Small growth in IT spend presages recovery in 2003

Nick Huber examines a future that may not be as black as it has been recently painted.

Nick Huber examines a future that may not be as black as it has been recently painted.

European IT budgets are expected to rise by 4% this year, according to a survey of chief information officers (CIOs), an indication that the financial squeeze in some IT departments may be drawing to a close.

Despite recessionary fears European CIOs questioned by US investment bank Merrill Lynch said that their IT department budgets would increase by 4% - up from 2.6% in 2001.

US corporate IT budgets are predicted to rise by 2%, after falling 2.8% last year.

In Europe and the US IT budgets will rise by an average of about 3%, the survey of more than 100 CIOs found.

2003 will be the year of the recovery, the CIOs believe, when company IT spending growth will return to double figures.

The IT chiefs questioned expect a 12.1% average increase in European IT budgets and 6.8% for the US next year.

However, the optimistic forecast contrasts sharply with an exclusive Computer Weekly/Kew Associates IT spending survey last month. It found growth in UK IT spending at its lowest level since 1993 and predicted that growth for 2002 would be lower still.

Last year was a grim one for IT staff across most industries, as companies trimmed budgets and laid off IT professionals and contractors in response to the sharp downturn in the economy.

The Merrill Lynch report, however, asserts that IT budgets will this year stage a modest recovery.

"The average increase looks set to be about 3%, with the Europeans again more optimistic," said Steven Milunovich, Merrill Lynch's chief technology strategist and author of the report.

"This contrasts with some surveys that find flat to down spending in 2002. We would not split hairs. Our conclusion is that users will see a modest pick-up."

Security is the top IT spending priority for 2002, followed by implementation of enterprise resource planning software and disaster recovery systems and safeguards.

Other key areas for company IT investment in the year ahead include storage of data - with an anticipated growth of 12% for this year - and upgrades to Microsoft's Windows 2000 operating system.

But before company directors increase IT budgets any further they will need proof of an upturn in the economy, the report adds. IT managers will also have to demonstrate the cost savings that the IT investment can deliver.

A more bleak outlook for UK's IT spending emerged late last year in the Computer Weekly/Kew Associates IT spending survey.

The comprehensive survey of 2,500 corporate IT users found that year-on-year growth in IT spend had fallen to 6% for the final quarter of last year. That was down from a growth rate of 11% at the beginning of the year.

Users should not expect any recovery in growth rates until 2003, the survey forecast.

The growth rate for this year of 6.9% will be down on last year's average (8.4%), it predicted.

2002 spending priorities
  • Security

  • Enterprise resource planning implementation

  • Disaster recovery

  • Web development

  • Windows 2000

  • Storage

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