IT directors will not spend their full budgets in 2003 and
their annual spending in 2004 will shrink, according to analyst
group Ovum Holway.
Commenting on last week's annual 2003 Ovum Holway/Intellect
presentation on IT industry prospects for 2003, Antony Miller,
research director at the analyst group, said "IT directors 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 would
translate into 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," said Miller.
Miller said this meant IT directors would have a strong hand in
negotiations with suppliers, but warned that no IT supplier could
afford to support a loss-leading project. Suppliers would walk away
from any potential contract that is too restrictive, he said.
So far, cost cutting in the IT department has focused on paring
down projects and limiting spending on hardware and software. With
budget pressures continuing, there will be increased outsourcing
but with fewer big-bang, single-supplier deals. "We are seeing more
piecemeal outsourcing," said Miller.
One company that has taken this approach is Barclays. The bank is
currently in discussion with Accenture about taking on its
application development. EDS is managing its desktop
infrastructure.
The Ovum Holway predictions are more pessimistic than those of
rival analyst group Gartner, which predicted that IT expenditure by
European companies would rise by 3% to 4% next year, up from a flat
0.1% in 2002-2003.
It was also more downbeat than the Computer Weekly UK IT
Expenditure Report, produced by Kew Associates, which found that
spending on IT hardware, software and services in the second
quarter of this year was 4.6% up on the same period last year.