The boss of Xerox has warned that the uncertain economic environment is causing companies to take a more sceptical look at new technology investments.
"The hurdle rate for making investments has gone up in general," said Anne Mulcahy, chairman and chief executive of Xerox, in an interview with the Financial Times.
"I think what we see in the US is heightened anxiety,” she told the newspaper. “We see the financial services industry tightening their belts, and rightfully so, based on the impacts there."
With the fallout from the sub-prime mortgage crisis and worries about the state of the US economy, there is increasing concern that big IT projects could be delayed or even shelved.
Just before Christmas, analyst house Forrester Research warned that the year ahead was going to be a slow one for IT spending.
Indeed, the analyst house revised projections for IT investment in 2008 saying that the outlook for vendors was far gloomier than it had first predicted.
In the report, US And Global IT Spending And Purchases In 2008: Will The Grinch Of A Slowing US Economy Steal The Presents Of A Stronger 2008 IT Market?, Forrester said it expected US IT investment growth to slow slightly to 4.8 percent in 2008 from 5.3 percent in 2007. Previously, the research firm had predicted US IT spending growth would be about 8 percent in 2008, led by software and network equipment.
The areas hardest hit by the downturn will be computer and communications equipment and IT services, the latter being typically the first to get hit, said principal analyst Andrew Bartels. "The first things CIOs cut are consultants and contractors," he said. "They are readily delayable and cancellable items in the portfolio of spending."
To compound matters, Wall Street experienced a sharp fall on Friday, after the US Labor Department reported that job creation in the United States had nearly ground to a halt in December and unemployment rose to a two-year high of 5 percent.
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