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IT spending to grow, claim researchers
Thursday, August 08 2002
by Andrew McLindon


IT spending this year will be up slightly on last year as the bottom for the
market appears to have been reached, according to two leading research firms.

Both Forrester and IDC have predicted that spending on IT will have increased
during 2002 over 2001 by several percentage points with most of the expected
growth coming in the second half of the year. 

 

According to Forrester, firms will spend 2.3 percent more on IT in 2002 than in
2001, while IDC estimated an increase of 3.7 percent, which, it said, would bring
worldwide IT spending this year to USD981 billion. 

 

Analysts at Forrester and IDC both said that businesses were now increasingly
prepared to invest in IT.  "Executive commitment to IT is returning, and
interest in categories like IT consulting and storage are showing more life,"
said Tom Pohlmann, senior analyst at Forrester. 



"Business confidence is the killer app," remarked Stephen Minton, program
director of worldwide IT markets research at IDC. "The recent accounting
scandals in the United States have cast a shadow over business confidence, but
there is no evidence that this will have a long-term impact. If business profits
continue to improve during Q3 and Q4, in line with the gradual economic recovery,
we expect this to produce gradual increases in IT spending."

 

Forrester's latest research showed that 19 percent of companies surveyed will
raise IT budgets during the second half of 2002, while 12 percent will cut them.
Of those raising budgets, 37 percent will increase them by more than 10 percent. 
It also revealed that 55 percent of respondents said their executives were
willing to "spend what it takes" on IT. This compares with 36 percent feeling
this way at the start of the year. 

 

However, while spending in consumer services and retail will grow by more than 7
percent during 2002, Forrester said that high-tech firms and utilities will cut
their spend. "Although IT budgets have stopped bleeding, it's still a harsh
buyer's market for tech vendors," said Pohlmann. 

 

IDC also forecast increased growth this year with most of it coming in the latter
half. "The uptick will become more evident in Q4," said Stephen Minton of IDC.
"The bottom has already been reached, the green shoots of recovery will begin
to emerge gradually during Q3, and Q4 will show strong year-on-year comparisons
with 2001."

 

However, he added that major increases in spending will not happen until next
year. "New projects are likely to remain on hold until 2003," commented
Minton. "The limited budget burn-off in Q4 will be concentrated on replacing
products which have had extended lifecycles during the previous six quarters.
This means that the recovery will be uneven at first and won't favour all IT
vendors and market sectors at the same pace."

 

According to IDC, in 2003, with gradual economic recovery translating into
improved business profits, worldwide IT spending will see growth of 9 percent to
over USD1 trillion, which will be the largest in the industry's history. 
Growth in Western Europe, said IDC, will grow 4 percent this year and 6 percent
in 2003. Japan will experience flat growth levels this year, but will return to
positive market growth of 7 percent next year.