The current pall over the IT industry is lifting,
according to a survey from AMR Research that points to a boost in
IT spending in this year's third quarter.
But don't look for the market to return to the go-go years of
the late 1990s, said analysts from the Boston-based firm. According
to a survey last month of 200 manufacturing and service companies,
IT spending rose 4.3% during the quarter, up from a 3.4% rate of
growth in the prior quarter, AMR announced Monday.
However, growth remains uneven, companies continue to trim costs
by outsourcing IT functions, and deal sizes remain flat, analysts
said.
Companies are still reluctant to launch large
business-application projects, especially given the complexity of
software already in place, AMR analyst Bruce Richardson said.
"There is a growing backlash over the high cost of upgrades, forced
upgrades and the high cost of maintenance. We 'feature-functioned'
people to death. There is way too much functionality in these
products, and companies want to go longer between their
upgrades."
As a result, companies will likely push to simplify and connect
their business processes, increase automation and make individual
employees more productive, Richardson said. He noted that Dell has
a goal of generating revenue of $1m per employee. Those kinds of
plans mean that companies will outsource IT operations to other
countries, something enabled in part by technology such as voice
over IP (VoIP), which makes it financially feasible to place
service calls from the US to locations such as India.
Ultimately, companies are also more focused on business
processes than on technology itself. "This is the post-technology
era," said Richardson. "It's not about gadgets and gizmos. Nothing
is exciting the buyer these days. Maybe the buyer has no
money."
The IT market itself continues to change, with technology costs
declining even as features and power increase, said AMR chief
technology officer Scott Lundstrom. Companies now buy in higher
volumes for lower prices, so the average deal size remains the
same. "All growth comes by finding volume," he said.
The following were among some of AMR's other survey
findings:
- 38% of the companies polled said customer service will be their
central focus in 2004.
- 24% said they would be making most of their investments in
networking and communications technology in the next year.
- ERP vendors are seen as the best source for integrated
applications by companies hoping to avoid cobbling together a suite
from smaller best-of-breed vendors.
Marc L Songini writes for IDG News
Service