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Gartner: European IT spending to grow next year

More European chief information officers plan to increase their IT spending next year rather than cut it, according to figures from analyst firm Gartner.

Gartner is predicting total European IT spending will grow faster next year than this, but Peter Sondergaard, Gartner's head of European research, warned that organisations need to change the way this money is spent.

In future, cost optimisation, not cost cutting, should be key to corporate IT strategy, according to Sondergaard.

"In the past year and a half, they had these knee-jerk reactions to cost-cutting, with no reference to optimisation, to whether they were eliminating the cost that delivered the least business value," he said.

If you think you've heard the "spend smarter" rhetoric before, you're right, said Sondergaard, adding that this time, it was serious. "People talked about this three years ago, but then there was money in abundance," he said. "It's a completely new environment now."

Around one in three of the chief information officers of medium-sized and large European companies questioned by Gartner plan to increase their IT spending by more than 3% in 2003, while around one in five plan to cut spending by at least 3%.

One in ten expect to spend more than 10% more next year, and about one in 11 expect to cut spending by more than 10%, according to figures supplied by the research firm.

"One of the positive impacts during the e-business bubble was that CIOs became members of the board," Sondergaard said. This new status, he said, gave them a much clearer view of their organisation's spending needs in the economic downturn.

Gartner questioned the 1,500 CIO members of its European Executive Program, and compiled the figures from a statistically representative group of 336 respondents.

The most optimistic CIOs are to be found in Italy, with 46% of respondents there planning to increase spending in 2003 by more than 3%, followed by the UK and Ireland (37.7%).

Another Gartner study, compiled by its Dataquest unit, forecasts overall IT spending in Europe will increase by 5.4% next year, compared with 1.7% this year. Growth will be strongest in software (6.4%) and services (7.1%), with no growth expected in hardware sales.

This pattern is a symptom of the trend towards cost optimisation rather than cost cutting, according to Sondergaard. "In 2003, the replacement cycle may see software replace hardware," he said.

Sondergaard foresees an increase in spending on middleware. "There's a tremendous focus on improving your enterprise architecture, and vendors that operate in the middleware space up to the border of the packaged application layer will do relatively well," he said.

CIOs are likely to have fewer suppliers to choose from in the middleware-to-application layer market, although they will offer a broader range of products, Sondergaard added.

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