New Study Shows ‘IT Spending Squeeze’ is Over

Maven Wave Launches New Information Technology Spending Index

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Maven Wave Partners

Strong Q1 earnings announcements from IT giants such as IBM, Intel, Microsoft and Oracle support our findings that, despite the largest ‘IT squeeze’ we’ve seen in years, spending on hardware and software is back in 2011

Chicago, IL (PRWEB) May 04, 2011

During the recession, companies cut IT spending as they focused on cost reduction to stop the bleeding in earnings. Doing more with less, businesses put strategic projects on hold. However according to the Maven Wave Partners IT Investment Index (the “MIT Index”), a new bellwether measure of investment in information technology spending, the IT spending squeeze is over.

From its low in 3Q 2009 at the depths of the financial crisis, the MIT Index, representing aggregate enterprise spending on IT, is projected to increase by 16.9% to an all time high by the end of 2012.

“During the financial crisis, the MIT was crushed by sharp reductions in hardware and software spending. Spending on headcount suffered too, just not as much,” said Brian Farrar, partner at Maven Wave Partners, “In a normal market, spending on headcount and tools moves together—it takes people to make the technology work. But the disruption resulting from the collapse of the credit markets opened up the largest gap between these two components of the MIT in at least 10 years, creating the IT spending squeeze.”

A new study released in connection with the launch of the MIT Index reveals that the gap between spending on tools and spending on headcount opened in 2Q 2009 and reached a 10 year high of 7.1% in 2Q 2010. However, by 4Q 2010, the gap had closed, signaling increased appetite for corporate spending on information technology through the end of 2012.

“Strong Q1 earnings announcements from IT giants such as IBM, Intel, Microsoft and Oracle support our findings that, despite the largest ‘IT squeeze’ we’ve seen in years, spending on hardware and software is back in 2011,” said Farrar.

Additional key findings from the Study show how IT investments affect earnings including:
March 2009 marked the bottom when companies earned $12.67 for every $1 spent on IT headcount. Maven Wave Partners predicts that corporate earnings from IT investment will reach a 6-year high of $21.80 for every $1 spent on IT headcount by the end of 2012

“In a contracting market, the earnings generated per IT worker decreases because earnings fall faster than headcount. In a growing market, IT skills become scarce, and the opportunities to improve earnings through technology innovation are often growth dependent, so earnings per IT worker go up,” added Farrar. “Given the depth of the recent contraction, big earnings gains are available for companies that invest wisely.”

For more information on the Maven Wave Partners IT Spending & Investment Study please visit http://www.mavenwave.com/download-1q-2011-mwp-study/ or contact Matt Batt at matt.batt(at)mavenwave(dot)com.

About Maven Wave Partners
Maven Wave Partners provides management consulting, technology delivery and outsourcing services to companies that seek exceptional business advancement through transformation. Maven Wave hand picks the top business and tech savvy talent based on the unique client needs and is focused on delivering the entire chain of consulting services, from strategy to implementation to operations and results management.

The management team of Maven Wave Partners has successfully delivered for a wide variety of clients across several industries, including both mid-market and large scale corporations.

For more information, visit http://www.mavenwave.com.

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IT Spending Gap IT Spending Gap in 2010

Over the last year, companies sought to squeeze more value out of existing IT investment as the spread between IT investment in labor vs. investment in hardware and software widened to a multi-year high in Q2 2010


MIT Index, Q1 2011 MIT Index Q1 2011

MIT Index tracks IT spending. Maven Wave predicts MIT Index will reach historic high by the end of 2012