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Weak IT spending growth for 2001

Last year, IT managers and business executives told Gartner Group they planned to spend 8% more on technology and IT services in 2001. However, their actual IT spending only increased by 2.5%.

Asked at Gartner's Symposium/ITxpo 2001 in October how they planned to spend for 2002, IT managers estimated they would spend 1.5% more than they had this year.

But the economic downturn has pushed many companies into survival mode, conserving cash until the markets recover, rather than investing in new technologies. Gartner forecasts that IT spending will increase in only a few areas, including storage, security, development of Web services, and personal digital assistants (PDAs).

About 59% of respondents reported underspending against their full-year budgets through the end of September, according to the survey of 1,048 delegates. The survey, conducted in conjunction with SoundView Technology Group, polled IT professionals mostly from the financial services industry, manufacturing, utilities, health care and the media.

Top-level management reporting directly to corporate officers tended to forecast their company's IT spending a little higher than those who reported to division or department chiefs, according to the report.

But some industries, such as providers of IT outsourced services, will see declines in IT spending, according to the survey. Corporate customers may squeeze their IT services providers for better prices, eating into margins. Providers of IT services, such as data centre outsourcing companies, have thin margins already and few costs to cut. Job cuts and wage deterioration are on the horizon in this area, warned Al Case, senior vice president at Gartner.

On the other hand, the survey did not predict massive lay-offs of IT personnel. IT professionals who understood how to integrate the Internet into their businesses would still have jobs waiting for them.

Case identified Web services as one potential growth area. "Those particular kinds of services have labour-saving or market-expanding potential for companies," he said.

Spending on data storage to accommodate the ever-increasing archives of accumulating company information will also increase, as will spending on security.

Part of the increased emphasis on security and storage spending comes from the 11 September terrorist attacks and the current focus on disaster recovery and defence, Case said. The symposium was the first large gathering of IT professionals held by Gartner since the 11 September terrorist attacks.

Companies surveyed spent roughly three-times as much on capital expenditures in support of current operations as they did on new IT initiatives, a ratio that did not change from last year even as companies began cutting back on IT spending.

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