Study: IT Spending Cutbacks are Over

A large majority of companies expect to maintain or even increase their IT spending levels this year, according to a study just released by analyst firm, International Data Corp.

The study shows that 85% of IT leaders in the U.S., Europe and Asia expect their budgets to stabilize, if not grow, throughout 2003. Many companies, the study also shows, are prepared to reevaluate their IT spending plans on a consistent basis through the year. Any change in IT spending — whether up or down — will hinge on worldwide economic stability, business confidence and corporate profits. All of those indicators have been volatile over the past year or more.

”IT suppliers should monitor economic and business confidence indicators for the early warning signs that IT spending will either exceed or be lower than current projections,” says Stephen Minton, program director at IDC Worldwide IT Markets. ”Just as spending was severely disrupted in 2002 by wild card factors, including WorldCom and Iraq, so it is that the outlook for 2003 remains clouded by similar uncertainty.”

The study, based on a recent survey of nearly 1,000 CEOs and CIOs in 12 countries, shows that business executives are more optimistic than their CIO counterparts when it comes to IT spending increases expected this year. But almost half of all CEOs surveyed cited low profits and a weak business climate as potential reasons to delay IT spending this year.

”Routine infrastructure upgrades will dominate short-term budget priorities, taking up almost half of all spending in 2003,” says Minton. “This isn’t surprising, given that a lot of companies have spent very little during the past two years on the technology, which is already core to running their business.”

This pent-up demand is expected to boost sales for storage hardware, PCs and networking equipment. However, price competition will suppress overall revenue in those sectors of the industry.

And it seems that IT administrators are losing control of their budgets.

The IDC study shows that one-third of business IT spending originates outside of the traditional IT department.