Business, not technology, drives IT sales, says AMR

The current pall over the IT industry is lifting, according to a survey from AMR Research that points to a boost in IT spending...

The current pall over the IT industry is lifting, according to a survey from AMR Research that points to a boost in IT spending in this year's third quarter.

But don't look for the market to return to the go-go years of the late 1990s, said analysts from the Boston-based firm. According to a survey last month of 200 manufacturing and service companies, IT spending rose 4.3% during the quarter, up from a 3.4% rate of growth in the prior quarter, AMR announced Monday.

However, growth remains uneven, companies continue to trim costs by outsourcing IT functions, and deal sizes remain flat, analysts said.

Companies are still reluctant to launch large business-application projects, especially given the complexity of software already in place, AMR analyst Bruce Richardson said. "There is a growing backlash over the high cost of upgrades, forced upgrades and the high cost of maintenance. We 'feature-functioned' people to death. There is way too much functionality in these products, and companies want to go longer between their upgrades."

As a result, companies will likely push to simplify and connect their business processes, increase automation and make individual employees more productive, Richardson said. He noted that Dell has a goal of generating revenue of $1m per employee. Those kinds of plans mean that companies will outsource IT operations to other countries, something enabled in part by technology such as voice over IP (VoIP), which makes it financially feasible to place service calls from the US to locations such as India.

Ultimately, companies are also more focused on business processes than on technology itself. "This is the post-technology era," said Richardson. "It's not about gadgets and gizmos. Nothing is exciting the buyer these days. Maybe the buyer has no money."

The IT market itself continues to change, with technology costs declining even as features and power increase, said AMR chief technology officer Scott Lundstrom. Companies now buy in higher volumes for lower prices, so the average deal size remains the same. "All growth comes by finding volume," he said.

The following were among some of AMR's other survey findings:

  • 38% of the companies polled said customer service will be their central focus in 2004.
  • 24% said they would be making most of their investments in networking and communications technology in the next year.
  • ERP vendors are seen as the best source for integrated applications by companies hoping to avoid cobbling together a suite from smaller best-of-breed vendors.

Marc L Songini writes for IDG News Service


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