Six in ten large firms cutting consultancy budgets

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By: Wise Marketer Staff |

Posted on November 2, 2001

A new survey compares large firms' budgets pre- and post-September 11. Some findings are expected, others are surprising.

The events of September 11 resulted in many predictions that activities that involved travel (like big city shopping and business travel) would be cut and that technology-based replacement solutions would thrive. It did seem logical, didn't it?

Well, Forrester's latest survey seems, in some cases, to point the other way. The survey reveals that the number of large US companies that have actually cut their e-business budgets has nearly doubled in the last five months. While more than half think that the terrorist attacks will exacerbate current economic conditions, most blame the weak economy - rather than the attacks - for their budget reductions.

The survey tracks the direction of e-business budgets before and after September 11 (in May and in early October). In May, only 17% had decreased their e-business budgets this year; by October that had risen to almost one third. In May, the average reduction was only 0.3%; by October it had risen to 6%.

Business travel budgets up
According to David E. Weisman, vice president, global research, at Forrester: "Many industry observers expected that September 11 would result in a drastic drop in business travel, prompting a big influx in spending on such remote-meeting offerings as video-conferencing and instant messaging." But in fact the trend revealed is different: respondents expect a 6% decrease in remote-meeting technology and  an increase of more than 6% in business-travel spending among big companies this year. "Take a closer look at that technology," said Weisman, "and you'll see it's still too clumsy, awkward, and impersonal to spark a major investment. Furthermore, company travel budgets are up because although many people remain too frightened to fly, businesses are still committed to allocating travel resources to keep employees in the field."

CRM Spending down
While spending on security and disaster recovery are up considerably, companies generally plan to decrease their spending on CRM software, server hardware, and mobile and wireless data products.

Consultants hit hardest
Rather unsurprisingly, the news on the labour front is not optimistic, with consultants being hardest hit. Since May, 60% of large companies have reduced their consulting and implementation services budgets by an average of 30%. In addition to existing layoffs, 25% of big businesses plan to cut more staff, and nearly 20% will reduce their spending on salaries further.

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