Report says IT spend will recover next year

Spending on IT projects will remain flat for the rest of 2002, according to a recent survey by Gartner and The Goldman Sachs...

Spending on IT projects will remain flat for the rest of 2002, according to a recent survey by Gartner and The Goldman Sachs Group.

Mainframes, contract labour services and data centre outsourcing are low on IT spending lists, while technology sectors such as security, storage, personal digital assistants and Web-based applications are likely to see the most growth this year.

The survey was conducted among 369 of the 1,800 attendees at a Gartner conference earlier this month.

Many the survey respondents said they expect the world economy to improve modestly by the end of the year. At the same time, 78% said any such improvement would not drive any change in their spending plans for 2002.

Al Case, a Gartner analyst and one of the creators of the survey, said that IT spend is likely to improve next year, propelled by pent-up demand from last year and a better economy.

Most of the spending will be on application development projects, especially in areas such as voice and data integration, PDAs and wireless applications, Case said.

"Fifteen per cent of the respondents were implementing some form of voice over IP or some sort of voice and data convergence, and 13% aimed to do it next year," Case said. "That was a real surprise, since this is a new area that's not really taken off yet."

Case added that Web-based applications would continue to be another big area of spending next year.

The survey also indicated that vendors may be slowing their substantial price-cutting activity, even though half of the respondents said their ability to command favourable pricing terms from vendors has increased.

Results of the Gartner/Sachs survey are consistent with a Giga Information Group report that also predicts flat IT spending for 2002. While US IT budgets are up 4% in 2002, actual spending will not show any improvement over 2001 based on first-quarter 2002 spending numbers, the Giga report said.

"We still believe an economic recovery will strengthen in the second half of 2002, and that CIOs will loosen the purse strings and accelerate the spending of their IT budgets in the third and fourth quarters.

"Nonetheless, given the weak first quarter, IT spending for the year as a whole will be flat with 2001," the Giga report said.

Read more on IT strategy