Survey: 2003 IT spending to remain flat

A survey of top IT executives at large companies paints a somber picture for growth in corporate IT spending in 2003 and in years to come.

Expectations for IT spending growth this year are below the timid forecast issued in late 2002, according to the survey, conducted in mid-February by the research unit of The Goldman Sachs Group Inc. investment bank.

Even more concerning is that respondents’ definitions of what their annual IT spending growth will be under normal circumstances in the long term dropped to an all-time low, according to the survey, whose results were released Tuesday.

The poll of 100 IT decision-makers shows respondents expect an average increase in IT spending of 1 percent in 2003, down from an average expectation of between 2 percent and 3 percent in late 2002, Goldman Sachs said.

When asked what they consider will be their “normal” long-term annual IT spending growth rate, respondents answered with historically low estimates. The average expectation is a growth rate of 4.3 percent, below average expectations of between 6 percent and 7 percent throughout 2002, Goldman Sachs said.

Respondents, which included 51 chief information officers, 27 IT directors and 15 IT vice presidents (15), are from the world’s largest 1,000 companies, according to Goldman Sachs.

Another bleak finding is that 48 respondents now expect an acceleration in their IT spending to come in 2004 or later, up from 43 respondents in the December survey, an indication that “spending recovery gets pushed out further beyond the near-term horizon,” Goldman Sachs said. Those that expect an acceleration to happen this year dropped to 27 from 36 in the December survey.

It’s clear also from the survey that the most important factor for increasing IT spending is an improvement in revenue growth, followed by upper-management conviction that IT investments will lead to increased profits, Goldman Sachs said. Concerns over global political issues was cited by only 19 respondents. Moreover, the survey found that technology innovations increasingly carry less weight in terms of influencing IT spending decisions.

“When IT managers consider technologies, they remain focused on those with a proven ROI (return on investment) or that can cut costs or lift bottom-line results,” the report reads. “Moreover, even the newest compelling technologies are not enough to separate dollars from IT managers.”

Regarding vendors, Dell Computer Corp. and IBM Corp. were cited as winning share of respondents’ IT dollars in enterprise hardware and storage, while Sun Microsystems Inc. and Hewlett-Packard Co. lost share in both categories.

Meanwhile, the Linux operating system experienced “a significant increase in interest … in the enterprise” since October 2002, as IT executives continued to be attracted by Linux’s price/performance in hardware based on Intel Corp. chips, Goldman Sachs said.