UK CIOs are more concerned with reducing expenditure than their peers in the US and Germany, and half expect their budgets to be cut again in the second half of 2010, according to a new survey.

In the global survey of 250 IT chiefs commissioned by enterprise application modernisation firm Micro Focus, 43 per cent of UK CIOs said that reducing IT spend would be their top priority for the next three years, compared with 26 per cent of US IT leaders and only 17 per cent of German counterparts.

Despite the UK officially emerging from recession in January of this year, half the British respondents have had their budgets cut for the current year, in line with the global average.

The survey interviewed IT leaders from the financial services, healthcare, retail and public sectors, and found that in all sectors apart from retail, cost reduction was the main priority for IT departments, with 55 per cent of financial services CIOs ranking it their top priority.

For retail CIOs, enabling business transformation through IT transformation was the number-one priority for 39 per cent of respondents. Only 22 per cent rated cost cutting as highly, a figure which is in line with the reduced budgetary demands on retail IT departments - only 26 per cent reported budget cuts for the current financial year. In contrast, 65 per cent of healthcare respondents reported reduced budgets.

The survey revealed that the preferred method of reducing IT spend was to embark on application modernisation projects and migrate mainframe applications to more modern architectures. In the UK, 86 per cent of respondents were either currently working on a modernisation project or had completed one in the last two years. In retail, 30 per cent had completed a modernisation project in the past 24 months, with healthcare the back marker on just eight per cent. Accordingly, 81 per cent of healthcare IT chiefs are now undertaking application modernisation.

Among those that had completed modernisation projects, 70 per cent claimed it had enabled them to reduce their overall IT operating costs, 63 per cent had been able to support future business growth through modernisation, 60 per cent said it has increased the speed of their operations or reaction time, and 55 per cent claimed it has improved the agility of their business, ensuring their IT can react to business opportunities more quickly.

The UK also seems to be leading the way in terms of moving applications away from the mainframe. The survey revealed that while 61 per cent of respondents still used a mainframe as a core element of their IT infrastructure, in the UK only 46 per cent of companies surveyed were still using a mainframe, compared to 67 per cent in Germany and 75 per cent in the US.

“Application modernisation has clearly been the unsung trend of the IT industry over the last 12 months, and is set to remain so for the immediate future," said Stuart McGill, CTO of Micro Focus. "With large projects realising tangible savings of millions of pounds in just a few years it is easy to see why.

“CIOs and IT professionals are being asked to do two things at once: cut even more costs and innovate to meet customer demands. They should remember that the savings they make by migrating their mainframe applications to more modern architectures can actually be reinvested into new projects, so they can in fact achieve both aims at the same time," McGill added.