US still spending on IT
- Posted:
- 12:50 18 Jul 2001
- Topics:
- IT Management
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.
ADVERTISEMENT
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.
