The Roundup: A Positive Outlook for IT Spending

Gartner: 56% Increasing IT Spending
A new survey by the IT research firm Gartner Inc. identifies the business sectors that are cutting back or spending more on IT this year.

Among the sectors spending more in 2001 than in 2000: government agencies and telecom service companies. Those spending less this year include utilities and construction companies.

Gartner, based in Stamford, Conn., said that 56% of the 589 businesses it surveyed are spending more on IT this year than last. The average enterprise of the respondents had $2.3 billion in revenue, averaged 8,100 employees and had an average IT workforce of 286.

The spending survey –which is surprisingly positive– comes amid lingering concerns that the IT industry faces a long and difficult road to recovery amid widespread spending cuts and dot-com implosions. As companies have curbed spending and cut staff, the major computer, software, telecom and other firms that supplied them have also taken big hits.

Gartner’s survey paints a hopeful picture for IT budgets. “While many IT vendors are having a difficult time right now, it’s important to point out that this does not necessarily translate into trouble for the organization’s IT spending budget,” said Barbara Gomolski, Gartner’s research director. “Though companies have cut back on their hardware purchases, they continue to spend on services and personnel.”

In an industry-by-industry exam, Gartner reports it found the economic climate has not deterred so-called “Type A” or leading-edge adopter industries from increasing their IT budgets as a percentage of revenue. As examples, the government sector is expected to increase spending 18% between 2000 and 2002, followed by the telecom services sector (13.9%). Other sectors where IT capital budgets as a percentage of revenue are growing include banks and health services.

The utilities segment is expected to reduce the IT spending budget as a percentage of revenue by 15% between 2000 and 2002, while the construction segment is seen decreasing 13.5% in the same period.

Gartner also found that spending on internal staff consumes the biggest chunk of the IS budgtet (32.6%). Respondents said 81% of their IT staff are internal employees, with 19% being external staff. After personnel costs, hardware consumes 20.4% of a budget, software 17%, external service providers 14%, data and voice communications 12.8% and facilities and other 3.1%.

IDC: U.S. Spending Recovery Seen in 2002
Research firm IDC reports that despite declines in U.S. and Canadian IT spending, regions outside North America have remained “relatively immune” to the worst of the economic hardships hitting those nations. For 2001, IDC, of Framingham, Mass., predicts worldwide IT spending growth to hover around 9%.

“As the United States remains the largest single portion of the worldwide IT market, the continued impact of a slowing economy will make itself felt on the total worldwide market,” said Stephen Minton, program manager for IDC’s Worldwide IT Markets and Strategies program. “However, current forecasts do not point to a worldwide slowdown on the same scale as North America. While there is undoubtedly a decline in the growth of spending in 2001 compared to 2000, this is expected to be less severe in international markets than the U.S. slowdown.”

IDC reports that IT spending will remain steady in Western Europe increasing 11% annually from 2001 to 2005. The software market will see the most growth (15% in 2001).

IT spending growth in Asia/Pacific will be 8% in 2001, while spending in Latin America, Eastern Europe, and Middle East/Africa will increase 11%, 12%, and 15%, respectively, this year.

There is good news for North America. IDC reports that by 2002 the region will experience “some recovery” in IT spending.

Big Market for Network Consulting
Spending on network consulting and integration services will more than double in the next several years from $18.2 billion in 2000 to $39.8 billion in 2005, according to tech research firm IDC of Framingham, Mass.

Among the areas of service demand: network planning, installation, access provisioning, project management, and information security services.

“The deployment of Internet, IP telephony, VPN, and mobile networking infrastructure technologies still leaves end users at all levels of the corporate structure demanding increased network access to applications and greater amounts of information,” said Richard Dean, program director for IDC’s Infrastructure Integration and Support Service research.

IDC reports that information security services represents among the hottest growth areas, as companies look to outsource a range of functions including security consulting, auditing, policy planning, firewall implementation, testing, and managed security services.

Execs Sound Off on CRM
YOUcentric Inc., an e-business software company in Charlotte, N.C., recently polled more than 250 senior business execs in charge of e-business and CRM services to gauge their experiences and expectations for CRM.

The upshot of the survey results: ease of integration and getting a strong return on investment are highest in the minds of the execs.

According to YOUcentric’s survey, conducted in June:

  • The ability to integrate CRM software with existing technology was the single most important factor when evaluating a CRM solution, getting 36% of executives’ votes. The second most important factor: that a CRM solution is tailored to fit a company’s exact needs (25%).
  • The biggest challenges to CRM success: integration to legacy data and low adoption rate by users.
  • 40% of respondents claim a “solid return” on their CRM investment, while 80% said they’ve seen “moderate to solid” ROI ( 20% saw no ROI). A proven return on investment will be the “most important” element of CRM in the future (65% of respondents).
  • Companies are setting aggressive goals for CRM projects. More than 65% of those polled expect CRM to increase sales by more than 10%, with 27% expecting an increase in sales over 20%.

WLAN Update Trend Intensifies
A new study by analysts at Sage Research indicates that Wireless LANs are rapidly gaining acceptance in the enterprise. The study, called, “Wireless LAN Adoption: A Quantitative Analysis,” polled network managers from 129 US organizations. The companies chosen had more than 100 employees each.

The report underscores the idea that WLANs are become mainstream, reliable technologies, rather than niche technology for early adopters. Sage’s President Kathryn Krostoff stated that nearly one-third of the organizations surveyed had some wireless technolgies already integrated into their IT deployments.

Results of the survey revealed that more than half of the companies polled state that they are likely to install WLANs in the next two years. One of the key factors driving WLAN adoption in the enterprise has been the steady growth of the number of workers who rely on handhelds, laptops, and other mobile devices. Companies explicitly stated that this was a determining factor in the infrastructure investment consideration.

Sage analysts pointed out that actual implementation may fall far short of the companies goals. However, the trend does indicate the acceptance of the technology on both the consumer and enterprise level.

–This item was written by Matthew Peretz of, an site.