Weak recovery in IT spending seen for 2002

Spending on IT projects will remain flat for the rest of 2002, according to a recent survey by Gartner Inc. and The Goldman Sachs Group Inc.

Mainframes, contract labor services and data centre outsourcing are low on IT spending lists, while technology sectors such as security, storage, personal digital assistants and Web-based applications are likely to see the most growth this year.

The survey was conducted among 369 of the 1,800 attendees at a Gartner conference earlier this month.

A large majority of the survey respondents said they expect the world economy to improve modestly by year’s end. At the same time, 78 per cent said any such improvement wouldn’t drive any change in their spending plans for 2002.

Instead, expect to see an improvement in IT spending in 2003, said Al Case, a Gartner analyst and one of the creators of the survey.

Pent-up demand from this year and expectations of a better economy in 2003 have a lot of corporations planning increases in IT spending next year, Case said.

Most of the spending will be on new application development projects, especially in areas such as voice and data integration, PDAs and wireless applications, Case said.

“Fifteen per cent of the respondents were currently implementing some form of voice over IP or some sort of voice and data convergence, and 13 per cent were targeting to do it next year,” Case said. “That was a real surprise, since this is a new area that’s not really taken off yet.”

Web-based applications will continue to be another big area of spending in 2003, he said.

The survey also indicated that vendors may be slowing their substantial price-cutting activity, even though 50 per cent of the respondents said their ability to command favorable pricing terms from vendors has increased.

Results of the Gartner/Sachs survey are consistent with a Giga Information Group Inc. report that also predicts flat IT spending for 2002. While U.S. IT budgets are up 4 per cent in 2002, actual spending won’t show any improvement over 2001 based on first-quarter 2002 spending numbers, according to a Giga advisory.

“We still believe an economic recovery will strengthen in the second half of 2002, and that CIOs will loosen the purse strings and accelerate the spending of their IT budgets in the third and fourth quarters. Nonetheless, given the weak first quarter, IT spending for the year as a whole will be flat with 2001,” the Giga report said.