IT Spending to Rebound Slightly in 2002

U.S. IT spending is set to rebound with 4 percent growth in 2002 following a 5 percent contraction in 2001, Giga Information Group
Inc. projected in a new report Wednesday.

The projections update figures from before Sept. 11, which suggested U.S. IT budgets would shrink 3 percent in 2001 and bounce back
with a 7 percent increase in 2002.

Giga’s findings tally somewhat with the results of a report issued last week by the CyberAtlas Research division of INT Media Group
Inc., parent of The CyberAtlas report, which looked at both the U.S. and Europe, predicted
that IT/IS capital spending will increase about 2.4 percent in 2002. That report also forecast that European IT/IS budgets will be
increased 1.5 percent in the first two quarters of 2002, while the U.S. market will remain soft with budget increases of less than
11 percent in the first six months of 2002. However, CyberAtlas suggested that beginning in the third quarter of 2002 spending will

Still, the first half of the year is likely to be difficult for sectors of the IT industry, with IT vendors — especially those
selling computer and telecom hardware — struggling with weak demand until the second half of 2002 at the earliest, according to
Giga Vice President Andrew Bartels, lead author of the IT spending forecast.

“Software and consulting and outsourcing vendors will do a bit better, with growth potential into the very low double digits in
2002,” Bartels said.

The computer and telecom hardware sector bore the burnt of the cuts in 2001, with investment dropping more than 20 percent compared
with 2000. Giga said that sector is expected to be flat in 2002. Software and IT consulting, outsourcing and other services,
meanwhile, managed to hold onto single digit growth in 2001 and face the potential of a slight increase in 2002, Giga said.

“The cutback in IT spending has been uneven,” Bartels said. “Among individual companies, we continue to see some financially strong
companies that are increasing their IT budgets by 15 percent or more, but this is offset by the loss of IT spending by companies
that fail, such as Enron, Exodus, various dot coms, etc., and by general conservatism in spending by most companies.”

However, the projections aren’t all bad. CyberAtlas research predicted that IT/IS vendors supplying goods and services to the public
sector would reap rewards beginning in third quarter 2002, while security and wireless endeavors will top the list of IT/IS spending
initiatives early in 2002. Giga said it sees relatively good growth in store for spending on security, application servers and
integration, data warehouses and analytics, e-procurement and e-sourcing software, database software, portals, customer relationship
management software, human resource and financial management applications, outsourcing of information systems and application

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