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Meta: Cost-cutting firms can spend more in 2004

Companies which cut IT costs over the past three years could benefit from discretionary spending increases next year, says Meta Group.

In a soon-to-be-published report on IT spending across 21 industries, based on responses from 860 IT decision-makers, Meta has forecast that the insurance and manufacturing sectors will see double-digit gains in 2004 IT spend.

Companies which have become agile in shedding or adding IT costs on an as-needed basis will be better positioned to take advantage of growth opportunities as the US economy starts to rebound, said Howard Rubin, executive vice president at Meta.

In the insurance industry, said Rubin, "we're seeing companies moving along at somewhat of a recovery mode and investing in IT for future growth and to gain a better customer view". Meta Group will publish its findings later this month.

Rubin added that as orders continue to climb, manufacturing companies will be investing more heavily in technologies such as enterprise resource planning packages to help make warehousing and distribution activities more efficient, while tightening links with business partners and suppliers.

Some sectors hit hardest by the economic downturn, such as telecommunications, could also see a big uptick in IT spending next year. A Gartner report published last month predicted that the telecommunications sector could see a 25% spike in IT spending in 2004 compared with this year.

The gains are "indicative of a pattern" that has emerged over the past few years where industries that spend the most on IT "tend to experience the widest swings in IT spending levels", wrote Barbara Gomolski, the author of the report.

The Wendover-Global Insight IT Spending Index, a quarterly report which measures the IT purchasing intentions at 30,000-plus US companies, ranked telecommunications second behind the wholesale industry in terms of quarter-to-quarter IT project growth, said Larry Dillon, president of Wendover.

The group's most recent study, which examined third-quarter IT spending plans, was released earlier this week and examines IT purchasing plans over a six- to nine-month period.

Gartner's survey of more than 400 IT executives, conducted over the summer, projects that manufacturers of industrial equipment should see their IT budgets jump 27% year on year, while state governments should see a 32% increase in IT spending in 2004. That comes after state governments cut technology spending by 18% in 2003 amid declining tax revenues.

Another reason why manufacturing companies might see a boost in 2004 IT spending is "the fact that they haven't spent anything (on discretionary projects) for the past two and a half years",said John Parkinson, chief technologist for the Americas at Cap Gemini Ernst & Young.

Parkinson said many manufacturers are analysing whether to "replatform" to Microsoft Windows NT or Linux to replace IBM's AS/400 midrange systems with dwindling third-party application support.

Then there are companies whose IT spending cuts across the grain. Meta and Gartner are forecasting a drop in IT outlays in the transportation industry - 3% and 12% respectively.

Thomas Hoffman writes for Computerworld


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