Gartner predicts 'modest' rise in IT spend by 2004

After two consecutive years of declines in IT spending, most enterprises will see a modest recovery in technology outlays by...

After two consecutive years of declines in IT spending, most enterprises will see a modest recovery in technology outlays by 2004, Gartner claimed yesterday.

"No industry will experience double-digit growth in IT spending through 2006 - if ever again," said analyst Barbara Gomolski.

However, when looking at IT budgets as a percentage of corporate revenues, companies in process manufacturing, services and petroleum have seen increases in their 2003 IT budgets compared with last year, said Gomolski.

Meanwhile, IT budgets in the retail sector are down 4.2% this year, while tech spending among IT companies is down a whopping 17.2%.

Gartner, which based its figures on surveys it conducted with roughly 500 clients last October combined with some recent updates, estimated that the average company allots roughly 70% of its IT budget to day-to-day operations such as data centre activities and software licences.

Of that, 32% goes to staff, 21% to hardware, 17% to software costs, 14% to external services, 14% to telecommunications and 2% to other costs.

Gomolski said another 22% of IT budgets is typically set aside for capital spending, with 35% of those investments going to hardware, 25% to software, 20% to networking and telecom, 14% to external services and 6% to other areas. That leaves roughly 8% of IT spending that goes to "hidden" costs or business unit/IS-related expenses.

On average, almost half of operating costs go to help desk and end-user support for mainframe, midrange, distributed computing, Wan and voice activities.

Twenty-two percent of operating costs is steered toward administration and planning, 10% is earmarked for new development activities, 9% allotted for "major enhancements" and 11% goes to application support and maintenance.

The IT costs per employee range widely among industries. For example, employees in the securities industry, including brokers who use expensive high-end workstations with massive transaction processing volumes, come in at a hefty $28,000 per worker.

Meanwhile, support of workers in the energy utilities industry, which continues to deploy a large number of host-based systems, costs just $4,000 per person.

When it comes to the size of an IT workforce as a percentage of total employees, technology suppliers led the pack, with 15.4% of total head count, followed by the securities industry, with 12.6%. Insurance companies also employ a high number of IT employees, with 11.9% of their workforce composed of technologists.

On the low end of the scale, IT workers at petroleum and healthcare companies make up just 4.9% and 4.3% of corporate employees, respectively, lagging federal and state government agencies, whose IT worker head counts are at 7% and 5.6% respectively.

Gomolski said that in the end, the amount of money companies spend on IT "is a lot less important than having good quality management" to ensure that the technology is deployed effectively.

Thomas Hoffman writes for Computerworld

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