Gartner: IT spending still rising –

IT spending isn't growing as rapidly as it has in past years, but it's still rising, research firm Gartner Inc. said today as it released preliminary results from its annual IT Spending and Staffing Survey report.

More than half of Gartner's worldwide respondents -- 56.4 percent of the 589 surveyed large organizations -- said they plan to increase their IT budgets in 2001. Only 21.1 percent of respondents said they're decreasing their year-over-year spending, while 22.4 percent said their spending will be unchanged from 2000 to 2001.

Overall, Gartner forecasts that IT spending will rise 10.1 percent in 2001 and 6.1 percent in 2002. That's a chunky decline from last year's growth rate: In 2000, overall IT spending rose 13.3 percent, according to Gartner.

Still, companies aren't taking a slash-and-burn approach to reducing IT spending, Gartner analysts said.

"We don't get harried phone calls from clients who are crying, 'We need to slice 25 percent from our budget.' In the past, that's happened," said Gartner Research Director Barbara Gomolski. She cited the Asian financial crisis as a time when companies were scrambling to drastically reduce expenditures.

"What we did see (this year) and continue to see is an increased focus on value justification," Gomolski said.

Companies are shortening their planning cycles and focusing on near-term goals and projects that will immediately improve their bottom line, the survey found. That's good news for service providers and bad news for hardware vendors, said Gartner Research Director Jeremy Grigg.

Firms, particularly those in sectors hit hard by the economic slowdown, are looking to decrease their capital expenditures, he said. Large companies' total IT spending as a percentage of revenue is steadily creeping upward. Last year, Gartner's pan-industry average figure was 3.5 percent. In 2001, Gartner's estimate climbs to 3.54 percent, and to 3.57 percent the year after. But companies' IT capital budget as a percentage of revenue is dwindling, from 1.33 percent in 2000 to 1.31 percent in 2001. In 2002, the estimate drops again, to 1.27 percent. The IT capital budget is a subset of total IT spending that includes most software and hardware purchases.

"Organizations want to get out of the business of buying and building and maintaining all of their IT. Increasingly, they want to be consumers of services and not purchasers of products. This is not just a short-term trend," Gomolski said. "We suspect that there's a lot more leasing of hardware, and the upgrading of hardware is viewed as a discretionary expense."

Spending on external services jumped from consuming an average of 9.7 percent of firms' IT budgets in 2000 to an expected 14 percent in 2001, Gartner said.

Gartner's analysts acknowledged that their findings are out of step with the widespread perception that IT spending is dropping, but offered several explanations for the discrepancy.

Gartner's survey includes the "hidden" IT costs other studies overlook, analysts said -- spending that is authorized outside of an enterprise's central IS organization, such as purchases by business units or departments.

The Gartner study also focused on large firms. The average surveyed enterprise generates annual revenue of US$2.3 billion and employs 8,100, with an IT workforce of 286. Grigg noted that small- and mid-size companies, which have shorter planning cycles, are more susceptible to the impact of a downturn and may be quicker to curtail their IT spending.

Gartner will release the full results of its 2001 IT Spending and Staffing Survey in mid-October, during its Gartner Symposium/ITxpo 2001 in Orlando.

Gartner, in Stamford, Connecticut, can be reached at +1-203-316-1111 or via the Web at

This story, "Gartner: IT spending still rising" was originally published by ITworld.


Copyright © 2001 IDG Communications, Inc.

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