IT directors will not spend their full budgets in 2003
and their annual spending in 2004 will shrink, according to analyst
group Ovum Holway.
Speaking ahead of yesterday's (29 October) annual 2003 Ovum
Holway/Intellect presentation in London, Richard Holway, director
of the analyst firm, said users would step up demands for "more for
less" from suppliers, while offshore outsourcers and software
companies would also offer increasingly attractive pricing to IT
directors.
Anthony Miller, research director at Ovum Holway, said IT
directors were not spending their full annual IT budgets. "They
have money, but are very constrained in what they can spend. I
expect annual IT budgets to go down."
Ovum Holway has predicted that this lack of spending will
translate to an annual growth in the IT industry of no more than
2%.
"We find it hard to see a time when demand for IT will outstrip
supply."
As a result, Miller believed that IT directors will have a
strong negotiating hand. However, he warned that no IT supplier
could afford to support a loss-leading project.
"Negotiations would show greater maturity," he said, warning
that suppliers would walk away from any potential contract that is
too restrictive.
Miller said that IT departments' cost cutting had, so far,
focused on paring down projects and limiting spending on hardware
and software suppliers. With budget pressures continuing, he said
organisations would look at making more cost savings within their
own IT departments by outsourcing certain areas of IT
operations.
"IT managers feel quite comfortable outsourcing their desktop
support," he said.
Desktop outsourcing allowed IT directors to reduce the
complexity of managing the desktop environment internally, he
added.
Miller also suggested there would be fewer big bang,
single-supplier outsourcing deals.
"We are seeing more piecemeal outsourcing," said Miller.
Barclays is one example of a company which has taken this
approach. The bank is in discussion with Accenture to take on
Barclays' application development while EDS manages its desktop
infrastructure.
The Ovum Holway predictions are more pessimistic than those of
rival analyst group Gartner, which has predicted that IT
expenditure by European companies would rise by 3%-4%, up from 0.1%
in 2002-2003.
It is also more downbeat than the latest Computer Weekly UK IT
Expenditure Report, produced by Kew Associates, which found that
spending on IT hardware, software and services by UK organisations
in the second quarter of this year was 4.6% up on the same period
last year.