Future of Tech Spending Still Unclear

Nearly half of all respondents to a survey of high-level technology purchase influencers plan to increase their IT spending in 2002, with systems upgrades or systems integration issues the most commonly named reasons for the increase.

The study, by Millward Brown IntelliQuest, found respondents were almost evenly split on whether or not they expected the technology market to take an upturn or a downturn in 2002. The survey was conducted Dec. 27, 2001, to Jan. 4, 2002. Respondents were C-level executives, vice presidents, general managers and managing directors, whose organizations had revenues of $50 million or more.

Nearly half (49 percent) of the executives surveyed said they expect the technology market to experience an upturn in 2002. In addition, 42 percent of respondents said that they expect their IT spending to increase in 2002 over 2001. Of those, 49 percent said the increase will be slight (10 percent or less) and 44 percent said the increase will be moderate. Systems upgrade or systems integration issues was the most frequently mentioned reason as driving the increase. Security was also commonly mentioned.

Systems upgrades or integration were also cited as the recipients of shifting technology funds among companies whose budgets were to remain the same in 2002 as in 2001.

Forty-four percent of the respondents said they thought the tech market would continue to decline in 2002 (49 percent think it will experience an upturn). Those who think the market will continue to slide are significantly more likely to think their company’s IT budget will decrease in comparison to 2001.

Exactly half of all respondents said that enhanced security tools or services are important enough to their organization to invest IT dollars in this year. Web application server software and application/business integration software were also seen as important enough to snag IT budget money, though less so than security. In addition, executives who think the market will improve in 2002 are significantly more likely than those who think the market will continue to decline to think their company will invest in application/business integration software.

Although META Group research has predicted flat IT spending, a joint IT user survey with First Albany Corp. found an upsurge in IT spending at midsize companies.

According to the survey, companies with 500 to 5,000 employees are expected to increase their IT spending in 2002. Spending by small companies (less than 50 employees) and larger firms (more than 5,000 employees) is expected to be flat to slightly down. The surge of the middle market is consistent with META Group’s previous findings identifying increased activity in middle-market ERP spending.

“Although overall spending is flat, the middle market stands out as a lone positive segment. There, respondents indicated an intention to increase IT spending by more than 8 percent,” said Doug Lynn, a vice president of META Group’s Executive Directions service. “This slow economy is a time of lower risk for midsized companies looking to make major system upgrades that larger companies have already completed.”

Survey respondents cited systems integration, CRM, security, networking and ERP as projects that would see the largest percentage increase in budget year over year. But when it came to top spending priorities for 2002, respondents identified computer hardware, networking, security, storage and operating systems.

“We are experiencing the first IT recession ever,” said Howard Rubin, executive vice president of META Group. “There is considerably less spending money out there. Therefore, the No. 1 IT priority across the board should be to control costs and look for value. This is a great time for IT decision makers to negotiate with vendors.”

The META Group study was conducted over the Internet from Dec. 2 to Dec. 17, 2001.

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