IT spending on the upswing, but hardware lags

This year will be better than last when it comes to enterprise technology spending, but IT hardware vendors will still find the going tough, according to new studies from industry analysts.

A report from research firm IDC says IT spending will increase four per cent overall in the U.S. by the end of this year, but hardware spending will still be down. Meanwhile, industry watcher In-Stat/MDR says any spending turnaround for network gear will be led by “mid-size” businesses (firms with 100 to 999 workers) with a growing appetite for WAN bandwidth.

The good news will be in the software sector, where IDC expects to see nine per cent growth in U.S. spending this year. Business purchases of computer hardware however is expected to continue to decline eight per cent, mimicking the deterioration of the market in 2001, IDC reports.

IT buying at mid-size businesses was down 14 per cent overall last year according to a recent survey of In-Stat/MDR, but spending on hardware was down only eight per cent. In-Stat/MDR says mid-size businesses will buy more than US$10 billion worth of networking hardware this year to support bandwidth needs for a growing number of teleworkers and remote offices. In-Stat/MDR’s survey found that mid-size enterprises will support around 680,000 remote offices and 4.6 million teleworkers in 2002.

The spending increases predicted by analysts would give a much-needed shot in the arm to the IT hardware and software markets, which have performed dismally as of late. The Dow Jones industry indexes for Communications Technology, Software and Computers are listed as the number two, three and four worst-performing industries over the last three months (the Dow Jones Wireless Index was the worst). These three Down Jones indexes – which collectively include companies such as Checkpoint, Cisco, Dell, EMC, Oracle, Nortel and Sun – have all been down more than 18 per cent over the same time period.