IT spending up as users keep a grip on day-to-day costs

Expenditure report puts IT spend growth rate at 4.7% for first quarter and set to meet 8.6% forecast for 2004

Expenditure report puts IT spend growth rate at 4.7% for first quarter and set to meet 8.6% forecast for 2004

Growth in IT spending reached 4.7% in the first quarter of 2004, according to the latest Computer Weekly IT Expenditure report.

This figure compares with a 4.1% rise for the same period in 2003.

But the spending survey, produced by Kew Associates, reveals a slight decline in the average rate of growth against the final quarter of 2003, down from 5.2%.

The report also confirms that the UK is on course to reach the 8.6% growth forecast by Kew for the year as a whole.

Large organisations, with more than 500 employees saw their IT outlay grow by 4.5% in Q1 2004, up from 3.9% at the end of last year. SMEs' IT outlay in Q1 was up 5.2% compared with 7.5% and 4.7% in the previous two quarters.

Growth in public sector IT expenditure was down to 6% in the latest quarter from 6.6% and 7.2% in the previous two quarters. "These numbers do not contain any spending under the national programme for IT in the NHS. We expect that to contribute about 2% to the growth in overall IT spending in 2004," said Kris Wicka, managing director of Kew Associates.

Delegates at the IT Directors' Forum on the cruiseship Aurora said the figures reflected their organisations' twin-track approach to IT spending: heavy pressure to bring down general costs while investment is available to meet compelling business needs.

Ben Booth, IS director at Mori, said, "The business is set to grow this year and IT will have to support that growth, subject to rigorous scrutiny. But IT is not being allowed to grow at the same rate as the business."

He added, "Where there is a good business case there will not be an arbitrary spending limit."

Margaret Smith, director of business information systems at Legal & General, said her budget remained tight but added, "My impression is that there is a lot more consultancy spend out there and there are stirrings in new developments."

The IT director of a large aerospace company told Computer Weekly that he had no difficulty in securing funding for business-critical and business development systems but this was combined with a continuous effort to strip out costs on major items of ongoing IT expenditure.

John Handby, chief executive of user group CIO Connect, identified a number of trends driving the increase in IT spend. "First, competition between companies on costs means organisations are looking to operate more efficiently and IT is seen as a way to achieve these efficiencies. Second, we have come out of a downturn and can afford to do some of the things that have been put on hold. And finally, it has been some five years since the last major IT replacement cycle," he said.

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