Spending on E-Biz Technology on the Decline

E-business technology spending will suffer through 2002, dropping from an average of 3.5 percent of revenue in 2001 to 3 percent, according to a Forrester Research, Inc. survey of nearly 900 high-level IT and business decision-makers at Global 3,500 firms.

“Most companies will curb the number and types of technology products that they will consider buying in 2002,” said Tom Pohlmann, senior analyst at Forrester. The survey indicates that fewer than half of the firms will consider purchasing enterprise application software like customer relationship management (CRM), enterprise resource planning (ERP), supply chain, and procurement in 2002.

“Compared with 2001, companies are much more risk-averse when considering new technologies, opting to make do with what they have before buying more,” said Pohlmann. In fact, 23 percent fewer firms will consider purchasing the nuts and bolts of server, network, and storage hardware, the survey revealed.

Additional key findings:

• 61 percent of global 3,500 firms will consider purchases of hardware, software infrastructure, or network bandwidth in 2002.
• Only 26 percent will consider purchasing enterprise apps – CRM, ERP, procurement, or supply chain – which is down from 58 percent last year.
• The number of firms considering purchases of technology consulting and implementation services fell 28 percent from last year, although demand remains healthy in insurance, finished goods manufacturing, and utilities.
• 65 percent of manufacturing firms are either considering or piloting enterprise application integration (EAI) – the highest of any industry.
• One in five companies named a services division of a software company as one of their preferred service partners. IBM was the runaway leader as a preferred consulting and implementation service provider.
• Compared to 2001, technology buyers are more likely to give business units influence over technology strategy and direction.
• Midsize firms actually lead their global 3,500 counterparts in rollouts of voice over Internet protocol (VoIP) and wireless LANs, while Canadian firms lead their US counterparts in adoption of PDAs, supply chain software, and enterprise portal technologies.

“Our survey also found that Global 3,500 executives estimate their online-generated 2002 revenues at 7.3 percent of overall corporate revenues, compared with 5.7 percent in 2001. They also estimate that in five years, online revenue will comprise 20 percent of total corporate revenues,” added Pohlmann. “Despite the economic downturn, companies still believe that technology will make a huge difference in driving business results.”

Meanwhile, a study by market research firm Techtel Corporation indicated that demand for IT products established a rising trend in the fourth quarter of 2001. The findings are from the Techtel Tech Demand Index, an independent, objective survey of IT sales and future demand utilized by technology investors and academia.

The Q4 2001 Techtel Tech Demand Index indicates a stable, gradual recovery for the technology hardware sector. The General Tech Demand Component (PCs, notebooks, copiers and printers) registered a gain in purchase and consideration, while the Enterprise Tech Demand Component (servers and storage) showed a recovery from low Q3 purchase levels. Continued improvements are expected after low Q3 consideration works its way through the pipeline.

“The really good news from Q4 2001 is: demand is rising,” said Michael Kelly, chairman and chief architect of Techtel Corp. “Our data indicates that, as a whole, the IT market is stable and should continue to improve barring another major shock to the system.”