked like we were going to pull out of it," says John Heiden, information systems manager. "After the terrorist attacks, it's like we've taken two steps back," he says. Now, his mandate is to keep IT spending flat for next year--or decrease it, if possible. He's looking to new technologies to save money, such as virtual private networks. With 750 employees worldwide, Orbis has many remote workers, Heiden says.

One area where CIOs do plan to spend is PC upgrades: Nearly 70% of respondents intend to do so. At first blush, those results seem to fly in the face of the trend toward shrinking IT budgets. But upfront expenditures on PC upgrades can actually save money, says Steven Milunovich, Merrill Lynch technology strategist. While a fully loaded PC can cost about $1,000, the yearly maintenance for each machine can reach six times that amount. Says Milunovich, "By upgrading hardware and software, it's possible for companies to save money on the cost of PC ownership."