IT budget growth set to remain in single figures

Any hopes that IT budgets would return to the double-digit growth of the late 1990s have been quashed by the latest research from...

Any hopes that IT budgets would return to the double-digit growth of the late 1990s have been quashed by the latest research from Kew Associates, based on a survey of thousands of IT budget holders.

IT expenditure in the UK is set to grow by 7.5% in 2003, rising to 8.3% in 2004, after recording modest growth of just 4.6% in 2002. However, the annual growth rate is set to fall to 7.5% in 2005 and 6.9% in 2006, the latest Kew Associates/Computer Weekly report on IT expenditure has predicted.

While software continued to attract investment in 2002, with spending on applications, development tools and systems software up by about 5%, hardware suffered. Spending on desktop PCs, servers and portable PCs fell (down 4.9%; 2.3%; and 0.2% respectively) as companies continued to sweat their IT assets - a trend that looks set to continue in 2003.

David Roberts, chief executive of Tif, the corporate IT forum, said the current situation was not a result of IT directors sweating their assets but finance directors sweating the IT function.

"Any changes we are seeing are reflections of the business and businesses' expectation of how they will perform over the next three years. The word is caution," he said. Roberts believes we are only halfway through a 10-year period of belt tightening. "The present situation will continue for some time," he said.

Some analysts have said there is a danger that companies could end up paying more to support old systems clogged with obsolete data than they would if they invested in more powerful new machines - especially now that cash-strapped suppliers are offering some genuine bargains.

However, Roberts dismissed such concerns. "This is the suppliers' view, not the business point of view," he said.

IT directors should conduct more stringent audits of IT spending to understand their hardware usage and ensure they are not spending too much money supporting old hardware, said Tim Jennings, research director at analyst firm Butler Group. Such an approach would also help to justify new expenditure to the board.

"IT directors tend not to have a good understanding of how their hardware is utilised," said Jennings. "They need to relate infrastructure usage to business processes more."

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