IT is now a "non-growth industry" with spending lagging behind general economic growth as user organisations lose faith in the returns on their tech investments, according to Gartner.
New research from the analyst house shows that IT budgets globally will increase by just 2.7 per cent in 2006.
Gartner VP and research fellow Ken McGee told silicon.com: "We think there is a slowdown taking place. Businesses don't see the value [in technology] any longer. They find no compelling reasons for vigorous investment. It's a non-growth industry."
This trend could put the future of the CIO and the existence of the IT department under threat as organisations increasingly go down the outsourcing route.
McGee said: "This represents a very dangerous period ahead. It will only accelerate the number of organisations who conclude 'this is a commodity and I don't need you to do it'."
Part of the problem is that many IT departments are simply applying new technologies to the existing business processes without adding any tangible value, according to Gartner's McGee.
He warned: "There's not a lot of new application of IT. CIOs have got to devote more energy towards being innovative and taking IT where IT has never been before."
Among the advice for CIOs is to build up a demonstrable track record of creating more value for the business, such as improving customer satisfaction or earnings per share.
On the technology front Gartner has identified business intelligence (BI) as one of the key areas CIOs can add value and it advises organisations to create a BI "centre of excellence" by 2008.
McGee will be presenting the full findings of the Current State and Future Directions of IT at Gartner's European Symposium in Barcelona next week.
UK IT chiefs also warned last week that unless the profession adapts to new ways of working it will cease to exist in the future.
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