Finally, Some Hopeful News About Health IT Spending
After weeks of downright horrible news on the economy, it's nice to see good news -- even if just a glimmer. A survey published this week by TNS Global, a global market information research firm, offers health care IT suppliers hope in these horrible economic times. TNS projects that health care IT will be relatively strong with more budget increases than reductions being made.
TNS Global's survey of IT managers found that about half have cut their 2009 budgets, while slightly more than one-third of IT managers are seeing flat budgets from 2008 to 2009, and 16 percent are projected to increase their spending this year.
As part of its ongoing technology leadership program, TNS surveyed 400 IT managers in the United States and Europe in February about the impact of the economy on their budgets. Reflecting a pullback in economic activity, a substantial percentage of organizations in every industry reported declining IT budgets. As expected, financial services and manufacturing saw the biggest reductions in their IT budgets. However, health care IT spending is projected by TNS to be relatively strong, with more increases in budgets and spending than cuts being made.
While budgets are generally down and no technology category emerged as a winner, some areas, such as storage hardware, are seeing less of an impact from economic conditions, and will likely grow. Strategic projects designed to improve business performance remain on the table for many organizations, TNS' survey found.
John Scott, vice president of technology at TNS, said, "Companies are adjusting to the economic crisis by prioritizing projects to maximize the dollar impact and stretch existing IT assets. However, budget allocations are not solely focused on the short term. As personnel and consulting budgets continue to shrink, the winning vendors will be those who offer solutions that are easy to implement and maintain with a compelling total cost of ownership -- not necessarily the lowest initial cost."
In addition to cost-cutting, the survey found that many organizations are reallocating their spending. Infrastructure spending, particularly in areas such as storage appear to be weathering the storm best, while consulting and professional services appear to be taking the most hits. "This underscores a trend we identified toward right-sizing," Scott said. "It's easier and faster to reduce variable costs than expenditures to support a fixed infrastructure."
Some other findings from the survey include:
- Relative to other technology areas, storage hardware spending will perform well in 2009 with 31 percent of respondents increasing their budgets and more than four in 10 holding their budgets flat as compared to 2008.
- While few of the respondents said they are increasing expenditures on end-user or enterprise applications, about half are holding budgets firm in these areas.
- Forty-three percent of respondents have cut desktop hardware budgets, likely extending the life of their existing hardware assets.
- Cuts in consulting and professional services are broad and deep. Fifty-six percent had cut their consulting and professional services budget, the respondents said. Among those who have made cuts, 65 percent indicated they were cutting 30 percent or more with nearly one-third of respondents cutting their budget by over 50 percent.
- Personnel budget cuts are mixed. Forty-three percent of respondents have cut their personnel budget but cuts are smaller than for products and services
Despite the budget crunch, many organizations are taking the long-term view in both costs and investment for business improvement.
- Instead of simply cutting costs, about four in 10 respondents are allocating budgets toward significant new IT projects that will support business growth.
- Thirty-seven percent are more focused on total cost of ownership as a result of the economic environment compared with only 24 percent who are now more focused on initial cost.