Preliminary results from an IT spending and staffing survey
released by US research firm Gartner show that spending is still on
the rise, despite growing less rapidly than in recent years.
Of the 589 large organisations worldwide polled by Gartner in its
annual Spending and Staffing survey, over half the respondents said
that they planned to increase their IT budgets in 2001. Only 21.1%
said that they would decrease their year-over-year spending, while
22.4% said that their spending would be unchanged from 2000 to
2001.
Overall, however, IT spending will see a substantial decline from
2000's growth rate of 13.3%, Gartner forecasts. According to the
research company's estimates, spending will rise by 10.1 % in 2001
and just 6.1% in 2002.
But despite these figures, companies have not taken a
slash-and-burn approach to reducing IT spending, said
analysts.
"We don't get harried phone calls from clients who are crying, 'We
need to slice 25% from our budget.' In the past, that's happened,"
said Barbara Gomolski, research director at Gartner, citing the
Asian financial crisis as a time when companies were scrambling to
drastically reduce expenditures.
"What we did see [this year] and continue to see is an increased
focus on value justification," Gomolski said.
Companies are shortening their planning cycles and focusing on
near-term goals and projects that will immediately improve their
bottom line, the survey found. That's good news for service
providers but bad news for hardware vendors, according to Gartner
research director Jeremy Grigg. In particular, firms in sectors hit
hard by the economic slowdown are looking to decrease their capital
expenditures, he said.
Total IT spending by large companies as a percentage of revenue is
creeping upwards. Last year, Gartner's pan-industry average figure
was 3.5%, while its estimate for 2001 climbs to 3.54%, and to 3.57%
the year after.
But companies' IT capital budget - a subset of total IT spending
that includes most software and hardware purchases - is dwindling
as a percentage of revenue. From 1.33% in 2000 it slips to an
estimated 1.31% in 2001 and 1.27% in 2002.
Spending by companies on external services will jump from an
average of 9.7% of their IT budgets in 2000 to an expected 14% in
2001, Gartner predicted.
"Organisations want to get out of the business of buying and
building and maintaining all of their IT," explained Gomolski.
"Increasingly, they want to be consumers of services and not
purchasers of products. This is not just a short-term trend. We
suspect that there's a lot more leasing of hardware, and the
upgrading of hardware is viewed as a discretionary expense."
Analysts at Gartner acknowledged that their findings are out of
step with the widespread perception that IT spending is dropping,
but offered several explanations for the discrepancy highlighted in
their study.
The survey includes "hidden" IT costs - spending that is authorised
outside of an enterprise's central IS organisation, such as
purchases by business units or departments - that are overlooked by
other analysts, Gartner said
The study also focused on large firms: their average surveyed
company generates annual revenue of $2.3bn (£1.6bn) and employs
8,100 with an IT workforce of 286. But it is small and medium-sized
companies, which have shorter planning cycles, that are more
susceptible to the impact of a downturn and quicker to curtail
their IT spending.
Gartner will release the full results of its at the Gartner
Symposium/ITxpo 2001 in Florida.