The IT budget decline in first quarter of 2009 returned IT budgets to near 2007 levels, said Gartner earlier today. Their recent survey of 900 CIOs showed 42% of respondents reduced their budgets in the first quarter of 2009.

“CIOs reported that renegotiating vendor contracts and head count reductions were the primary focus areas for accommodating budget reductions,” said Mark McDonald, group vice president and head of research for Gartner EXP. “CIOs report shifting more work to in-house resources and delaying capital expenditures more than reducing IT project investments.”

The survey found that CIOs expect the economy to recover between the first and third quarter of 2010. CIOs plan to increase IT investment projects and workforce levels as their first investments in such a recovery. Software, hardware and infrastructure investments are also high on the CIO’s agenda on the path to economic recovery.